Last week I wrote about the success the Department of Defense is having in leveraging Government eCommerce for the strategic sourcing of its office supplies.  What I didn’t mention was the side effect its having on the pricing structures of  office supply vendors on the DOD EMALL.

In 2004, when the Army was establishing their strategic sourcing policy, they did a market-basket analysis of office supply prices on GSA Federal Supply Schedule Contracts.  In establishing their blanket purchase agreements with 20 office supply holders, they negotiated a 15% GSA  price reduction and mandated the use of those contracts.

Each of the Armed Services followed suit — negotiating their own office supply contracts and mandatory online purchase policies.  As a result,  DOD EMALL quickly became a magnet for office supply vendors, large and small. The number of office supplies vendors on DOD EMALL skyrocketed to over 500.  So when the Army redid their initial market basket analysis two years later, their 15% pricing advantage had vanished.

What happened?

Market forces brought down the prices of the competing catalogs.  By mandating the use of Government eCommerce for office supplies, the Army had saved millions of dollars on their own office supplies and created a savings environment for the whole Department of Defense.