Procurement is an essential part of running a business that must be handled properly to ensure necessary products are purchased at a cost that doesn’t exceed the allotted budget. For many small businesses or companies with complex procurement needs, it may not be feasible to handle this process in-house. Here is a look at group purchasing organizations – a type of business that specializes in offering procurement solutions to companies large and small.
What is a Group Purchasing Organization?
A group purchasing organization is a company that allows a business to enter into a group of other buyers who have similar procurement needs and facilitate the ordering and shipment of those goods and services. So, if your business has a consistent need for office supplies, a GPO can help pool you with other similar organizations to purchase the needed supplies in bulk and have them shipped to your location, saving you time and money. GPO’s are most commonly found in the healthcare industry but are now available for any business looking to outsource their procurement needs.
What are the Benefits of Working With a GPO?
A study by the supply chain association found that GPOs save healthcare providers an average of 10% to 18% on products and services and those figures are roughly the same for businesses in any industry. Procurement can be a costly and time-consuming endeavor. You have to know the price points of a variety of different products, know which suppliers to contact, be able to effectively negotiate contracts, record and understand spending analytics and perform a variety of other related tasks. If you have the budget to hire or appoint a dedicated procurement manager, you can handle those tasks in-house. But for many companies – especially startups, small businesses, and large corporations with complex needs– the time and money it takes to properly handle the procurement process may be better spent focusing on areas more central to the mission of the business, like growth or customer acquisition.
Some of the major benefits of working with a GPO include:
- Time savings
- Legal compliance
- Discounted products and shipping
- Long-term value
- High level of expertise
The major benefit of working with a GPO is that you can often get a discount on the products and services you need, while also freeing up time and resources that would have been put toward procurement. The other major benefit of working with a GPO is the level of expertise they offer. GPO’s have established partnerships with quality vendors and know how to negotiate to save you money. They also possess the legal knowledge to ensure that all contracts are upheld, and transactions comply with necessary regulations. This may be a major concern, depending on what industry you’re in. All of these benefits offer long-term value to customers and can help businesses significantly reduce costs in the long term.
How to Work With a GPO?
Working with a GPO is typically easy and efficient. All you have to do is contact a representative and let them know the needs of your business. Certain GPO’s focus on different industries and areas of expertise, so it’s important that you find an organization that is a good fit for your business. For instance, certain GPO’s specialize in the healthcare sector while others work primarily with schools and other public institutions.
It’s also important to take stock of what type of pricing model makes sense for your company. Some GPO’s bill on a monthly or annual basis, while others offer contracts that take a percentage of each order. So, it’s necessary to understand your budget and supply needs before signing a contract.
Once you’ve identified what type of group purchasing organization you’re looking for and what type of pricing structure makes sense, all you have to do is speak to a sales rep and begin shopping for contracts. This process can take anywhere from a few days to a few weeks, depending on what you’re looking for. But overall, the process of working with a GPO is fast and efficient and allows you to get back to running your company.
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