Prior to World War II, gases and supplies were sold directly from manufacturers to end-users. Following the war, however, large gas manufacturers tried to alleviate the cost and burden of selling directly to smaller customers, and wanted these customers to buy from warehouses and other suppliers. This allowed the major distributor to cut the cost incurred by servicing smaller accounts and focus on the larger, more profitable ones.
The resulting monopolization of gases and supplies by major manufacturers and distributors forced small companies to compete with the major companies for the same goods and services; the majors, however, could buy larger volumes at a lower cost per good. Facing an uneven playing field, individual operators banded together forming cooperatives and associations, a proven strategy that has been around for hundreds of years in almost every industry. These buying groups allowed the small-to-large distributors to increase their purchasing power against the national distributors for goods and services by buying in volume.
Banding together as one large group or buying allows the individual distributor to take advantage of the volume discounts that national competitors contract for when buying in bulk. These groups also provide other services such as education, references, and networking. Today, many buying groups within the US industrial gas distributor space are flourishing under the cooperative model. These cooperatives, associations, and groups are increasingly important to the marketing and operations of distributors as they set new, more vigorous priorities to improve their operating incomes. As part of CryoGas International’s coverage of continuous improvement initiatives in 2012, we profile some of these groups.
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