The More You Buy, the More You Save

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You probably already shop at Costco’s or BJ’s and know the price advantage of buying in bulk. Why not buy your farm supplies in bulk, too? Horsemen can band together for substantial savings by purchasing large orders.

Outside the equine world, farmers’ cooperatives are well-established in the U.S. Livestock producers—of cattle, hogs and sheep—often commit to work together to purchase goods or even property. For example, a group of Colorado cattle breeders collectively purchased grazing land.

A horsemen’s cooperative can be a major customer, too, and as such can have access to deals not available to individuals. Some suppliers prefer to sell only large quantities, such as an entire cutting of hay, or an entire season’s cuttings and having only one buyer reduces the seller’s marketing effort to a single transaction. With such an arrangement, buying groups could realize a savings up to $1.00 a bale, or get 10 to 15 percent off the entire order, depending on the price. Calculate your current hay expenses and consider the benefit. You could escalate your profit without raising prices to your customers, or invest the extra cash into a capital expenditure for your barn.

With its bargaining clout, a cooperative can locate reliable vendors who sell feed and bedding of a consistent quality, and get a wholesale price on a bulk load. It’s a win-win situation where horsemen enjoy a known source of goods and the seller depends on a regular customer.

A buying group can also deal directly with the manufacturer or grower. For example, you can work with a bedding producer, such as Marcal Paper Mills in New Jersey, which sells paper bedding in bulk loads of 16 to 23 tons. Or, contact a broker for hay and grain, who sells hay in 12- or 25-ton loads.

To locate sellers, consult your county’s Cooperative Extension Service or you might find a local farmer who doesn’t want to be bothered with smaller sales, but focuses on a few regular customers. Even some of your regular suppliers might like the idea of having their inventory sold to one entity and cut you a deal.

On-line sources abound for agricultural transactions. E-commerce has broadened the market for hay, as buyers and sellers find each other on the Web. Try hayexchange.com or hayingmantis.com, where your group can post on-line “hay wanted” ads.

While many farmers’ cooperatives are more formal in structure, where the venture is managed jointly and each member invests to share the savings, seeking a return on investment, the structure can also be informal, where bargain hunters simply agree to join forces. For example, two or three barn managers can split a truckload of shavings. With a load of 400 bags, the managers decide who needs what amount, and each shows up with a check when the truck arrives.

But before any kind of bulk buying arrangement is made, make sure there is an up-front agreement. In the shavings instance, how does each pay a fair share of the delivery and taxes? Who volunteers a barn as the central delivery site? Should an individual represent the group, and does that person receive payment for placing the order? Will each buyer haul his or her share home the day of delivery? What if a problem arises, such as wet weather that soaks the top layer of bags, or someone becomes injured during stacking?

To reduce risks, have a written agreement that documents the business operation among all parties. You may not need a formal contract for a one-time order, but consider how to prevent misunderstandings.

“Even some of your regular suppliers might like the idea of having their inventory sold to one entity and cut you a deal.”

Julie Fershtman, an attorney specializing in equine affairs, shares four basics of contract recommendations:

1. The parties. The contract needs to be clear on exactly who they are.

2. Name on order. Does the group want its own name as the one making the order? Does it want just one person, such as John Smith, to be referenced as the sole person making the order?

3. Quantity attributable to and ordered by each person. The contract needs to be very clear on who has agreed to order what or how much.

4. Payment obligations. If the provider is not paid, all of the buyers risk a collection lawsuit brought against them. The provider/seller should be paid as soon as possible. As one option, maybe the group can keep the funds in a jointly-held account or, if there is a particularly large amount involved, find someone to serve as “escrow agent” for the money and the items, in order to make sure that everyone pays his/her fair share.

While cooperative buying does involve relinquishing some independence, all can benefit from cost savings. And, pooling resources boosts your buying power and increases your savings.