Evaluate your GPO partnership regularly to ensure value is still being delivered, savings are recognized, and expectations are met.
Every procurement professional knows about the importance of measuring supplier performance. But you may be surprised to hear that organizations rarely bring the same level of rigor to evaluating their Group Purchasing Organization (GPO).
Why not? Most likely because a GPO isn’t strictly a supplier; rather, we act as an intermediary that leverages the collective buying power of members to negotiate better pricing and terms with suppliers on their behalf.
The other reason procurement might not bother evaluating GPO performance is because membership of some GPOs (including Una) is 100% free. No spend = no need to measure ROI, right?
Evaluating Your GPO Partnership
We encourage our members to regularly evaluate the value they receive from being an Una member, because we’re confident they will continue to be impressed. We also like to remind our members of all the value they’re getting beyond the average cost savings of 18-22% in categories like technology, shipping, office supplies, food, travel, facilities maintenance, and more.
Let’s dive in with Una’s suggestions for evaluating your GPO partnership.
Cost Savings
First things first: a solid GPO should clearly quantify potential savings on the products you buy. Keep in mind that savings in some categories will inevitably be higher than others. Look first at the average savings across all categories, then dive into category-specific savings.
How are these savings achieved? Through the power of bulk purchasing, providing you with access to incredible supplier discounts you would never have been able to negotiate on your own.
Time and Effort Savings
How much time and effort has your GPO helped you save? Using a GPO means you can, if you choose to, bypass entire stages of the procurement process such as supplier research, RfX, and contract negotiation. Think about the achievements that you may not have had time for without the time savings made possible through group purchasing.
Breadth of Contracts
How many supplier contracts are in the GPO’s portfolio? Una’s, for example, consists of over 2,500 contracts across six main categories of indirect spend:
- Corporate services
- Food & food distribution
- Jan/San and MRO
- Office supplies
- Packaging and supplies
- Telecom and IT
Contract Flexibility
Next, evaluate the GPO's contract terms. Is there flexibility? Can you opt out if necessary or purchase outside the network? A good GPO should allow you the freedom to opt in and out as your needs change.
Price Protection
Getting a great price from a supplier is the first step, but how long will it last? Many of the contracts Una has in place offer members an unmatched degree of price protection, locking in prices and capping price hikes for several years at a time.
Compliance and Risk Management
How has the GPO helped you improve in terms of improving compliance and lowering procurement/supply chain risk? How much time have they saved?
Alignment With Your Procurement Strategy
Your GPO should act as an extension of your team, supporting and enhancing your existing procurement strategy rather than replacing it. If you find that your GPO is dictating your strategy, it might be time to look for an alternative.
Right Fit
Is the GPO model the right fit for your needs? Consider whether it’s a Vertical GPO servicing a specific sector like healthcare or a Horizontal GPO like Una with broader coverage across indirect categories.
Tail Spend Management
Does the GPO have the ability to help you bring tail spend under control? Can you quantify the savings across the spend tail? Effective management of tail spend can lead to substantial savings and improved procurement efficiency.
Quality of Suppliers
Ensure that the GPO offers high-quality suppliers that meet your specific needs. After all, cost savings mean little if the quality is lacking.
Communication, Support, and Member Experience
Strong communication is key. Evaluate how often the GPO communicates with you and the quality of that communication. Are support teams responsive? Is there a dedicated account manager who knows your business? All Una members have a dedicated Member Experience representative working to answer contract and supplier questions, identify additional cost savings opportunities, and ensure their success.
Data and Cost Analytics
Does your GPO provide ongoing data analytics and business intelligence? Una members receive a free cost analysis on direct and indirect spend categories.
Track Record
How did the GPO respond when you went to them with a specific problem? Were they able to help you solve it? How did they respond in a crisis (like COVID-era supply chain disruption)?
Don’t Wait for an Annual Review
Schedule regular check-ins with your GPO to discuss performance. Regular reviews, clear communication, and a focus on quality and efficiency can help ensure that your GPO remains a valuable partner in your procurement journey.
Ready to get started? Contact our team to learn how group purchasing can work for you!
