The myth of confidentiality

Oct. 29, 2013

In my travels around the foodservice world, I have found that many buyers believe collective buying leads to the loss of one of their most prized possessions: price confidentiality.

Most foodservice buyers, who are notoriously suspicious by nature, are concerned about sharing this key information with others and rightly so. They are concerned to expose their special pricing that they have worked long and hard to secure and that a key market advantage will be lost.

Buyers worry that they will lose their competitive edge, when, in fact, they will gain an enormous purchasing advantage through a collective buying group.

'You will know my pricing!'

"If I join the group, then everyone will know my pricing," said one prominent buyer, echoing a concern of many of his peers. "I have worked hard to research and negotiate my prices, and they are completely confidential and proprietary."

Group purchasing does not work that way. Individual corporate pricing is not shared. The group purchasing organization (GPO) cannot exist if it shares pricing of one company with another. Confidentiality, in fact, is a basic tenant of any GPO worth its salt.

The ironic thing about the buyer's fear is that there are plenty of people in and around the company who already know his price. So, just how confidential is it?

For instance, the pricing on the invoice is available to everyone who encounters it. Every salesperson knows them. Every accounts payable person knows them. Your distributor's buyer knows them, of course, and so does every manager in your system.

'You will know my deals'

"But, you will know my mark-up and my terms," adds the worried buyer.

Actually, we won't. All we are privy to is the price you pay the distributor. We only see what you paid.

We will not know or see what your contract terms are with the suppliers, manufacture rebates or incentive programs, what marketing dollars are paid, what your terms and conditions are or what makes up your distribution agreement.

Keeping it confidential

Confidentially is actually stronger in a GPO because we are under strict confidentiality agreements. It is not the business as a group purchasing organization to share what they know. The job is to access the best possible deals available through our manufacturers and pass them on to our members. As the stewards of your purchasing program, we administrate the manufacturer allowances and pass the savings on to you. That is the great benefit of being part of a GPO.

We work within a secure system that ultimately must maintain a high level of confidentiality. Without it, neither the GPO nor its members would survive.

Topics: Equipment & Supplies , Food Cost Management , Operations Management

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