How to Manage Categories with Group Purchasing
By Hugo Britt | August 12, 2021
In this article, we’ll show you how to know when it’s the right time to work with a group purchasing organization (GPO), how to choose the categories suitable for group purchasing, and how to get started on the road to unprecedented savings.
Five signs it’s time manage categories with group purchasing
Through experience with hundreds of clients, we’ve learned to recognize several signs that mean it’s a good time to pick up the phone and start a discussion about partnering with a GPO.
Here are the top five:
1. You’ve picked all the low-hanging fruit in procurement
You’re running out of ways to keep driving cost savings and don’t want to squeeze your suppliers for every last cent. Group purchasing offers an additional strategy that can unlock average savings of 22% through the power of bulk discounts.
2. You run a one-person or very small procurement team
You simply don’t have the resources to drive value across every category. A GPO can act as an extension of your procurement team, working within your procurement strategy.
3. You’re getting frustrated with lengthy RFP processes and drawn-out negotiations
A group purchasing organization like Una has pre-negotiated contracts and established supplier relationships ready to go. All you have to do is pick your favorites and start saving.
4. You know there are savings to be found in the spend tail...
…but don’t know where to start. Outsourcing tail spend management to a GPO can identify and unlock immediate savings.
5. You don’t have the volume needed to drive deep discounts
Small and medium-sized businesses can join a GPO to supercharge their buying power and access savings that are usually only available to the very largest companies.
Choosing the categories most suitable for Group Purchasing
Horizontal GPOs like Una offer supplier catalogs with hundreds of pre-negotiated contracts in key indirect categories like corporate services, office supplies, shipping and logistics, facilities maintenance, and food/food distribution.
What makes these categories the most suitable for group purchasing? Being indirect, these categories are common across thousands of businesses like yours. Banding together under the umbrella of a GPO offers strength in numbers, boosts buying power, and provides access to unprecedented discounts. Clients often prefer to keep direct (strategic) categories under their centralized procurement team’s immediate control.
Procurement teams may choose to outsource the management of one category, several categories, or all their indirect categories to a GPO. It’s completely up to them.
Vertical GPOs deal with specialist categories that are very expensive if an organization tries to manage them alone. Medical and dental equipment, for example, can be notoriously expensive but the price will come down if buyers across several different medical facilities group together.
Getting started with GPO-boosted category management
It begins with a phone call. At Una, the first step is a 30-minute discovery call with one of our Senior Sourcing Advisors where both parties decide if there’s potential for a good fit. The Sourcing Advisor will ask questions such as what your goals are, what problems need to be solved, and what success looks like for you.
Knowing your goals helps us set the timeline and understand potential opportunities to explore.
The next step is to gather historical spend data and move the process forward to the cost analysis stage, analyzing your spend data one category at a time. Usually, we start with common categories such as office supplies, packaging, or MRO.
Where Una has contracts in place that will yield additional cost savings, we can connect buyers to contracts within days or weeks. We’ve already done the heavy lifting in terms of vetting suppliers and negotiating contracts, which saves you months of work and enables you to focus on activities that drive true value.
After the initial savings are unlocked through volume discounts, Una works with members to keep abreast of their needs, continue to analyze their spend, understand which contracts are being utilized, and identify additional savings opportunities to ensure no money is left on the table.
Want to learn more? Download Una’s playbook for getting the most out of your GPO membership and learn step-by-step how to manage categories with group purchasing to save you money, time, and effort.