How to Make the Most of a Group Purchasing Partnership

According to figures from Spend Matters, upwards of 20% of Fortune 1000 companies participate in GPOs. And 85% of the time, these companies save 10% or more.

For those who aren’t familiar with what these groups can do, a GPO is a buying consortium committed to helping businesses save money through aggregate purchasing. Anyone who’s ever set foot in Costco Wholesale knows that buying in bulk is usually cheaper, but not everyone wants to buy 32 watermelons at once. GPOs use cross-industry demand to leverage discounts with manufacturers and distributors.

GPOs Span Many Industries
These consortiums are common to industries ranging from industrial manufacturing to agriculture to healthcare. GPOs represent 97% of not-for-profit hospitals, providing contracts for 72% of purchases, including MRI machines, office supplies, and ambulances. In 2007, Savvik Buying Group helped members realize savings of more than $20,000 when purchasing ambulances and other equipment.

In this stagnant economy, manufacturers have been relentless in reducing costs—with much of it coming through headcount reductions. However, they often struggle to find cost savings in procurement, leading to higher prices and a drain on resources. For example, The Purchasing Department puts the purchasing power usually reserved for large organizations into the hands of all manufacturing firms. It focuses on products and processes while keeping operating expenses low and suppliers’ service levels high.

GPOs have serious bargaining power when they act on behalf of so many member companies. Unified Strategies Group—America’s leading purchasing cooperative for independently owned vending, office coffee, micro-marketing, and food services companies—has 700 members operating across 50 states, with annual revenues totaling over $4 billion.

Boost Your Bottom Line
GPOs allow you to save money on products you’re already buying. GPOs partner with a range of suppliers offering a variety of services, so you’ve got choices when it comes to your purchasing. There’s no obligation to buy, there are no costs to you, and there’s no threshold to meet to receive the discounts.

Many GPOs don’t even charge members a fee; instead, they recoup operational costs from the vendors, for whom they provide a guaranteed market.

Because GPOs handle purchasing, you can reallocate your purchasing personnel. And because a GPO’s job is to purchase supplies from a range of vendors, you won’t have to worry about running dry on supplies.

How to Get the Most Out of a GPO Partnership
1. Your first step should be to familiarize yourself with the marketplace. The right GPO is out there; you just have to know the ins and outs of your options before forging a partnership.

2. Identify a few categories you spend a lot on—these are areas in which you stand to gain savings. Vet potential partners based on your needs, the value proposition of each GPO, and the overall cost savings potential of each.

3. When you’re ready to make your selection, set a timeline for the transition. See how much help your GPO partner is willing to offer when switching over your purchasing process.

Your GPO partner should provide high-impact solutions in a timely manner, followed by additional resources on an ongoing basis. The end goal should be to save time and money and improve your relationships with vendors.