Group buying is a simple concept that allows companies to save money on purchasing components as a collective by increasing their purchasing power. Group buying is popular among electronics manufacturers looking to buy electronic components in bulk, but many don't know how it works or how they can get involved. In this article we'll go over the basics of group buying, and show you how it can help your company save money on business purchases like manufacturing services, test equipment and more.
What is group buying?
Group buying is a form of collective buying. It's a way for consumers and businesses to save money on goods and services. The process involves a group of people coming together to buy a product or service as a group, then being offered discounts on that product or service by the supplier in exchange for encouraging other customers to purchase it, too.
Group buying has become very popular with electronics manufacturers in China and Taiwan because it helps them sell more products at lower prices than they would otherwise be able to do on their own websites. Their interest in working with buying groups has significantly increased the opportunity for procurement teams to get lower prices for components.
Group buying for electronic components
Due to economies of scale, group buying is the best way to get the lowest price for components. For example, if several hardware manufacturers buy silicon chips together, it allows them to negotiate with their suppliers for a lower price. The result of this is that you can be assured of getting high-quality components at an affordable price.
So how does a company take advantage of group buying? Here are a few common tactics:
1. Connect with a community of companies buying the same components
One solution for finding purchasing power is to manually develop connections with a community of companies buying the same components. Finding companies with similar needs is a heavy lift to say the least– it can be difficult to keep track of who is using what and where. That being said, going through an investor and connecting with their portfolio of companies is a potential solution for taking full advantage of group buying prices.
2. Contract manufacturers
Contract manufacturers inherently have these communities developed. That's because they already have multiple customers and can use their combined volume as leverage for negotiating with suppliers. They also know that some products sell better than others and so can direct you toward the ones that will work best for your design.
However, this power comes at a price: contract manufacturers add huge margins to their purchasing services. On top of that, they’re incentivized to push their customers towards using the same components across multiple BOMs even if the component isn’t optimal. Since they used to be one of the only options for companies to take full advantage of group purchasing power, they're able to add on unnecessary premiums.
3. Component procurement solutions
If you're looking to reduce component costs and improve your electronic component supply chain, Amplio is a procurement solution that can assist in these efforts.
Amplio builds resilience into its customers’ supply chains by using intelligent tools to predict and preempt shortages. The solution also buys and consigns parts on behalf of OEMs to reduce their workload and streamline the procurement process.
Thanks to these services, Amplio doubles as a group buying platform for all its customers to get familiar parts at a fraction of the price of contract manufacturers. This gives power back to individuals so they can own their supply chain—and it allows them to be more nimble when there are disruptions with other providers.
Online marketplaces are also a good place to find hard-to-find electronic components. They offer a wide range of suppliers and often have parts that are hard to find elsewhere or that may not even be available through traditional channels at all.
Get lower prices for components with Amplio
Group buying is a good way to get electronic components at a lower price. It also makes it easier to get the parts you need and ensure that you have enough of them in stock. Without building a network of trusted partners by hand, though, it’s difficult for smaller OEMs to build enough purchasing power to make a difference.
Amplio has changed what’s possible for OEMs with its resilient supply chain solution. Now, you can be strategic about owning your logistics and supply chain management while also driving costs down as much as possible. If you'd like to learn more about how much Amplio can save electronics companies using group buying, don't hesitate to reach out to our expert team.