PPS and PPLNS pools: a guide to mining reward structures

In the dictionary D.N. Ushakova

PUL, pula, man. (English pool - common boiler) (economy). 1. In England and the USA - a type of monopolistic association of capitalists to artificially increase prices, in which the profits of the participants go to a common fund with subsequent distribution according to a predetermined proportion. 2. In the USA, Canada and Australia - a capitalist organization for the sale of agricultural products. products, in the form of farmer cooperation, seeking to monopolize the market and increase prices and exploit both consumers and farmers themselves.

Pool in the game World of Warcraft

Players of the famous computer game World of Warcraft also often use the word “pool” in their speech. For them, the pool is the beginning of the battle, the moment when the monsters notice the character and try to attack him. Moreover, such a pool can be either good, which marks victory in the battle, or bad, which can cause the death of the raid even if the tactics are worked out to the last detail. However, a bad pool can still be avoided if you set clear goals for each raid member. And when all participants in the battle know what to do, and the actions are synchronized, the pool will be simply excellent, and the battle will end in victory. The main thing to remember is that when fighting a boss, it is better to give the primary role to tanks or hunters, and then there will certainly be no defeat.

In the first part of the article, we talked about the benefits of collective purchasing and how to choose categories and pool partners. Let's move on to the scheme for carrying out such purchases.

There are 2 collective procurement schemes.

Option 1:

1. The group purchasing organizer enters into a separate service agreement with each client (pool participant).
2. The organizer analyzes and standardizes the client’s needs in the purchased category, conducts a competition taking into account the total requirements of the pool participants and agrees on its results with each client. Coordinates the implementation of sourcing results.
3. The Client provides the Organizer with access to the necessary data, and also makes key decisions: approves the supplier, coordinates and implements the results, monitors the progress of the project.
4. The organizer receives a remuneration from the client, consisting of a fixed part and/or a reward for the result. Suppliers do not pay remuneration.

The project consists of three phases:

Move the table

The client begins to realize savings from collective procurement after the completion of the third phase of the project.

Option 2:

1. The organizer of group procurement for certain categories selects suppliers with the best commercial conditions and concludes framework agreements.
2. The client compares its terms with those of the supplier and, if desired, can join the pool without holding a tender.
3. The client signs an agreement with the pool provider and begins choosing volumes.
4. The organizer receives remuneration from the supplier. As a rule, this is a percentage of the turnover with clients attracted by the Organizer.

Which scheme should I choose?

Each of the schemes has its pros and cons.

Move the table

For large companies (total purchases amounting to more than 500 million rubles per year), we recommend the first option.

Where to begin?

1. You choose a group procurement organizer and enter into a service agreement and non-disclosure agreement (NDA) with him. Please pay attention to the following aspects:

• experience in collective procurement in indirect categories;
• availability of project methodology, IT tools, templates;
• the method for calculating savings must be specified in the contract.

1. Select one pilot procurement category.
2. The organizer collects a pool of clients.
3. You start a project at the same time as everyone else

Success Factors

1. Interest of the client company's management (CEO and CFO) in the project. Otherwise, there is a high probability that the initiators and suppliers will simply not allow it to be realized. In the creation of Agrega, for example, the decision was made by the shareholders of BAT and AB InBev. Therefore, they were able to create a global indirect purchasing structure for both companies.
2. The client company has a strong account manager. He must be results-oriented, have influence within the company to defend the terms of the pool and introduce new commercial terms.
3. Timely approval of solutions within the project. One of our projects dragged on for almost a year due to lengthy approvals within one of the companies, as a result the client received savings much later.
4. Similarity of corporate cultures of pool participants . For example, in the case of Agrega, it was difficult to find a compromise between BAT and AB InBev because Inbev was focused on the cheapest and simplest solution, and in BAT the initiators wanted the best. Often, as a result of the tender, companies remained with their suppliers and conditions.
5. Comparability of purchase volumes from pool participants creates an atmosphere of cooperation. If purchase volumes vary significantly, it is likely that the largest participant in the pool will begin to dictate terms to smaller clients.
6. as much as possible . Matching specifications by at least 50% simplifies obtaining favorable conditions from suppliers.

Still have questions?

Write to us or read FAQ :

What category size is interesting for collective purchasing?

We at PrECA conduct collective procurement for companies whose costs average from 5 to 20 million rubles. in year. But there were cases with categories of 50-70 million rubles. per year, the same principles apply for them as for large categories.

Will my commercial terms be available to other pool participants?

Companies may disclose information to each other only by mutual consent. The procurement organizer has access to the commercial information of each participant, but does not disclose it to other participants in the pool. To do this, a non-disclosure agreement (NDA) is concluded. In addition, if the conditions are disclosed, the Procurement Organizer bears reputational risks.

I'm confused. Who does the client ultimately enter into a contract with?

If you are a large company (total purchases worth more than 500 million rubles per year), then the first scheme is suitable for you. In this case, you enter into a service agreement with the Group Purchasing Organizer. When a supplier is selected, you (with the support of the Procurement Organizer) enter into a supply agreement with the supplier of goods or services.

Important: The procurement organizer is not an intermediary in the transaction and cannot be required to become one. An organizer is a partner who outsources the purchasing process for a certain category, organizes the interaction of pool participants, and conducts analytics and optimization. If he becomes an intermediary, then his costs and risks will increase greatly, which means it will be expensive and ineffective for you. In addition, to become a supplier of office supplies, for example, you need completely different competencies.

How much savings can you expect? How to make sure that the savings from the project will not be “eaten up” by fees for public health insurance services?

The amount of savings depends on many parameters, the level of procurement maturity, the volume of costs, how often and how well projects in this category were carried out. Typically, savings range from 5 to 25% of current annual costs.

Ask the Group Purchasing Organizer to conduct a preliminary assessment of the potential, this is free and will provide a guide to savings. Let's say at this stage you get an inflated estimate. Then, during the “diagnosis” stage, you will receive a more accurate assessment of the potential for cost reduction. If it is clear that the projected savings do not cover the costs of the Organizer’s services, then you can exit the project. But you will need to pay for the diagnosis.

It is worth remembering that saving on procurement costs is not the only benefit that a participant in collective procurement receives. The procurement organizer guarantees clients a legally reliable contract and tender documentation (for audit, tax, etc.), optimized nomenclature and tariffs, reduction in the number of suppliers and delivery/service delivery times, improvement of supplier service, benchmarking, checking the effectiveness of the current process, reduction of working capital etc. In addition, you do not waste the resources of your employees to conduct tenders and conclude contracts.

What if one of the pool members leaves? Does the supplier change prices?

There is such a possibility, because the supplier was counting on a larger volume, and with the departure of a key client, it may require a revision of the conditions for the remaining participants in the pool.

On the other hand, in collective procurement there is no group contract, there is a collective tender, the result of which is a template of uniform commercial conditions. The results are then recorded in contracts between the supplier and each client. There is no reference to other clients' volumes in these contracts.

If a partner with a large share of the total volume drops out of the pool, then the Procurement Organizer selects another comparable participant. Agrees with the supplier not to change the terms - this usually works because the supplier is interested in keeping the others.

Is there an obligation to select volumes?

There is no such obligation; the supplier receives forecast volumes, which the Procurement Organizer warns him about in advance. Moreover, after making a decision based on the results of the competition, it is necessary to fulfill the commercial conditions in accordance with the contract and the results of the tender, as in the case of conventional sourcing. The client's withdrawal from the pool and continuation of cooperation with the previous supplier on worse terms is also a violation of agreements.

Is it possible to customize the specifications? Or one size fits all? What if someone from the pool loses quality?

Of course, you can customize it if necessary. But a collective procurement project is carried out for standard categories (for example, office supplies), the need for customization is minimal.

Savings and standardization should not come at the expense of quality; the procurement organizer looks for analogues that suit everyone. If the client is not satisfied with the proposed specification, then he can stay with his own. For the supplier, the volume of purchases in monetary terms plays a more important role, rather than the number of purchased commodity items.

And we have global framework contracts concluded on exclusive terms; the Group Procurement Organizer will not achieve these.

A comparison needs to be made. Our experience shows that global contracts in parts of Russia almost always lose out to local solutions. Local consolidation provides more benefits because the supplier is local and makes an offer taking into account Russian realities. In a global contract, you get average values, which may be beneficial throughout the company, but for the Russian division this is not the best solution. In any case, you are not obliged to switch to another supplier if it is not profitable for you.

I would like to participate, but I am not sure that the project will bring any benefits. After all, we are a large company and conduct tenders ourselves.

Ask the Group Purchasing Organizer to compare your current terms with the terms he can get in the pool. They will conduct express diagnostics and assess the potential of the project. If there is no potential, then they themselves will not be interested, because they will not make money from it.

I still don’t understand why we can’t get such conditions ourselves? After all, we have our own purchasing department and we conduct tenders ourselves. What does a Group Purchasing Organizer do that we can’t do?

The involvement of a Group Purchasing Organizer does not exclude the purchasing department or call its effectiveness into question, but complements it. You can, of course, carry out the project yourself. But this requires internal expertise, which is difficult to obtain when the company, in addition to direct procurement, has more than 50 indirect categories, and resources are limited.

Participation in collective procurement helps achieve more than each individual could do individually. Within the pool, group dynamics, volumes, knowledge, and developments are used. More suppliers participate – more competition. Even if you are a large company, with a larger volume you will have more favorable conditions. For example, a pool with 6 thousand SIM cards can have much better tariffs from an operator than a company with 3 thousand SIM cards.

In indirect procurement, this is important because even for large companies, each category itself is relatively small in volume.

You save resources and can direct them to higher priority projects. When there are categories such as raw materials, packaging, transportation, marketing, spending the time of your own experts on office products is not very effective.

For the Group Purchasing Organizer, indirect categories are a specialized area; each category has its own IT tools, templates, and methods. Analytics is used much more deeply. For example, in the mobile communications sector, downloads and details for 12 months are analyzed using a special macro. The purchasing department is limited to receiving tariffs, while the Group Purchasing Organizer selects tariffs and options taking into account the volumes and specifics of consumption of each subscriber . Recommends changes in mobile communications policy, monitors service levels, disables unnecessary options and services. After implementation, he ensures that the prices in the bills correspond to the tariffs, and that subscribers are not connected to unnecessary services. When a provider has new tariffs or products that improve service or reduce costs, the Group Purchasing Organizer offers to use them. All this is much more than just holding a tender for an existing need.

The Group Purchasing Organizer has more motivation as their remuneration depends on the results achieved for the client. There is no such driver in the purchasing department. But the procurement department can use this tool to achieve its goals.

Are there any risks?

There are risks. Here are just a few of them:

• They chose the wrong Group Purchasing Organizer, without experience in consolidation and category expertise, but he failed.
• the companies in the pool turned out to have too different corporate cultures, and the pool collapsed.
• The project deadlines have been delayed, and you need the result now, so you had to do everything yourself.
• We expected one size of savings, but in the end it turned out to be much less.
• the project did not receive management support and was stopped.
• the category was not previously covered by procurement, influential initiators blocked the project.
• the account manager is very busy and cannot devote time to the project, as a result, the Group Purchasing Organizer acts without support, the initiators or suppliers block the project.

Risks can be mitigated by agreeing on conditions from the very beginning, talking through scenarios and subsequent actions.

Is this even legal? What if the antitrust agency sues?

In order for the FAS to sue you for violating antimonopoly laws, the market share controlled by the pool must reach 30%. In indirect categories, this is not possible, even if all FMCG companies and banks are pooled, since the categories are purchased by all companies and the customer market is too fragmented. For example, there are only 4 federal operators, but the number of legal entities using mobile communications is tens of thousands, which is almost all Russian companies.

Why do suppliers need to participate in collective procurement? What is the benefit for them?

The supplier is interested because:

1. Receives a large volume (in money) within one tender. It’s easier to “sell” such a deal within your company, to get favorable conditions for the client, and bonuses for yourself.
2. Facilitates work by standardizing technical and commercial conditions and optimizing the assortment within the pool. In addition, he can receive additional discounts from the manufacturer by ordering fewer items in larger volumes.
3. Saves on logistics, since goods can be delivered to several points in one approach. In the case of Internet services, for example, you can divide the costs of laying cables and installing a router between several clients. For example, technical support engineers can go to one shopping center to repair and service printing devices and cover several stores at once.
4. Operational support costs are also reduced because a group of clients can be supported under a single pattern. For example, one service manager is responsible for support for all SIM cards within a pool according to uniform rules, SLAs and tariffs.
5. The supplier's marketing and sales costs are lower since it participates in one tender instead of 5-7.

If you are interested in collective purchasing, write to us , we will answer your questions and help initiate the project.

Yesterday's betting results.

Bayer could not win, losing during the meeting and improving in the second half and was able to reduce the game only to a draw.

Real beat the opponent without any problems, scoring the first goal in the 4th minute and even played the bet option P1 + TO2.5 for a bigger win.

The miner scored one goal at the beginning of the second half, which was enough for the victory.

As I said about Turkey, it’s not clear

Although the Turkish championship can bring surprises.

And so it happened.

Now let's get to the interesting stuff. I hope you like it and check it out.

History of origin

American billiards began its history in the middle of the 19th century, or more precisely, in 1857. It was then that Michael Phelan received a patent for a billiard pocket with right angles, which began to be actively used in pool. At first, the new game was very reminiscent of Russian and English billiards, but gradually it was modified and moved away from it.

Since 1871, dramatic changes began. The tables were reduced from 11 feet (3.35 meters) to 10 (3.048 meters), and the pockets became four inches (10.16 centimeters). In this form, the American pool existed until 1950. It was obvious that the game needed changes because these requirements were too stringent even for professional players, let alone amateurs.

The turning point was the creation of the Billiard Congress of America in 1950. Its leaders were seriously concerned about the falling popularity of the game and developed new dimensions for the table (2.90 by 1.60 cm) and pockets (12.7 cm). This made pool more accessible and, accordingly, interesting for billiards lovers. Since then, these sizes have not changed, which indicates their successful ratio.

What are its advantages and disadvantages

The activities of investment pools are practically not regulated by law, that is, unlike, for example, the activities of various types of investment funds, they are not actually controlled in any way. This allows you to invest pool funds in almost any financial instruments and legal investment objects. While, for example, mutual funds are quite strictly limited both in their scope of investment and in terms of the structure of their portfolio, investment pools can operate completely freely, purchasing and selling any assets in any quantity (at the discretion of the pool manager).

This kind of freedom of choice can come in handy when the market goes into a steep dive amid another financial crisis. At this time, mutual funds are forced to hold a portion of obviously unprofitable securities, thus ensuring that the structure of their investment portfolio remains unchanged (in accordance with the requirements of the Central Bank of the Russian Federation, which tirelessly monitors their activities). But the investment pool may well not only close all long positions on shares, but also enter short positions on them in order to catch its share of the profit from the market decline.

In this freedom, along with obvious advantages, lies the main disadvantage of investment pools. Indeed, in essence, all the restrictions that are imposed on investment funds are aimed at protecting the interests of investors (including from investing their funds in rather risky instruments), and therefore their complete absence can be fraught not only with the possibility of receiving relatively large profits, but also quite impressive losses (up to complete loss). Here everything will depend solely on the manager’s experience and the capital management system he will adhere to.

In addition, the almost complete lack of control on the part of supervisory authorities makes the pool participants quite vulnerable to the actions of the manager, to the point that in the most unpleasant case of events, he can simply withdraw all the investors’ funds to some offshore accounts, and then disappear himself in an unknown direction. Fraud in the field of financial investments, unfortunately, has not been abolished, and it must be admitted that the art of taking money from gullible investors has sometimes been honed to perfection by scammers.

However, for partial protection against possible fraud of this kind, it is possible to provide for the manager’s access to the pool funds within the framework of a special master account, or under a power of attorney. This will protect depositors’ funds from possible theft, but will not save them from being drained as a result of incompetent management.

What is a modem pool?

For computer scientists, the word “pool” also has its own meaning. True, in their speech it most often appears next to the word “modem”. So, a modem pool is the simultaneous connection of several network users to a certain number of modems on the server. In this case, the method of sharing several modems by the entire network is used, which are visible to the average user as a single device. When a simple user connects to one of the modems in the pool, the one that is freely accessible and not busy is selected to establish a connection. The advantage of connecting the network via such a modem is a significant increase in Internet speed, thanks to which clients will not experience any delays in the transfer of information, as often happened when connecting through a communications server.

Thus, if we analyze all the above information, we can conclude that most often a pool is a voluntary association together of several people, companies, firms or items for the purpose of generating profit or benefit.