An Influence of Group Purchasing Organizations on Financial Security of SMEs Operating in the Renewable Energy Sector—Case for Poland
<p>Share of renewable sources in electricity production in 2018 in selected European countries. Source: author’s study based on Eurostat databases.</p> "> Figure 2
<p>Positional statistics for financial liquidity and profitability in the compared groups. Source: author’s calculations and studies.</p> "> Figure 3
<p>Scatter chart of receivables and inventory turnover cycles. Source: author’s calculations and studies.</p> "> Figure 4
<p>Graph of the relationship between the profitability level and the credit position and the share of inventories in current assets. Source: author’s calculations and studies</p> "> Figure 5
<p>Positional statistics for liabilities and inventory turnover ratio in the compared groups. Source: author’s calculations and studies.</p> "> Figure 6
<p>Renewable energy power (MW) in Poland. Source: Energy Regulatory Office (as of 31.12.2019).</p> "> Figure 7
<p>Share of energy from renewable sources in final consumption [<a href="#B13-energies-13-02926" class="html-bibr">13</a>].</p> ">
Abstract
:1. Introduction
2. Literature Review
2.1. Impact of Purchasing Groups
2.2. Purchasing Groups and Their Functioning
- Piggybacking groups. Piggybacking groups are informal GPOs that focus on the simplest cooperation possible. In some cases, this form of cooperative purchase involves only sharing information;
- Third-party groups. Third-party groups mostly involve long term piggybacking made possible by public or private external parties or central authorities with devoted resources. The third party is a for-profit organization or a non-profit organization and may be owned by the members of the group;
- Lead buying groups. A leading purchasing group includes outsourcing of purchasing activities to one of the other members of the group: each element is purchased by the most appropriate organization or external entity according to their specialist knowledge, resources or volume of purchases;
- Project groups. The group is an intensive form of cooperative purchase. Typically, a project group is a one-time purchase group for a joint purchasing project. The members of the group join forces once and together they make purchases. A project group is an intensive form of cooperative purchasing. Typically, a project group is a one-time purchasing group for a shared purchasing project;
- Program groups.
3. Materials and Methods
3.1. Data
3.2. Methods
4. Results
- GPO companies have, on average, 3.510 more liquidity than stand-alone companies with the same receivables, liabilities and inventory turnover
- the extension of the liability turnover by one day, results in a 0.033 decrease in liquidity
- the significance of the interaction between the GPO membership and the liability turnover allows to conclude that the relationship between the liability turnover and liquidity is greater in this group (adjusted coefficient −0.052) than in the group of stand-alone companies (adjusted coefficient −0.014)
- the extension of the inventory turnover by one day translates into an increase in liquidity by 0.019.
5. Managerial Insights
- The research shows a recommendation that in order to improve the profitability of companies in the renewable energy sector, they should join purchasing groups;
- The significant difference between the profitability of running a business within a purchasing group and an independent one indicates that operating within a purchasing group increases the financial security of each renewable energy company participating in it;
- Managers can control stocks, receivables and liabilities in the manner indicated in the surveys. The variable to be considered the most difficult to manage are receivables, as it is the customers who decide on the actual payment date. Therefore, it is recommended to pursue a consistent pricing policy with respect to customers, aimed at increasing sales and current control and effective enforcement of receivables payments by customers. As far as stock optimization is concerned, it is advisable for renewable energy companies to use a central warehouse when creating a new purchasing group. All the examined renewable energy companies that belong to purchasing groups used such a warehouse;
- Proper management of stocks, receivables and liabilities is crucial to increase the financial security of renewable energy companies. The research shows that the effectiveness of management of these variables is higher in renewable energy companies that operate in purchasing groups, which indicates another reason for renewable energy companies to associate into purchasing groups.
6. Discussion and Conclusions
- Renewable energy companies operating in groups obtain higher liquidity, a cash conversion cycle (CCC) and profitability;
- The operating cycle should also be assessed positively, as the average performance and median results in the entities operating in groups are lower than those of stand-alone companies. In a situation where enterprises operating in groups have obtained higher liquidity, the results of the operating cycle should be lower than those of stand-alone entities;
- Renewable energy companies operating in purchasing groups are better at managing their stocks than those operating independently. The main reason for this is the use of the central warehouse by renewable energy companies operating in purchasing groups. The research shows that the share of inventories in current assets is lower in enterprises operating in purchasing groups;
- The studies also show that acting in a purchasing group, by exploiting economies of scale, allows renewable energy companies to negotiate favorable repayment terms with suppliers. Shorter cycles of liabilities rotation in companies operating in purchasing groups prove higher financial liquidity. It also means greater financial security for renewable energy enterprises operating in purchasing groups than enterprises operating independently;
- The research has also shown that the profitability of renewable energy enterprises is significantly influenced by a larger share of receivables in the asset structure and the level of credit position in relation to enterprises operating independently. Better financial condition of enterprises operating in purchasing groups allows extending the cycle of receivables rotation, which is an important motivator encouraging customers to increase purchases in these enterprises. These actions also increase the profitability of conducting business activity by renewable energy enterprises operating in purchasing groups in relation to those enterprises which operate independently.
Author Contributions
Funding
Conflicts of Interest
References
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Renewable Source | Share in the Total Structure | ||||
---|---|---|---|---|---|
2014 | 2015 | 2016 | 2017 | 2018 | |
Solid biofuels | 76.13 | 74.24 | 70.78 | 67.87 | 69.26 |
Wind energy | 8.13 | 10.51 | 11.94 | 14.01 | 12.40 |
Liquid biofuels | 9.18 | 9.10 | 10.37 | 10.03 | 10.3 |
Biogas | 2.56 | 2.58 | 2.88 | 3.07 | 3.25 |
Water energy | 2.31 | 1.77 | 2.03 | 2.40 | 1.91 |
Municipal waste | 0.45 | 0.45 | 0.67 | 1.01 | 1.11 |
Solar power | 0.44 | 0.56 | 0.69 | 0.75 | 0.93 |
Heat pumps | 0.55 | 0.55 | 0.58 | 0.62 | 0.67 |
Geothermal energy | 0.25 | 0.24 | 0.25 | 0.25 | 0.27 |
Financial Indicators | Group | p | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
GPO (N = 42) | Independent Enterprises (N = 22) | ||||||||||
Mean | Me | Std. dev. | Min | Max | Mean | Me | Std. dev. | Min | Max | ||
Current Financial liquidity Ratio | 2.86 | 2.35 | 1.54 | 1.2 | 9.3 | 1.50 | 1.35 | 0.61 | 0.8 | 3.3 | 0.0000 *** |
ROS (return on sales) (%) | 4.43 | 4.10 | 2.41 | 1.00 | 9.20 | 1.40 | 1.25 | 0.55 | 1.00 | 3.40 | 0.0000 *** |
Operating cycle (days) | 142.9 | 138 | 33.1 | 94 | 201 | 157.2 | 159.5 | 21.4 | 116 | 198 | 0.0669 |
CCC (days) | 78.5 | 83 | 34.7 | 11 | 147 | 43.9 | 46 | 16.2 | 2 | 65 | 0.0001 *** |
Financial Indicators | Group | p | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
GPO (N = 42) | Independent Enterprises (N = 22) | ||||||||||
Mean | Me | Std. dev. | min | max | Mean | Me | Std. dev. | min | max | ||
Share of receivables in current assets (%) | 44.1 | 45.5 | 9.5 | 23.0 | 70.0 | 42.3 | 44.5 | 7.5 | 23.0 | 57.0 | 0.3723 |
Share of inventory in current assets (%) | 49.5 | 51.0 | 9.5 | 28.0 | 61.0 | 52.5 | 53.0 | 5.9 | 40.0 | 63.0 | 0.4193 |
Turnover Ratios (Days) | Group | |
---|---|---|
GPO | Independent Enterprises | |
Operating Cycle (Days) | ||
Receivables | 0.85 (p = 0.0000 ***) | 0.72 (p = 0.0002 ***) |
Liabilities | 0.28 (p = 0.0755) | 0.67 (p = 0.0006 ***) |
Inventory | 0.55 (p = 0.0002 ***) | 0.83 (p = 0.0000 ***) |
Financial Indicators | Group | |
---|---|---|
GPO | Independent Enterprises | |
ROS (Return on Sales) (%) | ||
Share of receivables in current assets (%) | 0.40 (p = 0.0094 **) | −0.04 (p = 0.8450) |
Share of inventory in current assets (% | −0.61 (p = 0.0000 ***) | 0.02 (p = 0.9360) |
Credit position | 0.50 (p = 0.0007 ***) | −0.15 (p = 0.5151) |
Operating cycle (days) | 0.14 (p = 0.3900) | 0.03 (p = 0.8851) |
Financial Indicators (days) | Group | p | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
GPO (N = 42) | Independent Enterprises (N = 22) | ||||||||||
Mean | Me | Std. dev. | Min | Max | Mean | Me | Std. dev. | Min | Max | ||
Receivables turnover ratio | 72.1 | 71 | 25.3 | 27 | 132 | 75.9 | 74.5 | 10.9 | 60 | 100 | 0.5794 |
Liabilities turnover ratio | 63.7 | 62 | 24.6 | 21 | 127 | 113.4 | 117 | 24.9 | 68 | 154 | 0.0000 *** |
Inventory turnover ratio | 70.5 | 67 | 18.9 | 44 | 124 | 81.3 | 81 | 15.5 | 50 | 119 | 0.0026 ** |
Effects | Current Financial Liquidity Ratio R2 = 64.9%; F = 37.0; p = 0.0000 *** | ||
---|---|---|---|
B | p | β | |
Group (GPO vs. independent) | 3.510 | 0.0351 * | 1.160 |
Receivables turnover ratio | 0.010 | 0.3512 | 0.155 |
Liabilities turnover ratio | −0.033 | 0.0000 *** | −0.785 |
Inventory turnover ratio | 0.019 | 0.0328 * | 0.240 |
Group × receivables turnover ratio | 0.015 | 0.1841 | 0.766 |
Group × liabilities turnover ratio | −0.019 | 0.0046*** | −1.173 |
Group × inventory turnover ratio | −0.016 | 0.0759 | −0.805 |
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Zimon, G.; Sobolewski, M.; Lew, G. An Influence of Group Purchasing Organizations on Financial Security of SMEs Operating in the Renewable Energy Sector—Case for Poland. Energies 2020, 13, 2926. https://doi.org/10.3390/en13112926
Zimon G, Sobolewski M, Lew G. An Influence of Group Purchasing Organizations on Financial Security of SMEs Operating in the Renewable Energy Sector—Case for Poland. Energies. 2020; 13(11):2926. https://doi.org/10.3390/en13112926
Chicago/Turabian StyleZimon, Grzegorz, Marek Sobolewski, and Grzegorz Lew. 2020. "An Influence of Group Purchasing Organizations on Financial Security of SMEs Operating in the Renewable Energy Sector—Case for Poland" Energies 13, no. 11: 2926. https://doi.org/10.3390/en13112926