A group purchasing organization is an entity that represents the collective purchasing needs of hundreds of small and medium-sized businesses to negotiate contracts with product and service suppliers. GPOs are also often called buying groups or collective buying groups. Through these contracts, GPOs are able to offer greater efficiency and lower procurement costs to their participants by leveraging their combined purchasing power.
What types of services do group purchasing organizations provide?
Businesses and organizations across many markets are increasingly relying on buying groups to help manage their purchasing, as well as to take advantage of cost savings they otherwise could not access. Many GPOs offer various solutions to help streamline and standardize purchasing processes, and help provide a unique system for organizations to coordinate evaluative market advances. By drawing upon a broad base of member companies, GPOs are able to give similar organizations a route for evaluating new products and services. Learn what UNA provides for its clients.
Are there different types of GPOs?
There are many distinct aspects of group purchasing organizations that vary from GPO to GPO. Size, type of ownership, and additional purchasing services offered are several of the widely varying aspects. Some buying groups are owned by hospitals, while other GPOs do not have a direct link to the companies or markets they serve. Some GPOs are nonprofit focused, while others only serve proprietary facilities. Some collective buying groups have an extensive list of supplier contracts that allows their members access to a vast array of products, while others focus only on specific product categories.
Some of the most common group purchasing organizations are in the following industries:
Small business purchasing
Association and member organizations
How many buying groups are there in the U.S.?
There are more than 600 group purchasing organizations in the United States, about 30 of which are very large and can negotiate substantial contracts for their member companies. The smaller GPOs may focus on establishing agreements with regional vendors for services or products, or offer their members access to contracts from larger groups.
What are the most common GPO benefits?
Since GPOs represent many companies, they are able to offer efficiencies and cost savings to their members on purchases they already make. By combining the purchasing power of multiple businesses, GPOs bring balance to the negotiating equation between purchasers and suppliers. Group purchasing organizations are able to help their members reach substantial savings on their procurement needs by removing barriers and supply chain costs, not by contracting for the cheapest products or services. These savings come through up-front pricing discounts, financing dividends, and lower administrative costs. In addition, larger GPOs also provide valuable cost-avoidance savings to organizations by helping them standardize and streamline their purchasing.
Who is the largest GPO?
Vizient, one of UNA’s affiliate partners, is the largest group purchasing organization in the country with $100 billion in annual purchasing volume. UNA’s members benefit from the power of Vizient and receive industry-leading pricing on the broadest portfolio of products and services available.
What is the difference between purchasing and procurement?
‘Purchasing’ and ‘procurement’ are often used interchangeably —and most people understand the intended meaning. However, they do actually pertain to separate elements of securing the goods and services your company uses. Procurement refers to setting up the structure of the deal —finding and vetting vendors, agreeing on payment terms and negotiating contracts, as well as the actual purchasing of the goods and services. Purchasing refers to the small portion of the whole procurement process that deals specifically with acquiring the goods and services for your organization.
If UNA doesn’t charge a membership fee, how do you make money?
UNA relies on fees paid by suppliers to finance the services we provide to our members. These contract administrative fees are generally based upon the purchase price that the member pays for a product purchased through a GPO contract. There is no cost to join UNA and membership participation is completely voluntary.
Do the suppliers charge me more by going through UNA instead of direct from them?
Absolutely not – you will actually pay less than going directly to a supplier. Since UNA is able to leverage the purchasing power of all of our members, suppliers see value in partnering with us to offer our members a lower price. In addition, UNA is taking aggressive measures to help members reduce overall supply expenses and ensure that the value received from contracts remains best-in-class.