7 Advantages of Group Purchasing
Explore seven of the top advantages of group purchasing and find out why working with a group purchasing organization is the right move for your business.
By Mackenzie Oakley | September 28, 2023
There are three things many procurement professionals try to achieve in their role:
- Save their company money,
- Be more conscious of their time, and
- Focus on the activities that will truly drive value for the organization
But, the way we procure goods and services is cumbersome, riddled with steps and processes to follow, RFPs to submit, contracts to negotiate, and more. It’s easy to get distracted from the true goals you’re trying to reach, especially if resources are limited and you’re trying to accomplish too much on your own.
Thankfully, procurement teams have the opportunity to capitalize on the power of group purchasing to make their jobs easier and catapult them into a position of success, driving value and reducing costs for their organizations, while saving time and effort on their own behalf.
What is group purchasing
The group purchasing method of sourcing is when buyers join a group purchasing organization and use the GPO’s collective buying power to purchase goods and services at discounted rates.
Because the GPO had previously negotiated contracts with lower rates based on their members’ committed volume of spend, members are immediately able to take advantage of discounted pricing on the items they need to run their business, without actually needing to purchase more.
Any business, regardless of size or industry, can join a GPO to leverage the collective buying power of its membership base.
For another brief explanation, check out this video:
Partnering with with a group purchasing organization paves the way for procurement leaders to utilize purchasing solutions that elevate existing strategies, increase cost savings, and refine their approach to effective spend management.
The advantages of group purchasing
When you decided to partner with a group purchasing organization, it paves the way for procurement leaders to utilize purchasing solutions that elevate their existing procurement strategies, increase cost savings, and refine their approach to effective spend management.
Here are 7 of the top advantages of group purchasing:
1. Cost savings
While not the only goal, finding cost savings is arguably one of the most important tasks procurement’s scope of work. There are several ways sourcing professionals can reduce costs and make a massive impact on the organization, but very few strategies offer a straight shot to savings right off the bat.
When working with a GPO, the fact that cost savings can be realized in a matter of weeks is a huge advantage of incorporating group purchasing into your procurement strategy.
Use Una’s free calculator to estimate your own savings:
2. Time savings
GPOs can facilitate a faster way to savings for your organization. Thanks to the pre-negotiated contracts that are already in place, you are able to bypass the supplier search process and contract negotiations because the GPO has done it for you.
This frees up your time to focus on more strategic areas of spend and value-driving initiatives that will impact your organization at a larger scale.
3. Collective buying power
Oftentimes suppliers will set prices on items or services based on the amount of money you spend with them.
For this hypothetical example, imagine your organization is making a purchase of 10 desktop computers and is being charged $500 for each unit. A larger company may come along with a need to purchase 100 computers, but they are only charged $350 per unit. Typically, the more you buy, the more you’ll save, right?
Now imagine that both your company and the larger business purchase the computers through a contract offered by a group purchasing organization. The GPO has negotiated a rate of only $150 per unit, meaning any GPO member can get this price regardless of how many computers they purchase. You’re able to buy the 10 computers you need and save more money in the process thanks to the increased buying power of the GPO.
A GPO is typically made up of thousands of businesses, all with varying needs and quantities of spend. When a GPO can offer that aggregate spend to a supplier, it encourages the supplier to offer deeper discounts thanks to the committed volume of spend the GPO provides.
4. Access to resources
Whether it be limited staffing, outdated technology, the inability to see spend data, or minimal category knowledge, the lack of resources is a common complaint amongst procurement professionals, especially when it comes to indirect spend.
We all know the bulk of a procurement department’s time and energy will be dedicated to direct spend categories and other areas of strategic spend, leaving little to no concern for indirect or tail spend. There is, however, significant value and savings to be found here. Partnering with a GPO to tackle indirect spend immediately grants your organization access to resources that allow you to manage these categories effectively.
A GPO partner should act as an extension of your procurement team, completing tasks, getting you connected to savings quickly, and be a trusted advisor that’s helping you reach your goals.
5. Cost analysis
Understanding your company’s current purchasing and procurement status can be challenging and time-consuming. GPOs can help sort through the data and analyze your savings quickly and efficiently.
A GPO like Una uses cost analyses to serve as a way to benchmark current pricing and assess the value of your current contract with a supplier. Our team will send your spend information directly to our supplier base to compare costs and identify potential savings opportunities.
To see a sample cost analysis, check out these two additional resources below:
Cost savings, a reduction in the time it takes to source, supply chain management, and access to additional procurement resources are just a few of the advantages of group purchasing.
6. Supply chain management and support
GPOs can provide businesses like yours with valuable cost-avoidance solutions by standardizing and streamlining their purchasing through supply chain management.
When a GPO manages some procurement activities from start to finish, it cuts down on the number of internal resources required to handle purchasing for a business. This may not make sense for every single category, but when it comes to nonstrategic spend or tail spend, using a GPO to help manage suppliers is a smart move.
Importantly, having an established GPO partnership allows for quick access to a robust supplier catalog, making switching or working with a new supplier seamless in the event of supply chain disruptions.
7. Free membership
Another huge advantage of group purchasing is the fact that businesses can implement it free of charge. Most GPOs offer free membership, and at Una, our pricing structure is set up to ensure our contracts are always free to use.
In addition to never charging a membership fee, we do not require members to purchase from certain suppliers or commit to a specified purchase volume. Members are also free to pick and choose which suppliers will best suit their needs. As a result, you are in control and our team of Sourcing Advisors is here to provide support every step of the way.
Ready to take full advantage of everything group purchasing has to offer? Get in touch with our team of Sourcing Advisors to learn more.