Group Purchasing Organizations (GPO’s) are gaining popularity amongst companies because of their role in increasing operational efficiency. A few GPO responsibilities consist of: aggregating the purchasing power of business in order to receive cost savings, solving procurement & sourcing concerns, negotiating for discounts & rebates from its vendors, & achieving lower cost per transaction for their customers. It’s essential to understand benefits from choosing a GPO, but companies must contain an introspective perspective before gaining membership. For instance, which type of GPO is suitable for your operations?

Here are three types of GPO’s that can best fit your company’s needs:

Vertical Market: Focused on one industry or vertical (examples: healthcare, food service, automotive, electrical, etc.). Allows organizations to purchase items specific to your industry at a significant discount.

Horizontal Market: GPO members in the horizontal market exist in different industries, but purchase similar goods and services. Membership grants savings on indirect spend, while freeing up time for organizations to focus on other strategic spend areas.
Master Buyer: Consists of a single buying organization that contains significant contracts in place with vendors and allows other companies to purchase off those current contracts.

All of which contain different benefits positively impacting the overall spend strategy. There are numerous other factors that companies should consider before selecting a GPO. Below will be factors that provide great insight into finding the correct fit:

Suitable Vendors Associated With the GPO

Does your GPO have the right vendors? Accessing a GPO’s vendor list, before gaining membership, provides proper time reviewing compatibility and avoiding any vetting required.

Customer and Advisory Services
An essential component of joining a GPO is the services and expertise behind managing contracts and driving cost savings. One important feature also revolves around support and advisory services that guide your operations in the right direction.

Supply Chain Savings

Organizations must know the cost they currently pay for products/services and the amount of savings a GPO can offer. A deep analysis of these costs also include: distribution, shipping, and other logistic expenses.

GPO’s require careful evaluation and thorough vetting to meet company needs that provide a significant ROI. Other factors that provide insight into suitability are integration abilities of the GPO with regard to procurement software, and the terms and conditions members receive. The factors listed above will help your company find the perfect GPO to join.
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Christopher Ivie

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