When Should You Outsource Procurement to a GPO?
By Hugo Britt | June 29, 2021
When is the best time to pick up the phone and talk to a group purchasing organization (GPO) about outsourcing procurement activities? Divvying up certain portions of the sourcing process can help you cut costs and reduce the time and effort it takes to negotiate contracts and vet suppliers.
Here at Una, one of the first questions we ask new partners is what prompted them to get in touch with us. We’ve discovered that their reasons fall into five key areas.
Outsource procurement when...
1. You want to cut the cost of tail spend
Hard to analyze and expensive to manage, there’s nothing quite so overwhelming as trying to tackle tail spend. Procurement professionals often get in touch with us after undertaking tail spend analysis, realizing the scale of the challenge, and searching for a solution.
We help our partners by analyzing their tail spend to find categories that could benefit from access to our bulk-purchasing-driven contracts to generate immediate cost savings.
Download our free tail spend playbook to get a play-by-play for taming tail spend in a way that achieves full spend visibility and improves your bottom line.
2. You want to boost and scale buying power
Every organization is different, but there are several procurement categories that can be found in just about every company. These include indirect spend categories like corporate services, office supplies, shipping and logistics, facilities maintenance, food, and food distribution.
Everybody is purchasing in these common categories, which is why it makes sense to band together and unlock enhanced buying power with a horizontal GPO like Una.
What about purchasing in niche or specialized categories like dental or medical equipment? Vertical GPOs serve niche industry segments, offering member companies a way to access discounts that would otherwise be out of reach.
3. You run a one-person procurement function and need to move faster
Spare a thought for one-person procurement teams. These sourcing heroes do their best to cut costs, reduce risks, and improve procurement processes but there’s ultimately a limit on what they can get done.
That’s why a GPO is often a one-person procurement function’s best friend. If you outsource procurement to a GPO like Una, we can take over the management of indirect spend, freeing up our partner’s time to focus on strategically important categories and relationships.
Alongside cost savings, GPOs also save effort and increase speed through pre-negotiated supplier contracts that remove the need for lengthy supplier discovery and RFP processes.
4. You need extra resources but can’t hire more team members
Another time sourcing professionals get in touch with Una is when they want to use us as an extension of their procurement team. This usually occurs when they run the numbers and realize that instead of filling a new upper-level position to manage a category or subcategory, it would make a lot more sense to use the GPO’s (free) services instead.
Alternately, procurement leaders often call us because they do not have the budget to increase their team size, but understand that they need more resources if they want to hit their savings targets.
The right GPO will work within your existing procurement strategy rather than trying to shoe-horn in a one-size-fits-all solution.
5. You have picked all the low-hanging fruit
When you’ve already collected all the quick wins in procurement, where do you turn next to generate additional cost savings? Many teams make the mistake of attempting to squeeze their suppliers for every last cent, but this will generate limited savings and damage relationships.
Instead, partner with a GPO to unlock an average saving of 22% across indirect and direct categories. From supplier and supply chain management to data analysis and education, the benefits of a group purchasing organization reach as far as providing you with the support and tools you need to source smarter and become more profitable.
Thinking about outsourcing procurement? Contact us today to learn how we can help.
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