Education Industry Challenges & the Role of Group Purchasing in Reducing Costs

Political and economic shifts are happening fast these days, and it’s taking a toll.

Credit analysts at Moody’s revised its 2025 outlook for the higher education sector in March, lowering the outlook from stable to negative, citing growing financial pressures across institutions nationwide. The warning was clear: colleges and universities are entering a period of intensified fiscal strain.

Michael Nietzel and Charles Ambrose presented a sobering picture in Inside Higher Ed in a piece titled “College on the Brink.” Nietzel, President Emeritus of Missouri State University, and Ambrose, former President at the University of Central Missouri and Pfeiffer University, summed up higher ed challenges this way: “At the vast majority of colleges, even some elites, the biggest problem is a more fundamental one, common to most enterprises: how to operate in a financially responsible way.”

The challenges are not isolated.

“A prolonged stretch of sinking enrollments, a global pandemic, uncertainties in state funding, a public increasingly skeptical of their value, and their own tendencies to overbuild and overspend have left hundreds of colleges facing unsustainable futures,” they wrote.

Against this backdrop, higher education procurement teams are under tremendous pressure to rethink traditional operations. Among the most effective strategies emerging today: leveraging group purchasing to drive significant cost efficiencies.

Mounting Higher Ed Challenges

Higher education institutions grapple with a convergence of factors:

• Financial pressures: Tuition increases are struggling to keep pace with rising operating costs, which grew 3.4% in 2024 alone. Add in inflation, tariffs, and ongoing supply chain disruptions, and it becomes clear that traditional budget models are struggling.
• Enrollment declines: The number of traditional college-age students continues to shrink, especially in the Midwest and Northeast, reducing tuition-driven revenue for many campuses.
• Political and economic instability: Cutbacks in NIH funding, concerns about student aid, tariffs, endowment tax levels, and changing government policies are creating a volatile economic environment.
• Technological demands: Students and faculty expect more robust technology, cybersecurity, and digital learning platforms, driving new categories of spending.

Collectively, these trends create an environment where procurement efficiency is critical for survival.

The Traditional Procurement Model vs. Group Purchasing

Procurement teams at colleges and universities have historically relied on decentralized, manual processes for sourcing goods and services. While this approach allows for flexibility, it has also led to several inefficiencies, including limited negotiation power, higher administrative burdens, and a lack of standardization.

This process no longer works. When austerity is needed, you need greater control to maximize institutional spend and overcome higher ed challenges.

Group purchasing offers a compelling solution to these challenges. By collaborating with peer institutions through a cooperative contract, colleges and universities can amplify their purchasing power to achieve greater savings, faster procurement cycles, and stronger contract terms.

Many group purchasing organizations (GPOs) provide access to pre-negotiated contracts that have already undergone a competitive solicitation process. This saves time, streamlines compliance, and often results in discounts of 10–15% or more on critical purchases.

Beyond financial savings, partnering with an education-focused GPO helps reduce administrative workloads, allowing procurement teams to focus on strategic initiatives like supplier relationship management, long-range forecasting, sustainability efforts, and value-added services.

Real-World Impacts of Group Purchasing in Higher Education

The benefits of group purchasing extend across multiple categories of spend. Institutions have leveraged cooperative contracts for a wide variety of goods and services. Some of the more common procurement categories include:

• Athletics
• Food & Food Services
• Offices & Classrooms
• Facilities & MRO Services
• Information Technology (IT)
• Professional, Consulting & Administrative
• Financial Services
• Logistics & Travel
• Research & Scientific

In addition to  volume pricing discounts, cooperative contracts often include value-added elements like extended warranties, bundled services, and enhanced support terms, which individual institutions would struggle to negotiate independently.

Group Purchasing Is a Strategic Response to Higher Ed Challenges

It’s tempting to view GPOs as a short-term cost-saving tactic, but the truth is that group purchasing is an essential component of long-term strategic planning in higher education. Cooperative contracts promote:

• Financial sustainability: Reducing structural budget deficits without cutting vital services.
• Operational resilience: Creating procurement processes that can adapt to economic changes and supply chain fluctuations.
• Strategic agility: Freeing procurement and finance teams to focus on initiatives that directly impact the institution’s mission and reputation.

Given the current financial climate, the stakes are too high for colleges and universities to rely solely on traditional methods. Institutions that incorporate group purchasing into their financial resilience strategies are better positioned to weather ongoing disruptions and thrive. By embracing cooperative solutions, institutions can protect their futures without compromising their standards.

E&I Cooperative Services is the only member-owned non-profit sourcing cooperative focused exclusively on education. There is no cost to become a member and join 6,000 academic institutions that leverage cooperative contracts to lower costs, streamline procurement, and reduce risk. Learn about the many benefits of membership today.