|Schools Surf to Save|
|Subject||Types of costs and cost curves|
|Topic||Production and Costs|
|Key Words||Intermediary, bids, online, benefit, costs, volume discounts, sales, savings, recruit|
Some school districts are beginning to buy their supplies-from fish sticks to microscopes-over the Internet. Companies, like Epylon.com, act as the intermediary between school districts and suppliers. School district personnel can browse products and prices online, email pre-approved vendors to solicit bids, and order online.
The benefit for schools is that their administrative costs are reduced. Each purchase order costs about $125 in administrative time: Epylon says that it can reduce that figure to $25. Further, the system allows school districts to band together to gain volume discounts. Delivery times are being cut from a week to a couple of days. The intermediaries make their money by charging vendors approximately 1-2% of sales.
The implication is that school districts can use their staff to do more productive things, even to find other ways of containing costs. The savings could also be used to hire more teachers. Given that the 100,000 public schools spend about $84 billion on supplies each year, savings of 10 percent would generate enough money to recruit 150,000 teachers at $56,000 each.
(Updated May 1, 2000)
|Source||Del Jones, "Some schools to surf Net to cut costs of supplies," USA Today, March 20, 2000.|
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