3 Things Every Business Needs to Know About Group Purchasing Organizations
Regardless of size, here are three things every business needs to know about working with group purchasing organizations to save more.
By Mackenzie Oakley | September 19, 2023
Here at Una, we have an entire resource center dedicated to empowering procurement to make informed decisions regarding their sourcing strategies and ways to improve their bottom line. That includes educating business leaders about GPOs and how working with a group purchasing organization could be one of the best moves you make for your business this year.
Despite its long history, the concept of group purchasing isn’t always known to be a viable option for companies in the private sector, yet the ability to work with a GPO is something that is available to all businesses out there.
Here are 3 key things every business owner needs to know about group purchasing organizations.
#1. Group purchasing organizations are a buying solution
Most businesses – small, medium, and large – have operating expenses which include everything from shipping, freight, and mailing, food, and information technology to JanSan and MRO, office supplies, corporate travel and more. Many times, these categories of spend are left unmanaged due to a severe lack of manpower and other resources.
When these categories are managed, however, spend amounts can vary widely depending on the size of the organization and don’t usually warrant the ability to secure favorable or discounted pricing directly from the supplier. Partnering with a group purchasing organization allows businesses to leverage the size and scope of the GPO to increase their buying power and access pre-negotiated contracts that have discounted pricing worked into the agreements.
A GPO is a solution for leveling the playing field for all businesses to access savings within their indirect spend categories that they’d otherwise be missing out on because of spend amounts.
What does it mean to increase your buying power?
A GPO leverages or combines all of its members and their purchasing volume to negotiate discounts with suppliers on its members’ behalf. When you join the GPO, you get to take advantage of those pre-negotiated contracts and pre-determined volume without having to hassle with setting your own terms and hoping you’re getting the best possible pricing available.
Most of the time, a GPO is used to help businesses save on their indirect spend or unplanned spend, but can also be used for direct spend categories as well.
Group purchasing organizations operate as a buying solution for every business to save more money, time, and effort, and can be a very important element of a company's procurement strategy.
#2. The best group purchasing organizations are free of obligations
Any business regardless of size can join a GPO and most are free. At Una, we never charge membership fees which means our program is free to join and our contracts are free to use.
Depending on your needs, you’re able to pick and choose which suppliers to work with, without ever having to worry about minimum purchasing requirements. You can also cancel your membership at any time.
What's the catch?
To some, the concept of a group purchasing organization sounds too good to be true and it’s one of the most common things we hear during the process of educating others on how GPOs really work.
The best group purchasing organizations increase your purchasing power, deliver value beyond cost savings, and give you access to better contracts and suppliers. A real GPO partnership should work with you to build a recipe for success based on your own goals, focusing on specific categories that will directly impact your business as a whole.
If you’re working with the right GPO, there truly shouldn’t be a “catch.” Transparency is key and Una strives to take a consultative approach with each of our members to define what success looks like for them, and figure out a plan together to make it happen.
#3. The benefits of a group purchasing organization extend beyond cost savings
Saving money is crucial, and oftentimes at the top of your list of priorities. However, the real value of working with a GPO will be found beyond the initial cost savings. GPOs have the ability to offer assistance on everything from supply chain management, data and analysis, education, and more.
Beyond cost savings and increased buying power, other benefits include:
- Supply chain and contract management solutions that help standardize and streamline purchasing needs
- Cost comparison analyses and data analytics when it comes to your direct and indirect spend categories
- Customized member programs for when your purchasing needs require out-of-the-box setups and flexibility
- Category management services with in-house category experts
- Personalized consulting to identify blind spots in spend visibility, review current spend and pinpoint where savings can be found
- Increased speed to savings thanks to pre-negotiated contracts in place
It's the real deal
The problem isn’t actually selling the idea of working with a GPO to a business – it’s a clear win-win situation for everyone involved. The problem is that most companies just don’t know that working with a group purchasing organization is even available to them.
The truth is, working with a GPO and obtaining significant cost savings, along with additional value-added benefits, is completely possible for many, if not all, of the businesses in the private sector.
Supplementing your current procurement strategy with a GPO is a great way to add additional resources to your team. With Una on your side, you’ll have access to dedicated Sourcing Advisors working behind the scenes to ensure you’re connected to the contracts that make sense for your business, and a Member Experience manager researching additional savings opportunities that may benefit your organization. With supplier and contract negotiations off your plate, you’re free to focus on other strategic initiatives and ways to grow your business.
To learn more about getting the most value from your GPO membership, download our free playbook: