Group Purchasing FAQs and Answers
Get answers to your top questions.
Answers to the most frequently asked questions about group purchasing and how group purchasing organizations work as part of a holistic approach to sourcing.
Group Purchasing FAQs: Covering the Basics
Una is dedicated to providing procurement leaders with the resources they need to make an impact within their organizations.
That includes tools that are easy to navigate so you can find the answers you’re looking for and feel confident knowing you’re equipped to continue delivering cost savings and bringing additional value to the table.
Here are answers to the most common questions asked about the concept of group purchasing and how group purchasing organizations work.
Don’t see what you’re looking for? Contact our team and we’d be happy to provide the answers you need.
What is a Group Purchasing Organization?
A group purchasing organization (GPO) is a platform that leverages the collective buying power of its members to secure volume-based discounted prices on the goods and services they need to run their businesses.
When you join a GPO, its network grows, increasing your power buying as well. The more members, the bigger the discount, giving you access to savings you wouldn’t be able to get on your own. This concept motivates suppliers – vendors of products and services – to give GPO members discounted pricing based on the committed volume of spend.
Una's Complete Guide to Group Purchasing is a tool designed to explain group purchasing and simplify the procurement process. Feel free to download a copy and become empowered to form an overall procurement strategy that meets and exceeds your business goals.
What is a Buying Group?
A buying group (also known as a purchasing group) consist of various businesses that come together primarily to negotiate better terms with suppliers for specific purchases.
Buying groups are very flexible; they can be short-term, formed just for one big purchase, or long-term arrangements that stick around for years. Plus, they often allow one member to take the lead on negotiations, which saves everyone else some legwork.
While they are oftentimes used synonymously with group purchasing organizations, buying groups usually charge membership fees and rely on members to do the negotiating themselves.
This infographic gives a good visual between the differences.
To see how the two can work together, check out this Buying Group Case Study.
How Do Group Purchasing Organizations Work?
Compared to Fortune 500 companies, most people and businesses only spend a modest amount in a particular category, such as office supplies or parcel shipping. Because purchasing is all about volume, you end up paying more since you only need a little bit.
When you join a GPO, you’re able to leverage the collective buying power of a group of people, meaning you can take advantage of those volume discounts without actually purchasing more.
Any business, regardless of size, can take advantage of the GPO’s purchasing power and access pre-negotiated contracts with some of the nation’s top suppliers and retailers, saving big on their portion of spend.
Partnering with with a group purchasing organization paves the way for procurement leaders to utilize purchasing solutions that elevate their existing procurement strategies, increase cost savings, and refine their overall approach to spend management.
Here are some more articles that cover how GPOs work as part of a holistic approach to sourcing:
Do GPOs Have Membership Fees?
GPOs typically make money via administration fees. While the fee is sometimes paid by the members, premier GPOs like Una never charge its members. The price is covered by our suppliers.
Free membership might sound too good to be true, but the reasoning is simple. Suppliers are incentivized to pay admin costs because they are guaranteed an increase in volume sold.
Learn more about Una Membership and how to maximize your GPO relationship.
I'm a Large Business Owner, Is a GPO Right For Me?
Actually, one of the most common misconceptions about GPOs is that they’re only helpful for small businesses. The truth is, that’s rarely the case.
Even if your organization is a Fortune 500 company with a fully developed procurement team, partnering with a GPO will likely improve your contract discounts in at least one category.
Check out these resources to help determine whether or not a GPO is right for your business:
Will a GPO Lock Me in to Contract Terms?
Participating members are not obligated to utilize a group purchasing organization holistically. Members leverage category offerings and services based on their unique needs and where the most value can be driven.
A GPO member can choose to participate in one supplier agreement or many and are free to use said agreements as much or as little as desired.
Browse our Supplier Portfolio to get a better idea of the caliber of partners we work with and how their contracts work.
What if I Can Save More Money on My Own?
It is possible that your organization could negotiate your own contracts with your own suppliers, however this won’t be true for every category. The beauty of a group purchasing organization is that it helps increase your buying power in areas where you wouldn’t be able to get a discount based on your amount of spend.
You can save money on the things you need to run your business, without having to actually purchase more.
Learn how to boost business growth with the help of a group purchasing organization.
How Much Could My Company Be Saving By Working With a Group Purchasing Organization?
While actual savings will depend on your company’s annual spend, and may vary by category, Una members typically see an average savings of 18-22% in categories like corporate travel, office supplies, shipping, JanSan and MRO, and more.
Cost Savings Calculator Tool
Use our free cost savings calculator tool to get an instant estimate of the money you could be saving by partnering with Una.
Can a GPO Help Across All Industries & Verticals?
Yes. GPOs originally got their start in the early 1900s helping hospitals save on medical costs. Since then, the group purchasing concept has reached far and wide, helping businesses within the private sector save money as well.
Vertical GPOs serve a niche segment of industry, like dental offices or veterinarian clinics. Horizontal GPOs serve organizations spanning all markets and industries offering assistance on a broad spectrum of goods and services, mostly related to indirect spend.
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How Do I Choose the Right Group Purchasing Organization to Work With?
When partnering with a GPO, we suggest finding one that aligns with your own company’s values and culture. Transparency and understanding the GPO relationship is key.
Everything from membership fees and participation to purchasing expectations and the suppliers they work with should be explained so there aren’t any surprises once you begin buying.
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Get to know Una by checking out our new brand video, too!
What Types of Suppliers do GPOs Partner With?
As a group purchasing organization, Una brings you a diverse supplier portfolio filled with some of the nation’s top suppliers. Suppliers go through a rigorous vetting process to ensure core value alignment and value-added services are included in each contract.
Una members have access to a robust supplier portfolio offering pre-negotiated contracts across six key spend taxonomies. This means we’ll be able to find savings and spend management solutions in several spend categories.
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Will a Group Purchasing Organization Replace Me as a Sourcing Professional?
No. In fact, partnering with a GPO gives you a chance to deliver more on cost savings while also freeing up some time so you can focus on other long-term strategic initiatives.
Instead of vetting suppliers and negotiating contracts, you’re able drive value that goes beyond saving money. Una works as an extension of your procurement team, enhancing its relevance within the organization.
Be a Sourcing Hero and download Una’s most popular playbook, a step-by-step instruction manual on how to jumpstart procurement in a way that leads to sourcing efficiency and profitability.
What Are the Benefits of Joining a GPO?
Not only can GPOs save you money, but they can also bring balance to the negotiating equation because they already have relationships with vendors and suppliers in place.
Beyond cost savings, other benefits of working with a group purchasing organization include:
- Supply chain management assistance
- Access to extended resources and a true procurement partner
- Cost analyses
- Customized member programs
- Access to data and analytics
- Category management expertise
- Personalized consulting
- Increased sourcing speed and efficiency
- Free membership
Explore all the benefits of partnering with a group purchasing organization.
What Else Do I Need to Know About GPOs?
A GPO alone doesn’t provide a comprehensive procurement outsourcing strategy. GPOs focus on driving value to a broad set of categories that can have a meaningful impact on a large number of participants.
Partnering with a GPO not only generates hard-dollar savings in the selected categories, it also enables corporate procurement to redirect freed-up resources to focus on other more strategic areas.
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Need more resources? Una's online resource center, Unaversity, is full of the content you need to be successful. Articles, Guides, Playbooks and more are published weekly. Be sure to check out The Sourcing Hero podcast as well!
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