Sign Up Free!

Not Another Procurement Platform:

Why Procurement Needs Solutions, Not Just Software, and How Your GPO Plays a Part

The shiniest procurement platform alone won't revolutionize your sourcing strategy. Implementing a modern, multi-faceted approach to procurement is your best bet.
Download PDF
A group purchasing organization acting alone cannot replace your procurement strategy - but neither can a procurement platform or purchasing software.

It’s easy to get swept up in the latest software trends that claim to revolutionize our purchasing processes. There are plenty of online resources that criticize group purchasing organizations, but the bulk of them miss their core purpose:

GPOs are designed to enhance, not replace, your multi-faceted procurement strategy.

Whether it’s a GPO, a procurement consultancy, or a software provider, be cautious of any entity that claims to offer a one-size-fits-all solution for boosting your procurement performance.

Modernizing the Group Purchasing Model

Remember, the essence of a group purchasing organization is to amplify your purchasing power through volume. This doesn't mean you are expected to buy more than what you need. It means you benefit from the comprehensive supplier portfolio and collective buying power of the GPO as a whole when it comes to your portion of spend.

It's also important to keep in mind the group purchasing model works best with an indirect spend strategy. This is where we can make the biggest impact: the volumes are substantial, the contracts apply to most members, and the savings and value can be applied to several categories.

This brief guide takes a closer look at some of the criticisms of GPOs and details how Una has worked to modernize the group purchasing business model.

Additional Resource → Complete Guide to Group Purchasing

Criticism #1

GPO Savings Depend on Internal Compliance

One criticism leveled at GPOs is the so-called complexity surrounding reported cost savings. While Una members typically save an average of 18-22% each year, critics argue that these figures depend on internal compliance rates.

But consider this: every contract negotiated by procurement can have its benefits eroded through poor compliance.

The benefits of the newest procurement platform you just purchased will fail to materialize if staff members aren't trained on how and when to use it, think it's too difficult to use, or simply choose not to use it at all.

This is also why maverick spend remains a perennial concern. Rouge spending creates more work, exposes the business to risk, and thwarts compliance efforts.

There are several levers that will help drive down maverick spend, including:

  • Creating a documented spend policy
  • Educating teams about maverick spend
  • Ensuring purchases go through a centralized system, and
  • Creating a cost-conscious culture

Having a GPO relationship in place can help promote compliance by removing the need for stakeholders to choose between suppliers. A simplified example is having a single supplier for office stationery which centralizes spending in this category

The Una team does everything we can to provide the appropriate training and instructions on how to utilize our contracts and close the gaps in your procurement process. If needed, we can serve as change management agents to help ensure a smooth transition and offer continued support past the initial connection process.

Criticism #2

GPOs Lack Accessibility and Efficiency

Another point of contention is the accessibility and efficiency of GPOs. There are claims that members might struggle to find the right “line-by-line” pricing in negotiated contracts, resulting in time-consuming searches.

This presents an image of procurement before the days of computers where a back-office professional would spend hours poring through reams of printed figures. We know procurement has evolved since then.

Any GPO worth its salt will offer easy-to-use search functionality to enable near-instant discovery of the needed pricing. Your GPO partner should also realize when and where they fit in. Having a group purchasing platform readily available for certain categories, especially those related to indirect spend, should be standard when creating a comprehensive strategy.

Like the function, group purchasing organizations have evolved to keep up with the ever-changing procurement landscape.

Here are a few examples of how Una supports the modern-day procurement function:

  • We work as an extension of your procurement team to complement existing efforts.
  • Our team works closely with our supplier partners to have all contract information readily available before and during the connection process.
  • We help establish the member-supplier relationship so everyone is properly equipped and comfortable working directly with the supplier to get what they need.
  • Una has been known to work with suppliers to get individual items added to contracts if there is a gap. 
  • We're acutely aware that cost savings is no longer the singular driving factor dictating procurement's success.

Procurement is constantly expected to do more with less. In practice, a GPO is designed to save you time, not consume it. When you partner with a group purchasing organization, you’re not just gaining access to discounts; you’re tapping into a network of expertise that allows you to skip the tedious vetting and negotiation processes.

This means you can reclaim valuable time that can be better spent on strategic initiatives instead of line-by-line contract reviews.

Criticism #3

Group Purchasing Doesn't Go Beyond Cost Savings

Speaking of the evolution of procurement, let’s discuss the value a GPO brings to the table beyond cost savings. Critics often overlook the additional benefits that group purchasing can provide. GPOs like Una understand that procurement success isn’t solely about reducing costs; it’s also about supply chain management, data and analytics, strategic sourcing, increasing efficiencies, and more.

Beyond cost savings, procurement also works to reduce risk, improve product quality, promote supplier diversity, implement sustainable practices, and more.

If you feel consumed with everything on your plate, consider outsourcing the job of cost reduction to a group purchasing organization. When you partner with a GPO, you gain access to a wealth of resources and expertise that can elevate your procurement strategy.

This holistic approach enables you to focus on broader business objectives, knowing that your procurement needs are being met efficiently and effectively.

Criticism #4

GPO Revenue Models Are Hard to Understand

It’s essential to have transparency about fee structures, and responsible GPOs will be upfront about how they operate. This clarity fosters a relationship built on trust, allowing you to focus on maximizing savings without the worry of hidden costs.

At Una, our model is straightforward. Our membership is always free to join and the contracts are always free to use.

Every time you entrust your purchasing needs to Una, we get paid an admin fee by our suppliers. The negotiated committed volume Una brings to the table is much more efficient for major suppliers and they want business to reach our members. We use the administrative fee to finance our services, allowing us to make and keep membership free for you.

When researching GPOs and their pricing structure, we recommend working with one that is completely transparent about the way they conduct business and what they expect of their members when it comes to fees and purchasing volume.

Criticism #5

GPOs Do Not Adhere to Ethical Standards

Una prioritizes ethical dealings and cultivates strong supplier partnerships based on mutual respect and transparent communication. When selecting a group purchasing organization, due diligence is key. Investigate their track record and reputation in the industry.

A reputable GPO will provide savings while upholding ethical standards, ensuring that your procurement practices are aligned with your organization’s values.

At Una, protecting your privacy is of utmost importance. We do not collect any information about you or your organization unless it is voluntarily provided and we do not sell, rent or lease member lists to third parties.

We use stringent methods to audit and investigate potential partners before signing any agreements. With full transparency, GPO members can be sure that due diligence has been performed and all suppliers have been thoroughly vetted.

Criticism #6

GPO Memberships Limit Free-Market Opportunities

Critics also argue that GPO membership can limit free-market opportunities, as members may feel obligated to procure supplies exclusively through preferred vendors. However, it’s important to understand that joining a GPO doesn’t mean relinquishing control over your procurement strategy.

Instead, it enhances your purchasing power while still allowing for independent negotiations when needed.

At no point during Una membership are members required to purchase through our contracts. Members have the autonomy to use the GPO as they see fit.

A well-structured GPO will offer diverse vendor options, ensuring that you have the flexibility to explore other options if they align better with your strategic goals. Think of a GPO as an additional tool in your procurement toolbox, complementing your existing strategies rather than constraining them.

With Una, there are no “lock ins,” no minimum purchasing requirements, and you may cancel your GPO membership at any time.

Check out some case studies featuring real Una members and the success they've had with group purchasing:

Campus Cooks Case Study

Learn how Campus Cooks, a national food service provider serving Greek Chapters, is saving members up to 15% on food costs with Una.

YPurchasing Case Study

Learn how YPurchasing, a group purchasing organization serving YMCAs, is saving members 10-15% on food costs through Una’s food cost reduction program.

Shipping Case Study

How this digital healthcare and manufacturing company is working with Una to save six-figures on shipping costs.

Criticism #7

Larger Companies Cannot Benefit from a GPO

Group purchasing organizations can help businesses of any size. The key is finding the right GPO partner to assist when the categories that will make the biggest impact.

When it comes to direct spend categories, an enterprise or the typical Fortune 5oo company might be better off handling that spend in house. You probably already have the supplier network, the internal expertise, and the spend volume to make it work as you manage direct spend hands-on, carefully and strategically.

Larger companies will never outgrow the benefits of working with a group purchasing organization.

For indirect spend, there’s no such thing as too big.

Here’s why:

  • Indirect categories are often left unmanaged. In an enterprise organization, this can add up to millions of dollars.
  • McKinsey found that “even though indirect spend can represent 10 to 18% of revenue in some industries, it typically isn’t fully managed by a single function or business owner, and is frequently overlooked.
  • The same McKinsey study found that indirect procurement optimization can reduce costs by 15 to 17%.

Enterprise organizations have volume, which should provide them with hefty purchasing power in a supplier negotiation. But if you’re not managing indirect spend categories and leveraging spend data to get the most out of every category, you are leaving mountains of value on the table.

And – here’s the impressive bit – even if an enterprise organization brings its indirect spend under control and comes to the negotiation with, say, $50 million in buying power, they’re still small-fry compared with the awesome power of a GPO.

The capacity in which we work together may vary depending on the size of your organization, but any business of any size can benefit from working with a GPO.

Pieces of the Procurement Puzzle

A group purchasing organization is a strategic ally that can enhance your procurement strategy and drive significant value for your organization.

By leveraging collective buying power, simplifying negotiations, and providing ethical and transparent practices, GPOs complement a diversified procurement strategy that includes – of course – the latest procurement platform.

As you navigate the complexities of procurement, remember that while software solutions are important, they are also just one piece of the puzzle. Embracing a multi-pronged strategy that incorporates GPOs will empower you to achieve your procurement goals while maximizing the value you deliver to your organization.

Is your procurement platform falling short? Contact our team to learn more about partnering with a GPO to drive savings and value.

Download Guide
Top crossmenu linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram