Procurement, sourcing and supply chain teams are instrumental to their companies and have proven to be a powerful force navigating some of the biggest challenges their businesses face in today’s market.
Those of you in these roles are masters of your craft and already achieving success through your strategic mindset at work. Right now you have an opportunity to make an even bigger impact at your company by simplifying and strengthening your process with the help of a group purchasing organization (GPO).
Partnering with a GPO allows you and your purchasing team to better manage spend along with the diverse categories in your spend cube. Group purchasing increases your buying power, gives your company more visibility into the market, and immediate access to industry-leading supplier solutions and subject matter experts.
Let’s discuss the definition of a GPO and how adding this strategy to your procurement process can lead your organization to success.
GPOs Explained
Group purchasing organizations (GPOs) streamline your procurement process and increase your buying power. How is this done? The GPO combines the spend of businesses from diverse industries to achieve better pricing, service levels and account representation from suppliers. Member companies represent a wide range of industries including, healthcare, hospitality, foodservice, electrical, plumbing, nonprofit and industrial manufacturing.
Members can leverage GPO contracts, which have lower prices and better contract terms. Through saving you time while freeing up internal procurement resources. We refer to this as 'Speed to Savings.’ Group purchasing helps you achieve speed to savings by bypassing the lengthy RFP process and providing you with pre-negotiated contracts at the best value giving you more spend under management.
Suppliers, the network of companies that offer goods and services to member companies, also benefit from the GPO by obtaining an expanded market share, increased access to industry insights and data, and better buyer relationships. With category offerings in facilities and MRO, freight and logistics, HR and more, you exceed the expectations of stakeholders and better equip end users.
Types of GPOs
There are three main types of group purchasing organizations:
- Horizontal market: Horizontal market GPO members exist in many different industries, but they purchase a lot of the same goods and services to build their products and run their companies. OMNIA Partners is an example of a horizontal market GPO.
- Vertical market: A vertical market GPO is focused on one industry or vertical. For example, in the healthcare market, there are small- and mid-sized medical centers or hospitals that join forces to reduce their costs.
- Master buyer: This is when one chief buying organization has substantial contracts in place with vendors and allows additional companies to buy off those contracts. The automotive industry is a perfect real-world example of the master buyer model because Tier 1 and Tier 2 suppliers can access the pricing contracts large automotive manufacturers have negotiated with vendors.
Achieve Cost & Time Savings through Group Purchasing
Procurement, sourcing and supply chain professionals are in the perfect position to help their companies excel. Through group purchasing, you can speed up and make your processes more seamless while achieving lower prices and saving time to dedicate to other key projects. Organizations turning to the group purchasing model are able to bypass hundreds of hours in sourcing time. Your procurement team can accomplish twice as much in the same amount of time with the same number of resources when you partner with a GPO.
Companies are leveraging buying groups to manage their supply chains, help drive efficiencies and have a better experience with supplier partners. It’s an exciting time to team up with a GPO, known as a catalyst for innovation. Joining the group purchasing community of members and supplier partners opens up a door where you can share and learn new ideas while fostering growth and success.
