What is a GPO?
A GPO (Group Purchasing Organization) leverages the collective buying power of its members to obtain bulk discounts from suppliers and retailers.
Group Purchasing Organizations Explained
A group purchasing organization (GPO) is a platform that allows any business to join a group of other buyers who are interested in the same products and services. This group purchasing method motivates suppliers – vendors of products and services – to give GPO members competitive pricing.
When you join a GPO, its network grows, increasing your power buying as well. The more members, the bigger the discount, giving you as a GPO member access to savings you wouldn’t be able to get on your own.
Could group purchasing fit into your overall procurement strategy?
How GPOs Work
Compared to Fortune 500 companies, most people and businesses only spend a modest amount in a particluar category, such asoffice supplies or parcel shipping. Because purchasing is all about volume, you end up paying more since you only need a smaller portion of the pie.
By joining a GPO, you’re able to leverage the collective buying power of a group of people, meaning you can take advantage of those larger discounts without actually purchasing more.
Businesses of all sizes, corporations, and others join the GPO, growing the membership of the GPO.
The GPO uses its large database of members to negotiate volume-based discounts with suppliers.
The GPO shares its contracts back to its members, providing access to deep discounts on products and services they would never be able to negotiate on their own.
GPO Quick Facts
- GPOs like Una are totally free
- GPOs get exclusive pricing from suppliers because they’re guaranteeing customers
- GPOs help you cut down on search time and issuing RFPs
Other GPO Benefits
Saving money isn’t the only benefit of joining a GPO. Some GPOs, like Una, also offer our members cost comparison analysis tools, a procurement partnership, and supply chain management support.
How do GPOs make money?
Every GPO is structured differently. Some GPOs charge members a fee for their services while other GPOs, like Una, are paid by the suppliers themselves. We, in turn, use that fee to fund our program, so that it’s always free for our members.
Vertical Market GPOs
Vertical market GPOs serve a niche segment or industry and are usually created as a way for management groups to benefit their member companies. This type of GPO is commonly found in:
- Healthcare GPOs
GPOs can help healthcare providers save time and costs by leveraging group purchasing to reduce spend on manufacturers, distributors and other vendors.
- Hospitality GPOs
By providing negotiated agreements with food distributors and hospitality suppliers, GPOs help save on all the sundry things a company needs to run efficiently and cost-effectively.
GPOs catering to businesses help save on the ongoing needs that all businesses encounter, like office furniture, shipping, business travel, and electronics. Learn more here.
- Dental and Veterinarian GPOs
Dental and Vet GPOs focus exclusively on providing procurement support and cost savings tailored to the unique industry needs.
Horizontal Market GPOs
Horizontal market GPOs serve organizations spanning all markets and industries. But they’re not all created equally. Some GPOs collect participation fees from member companies, and some GPOs collect fees from the suppliers. Other organizations do both and collect fees from both members and suppliers. Some GPOs require that members maintain a certain level of purchasing volume, others do not.
Medium and large-sized businesses use many different products and services in their operations, spanning from IT, office supplies to shipping and small parcel distribution, commonly described as indirect spend. Because their volume for these products and services are less than that of a larger organization, they often end up paying a lot more than a much bigger company would simply because a larger organization typically purchases at a higher volume and can negotiate a better rate.
Most businesses need relatively small amounts of supplies and services, so they inevitably end up paying a higher price, because they don’t get volume discounts. But business today has changed. GPOs help level the playing field of indirect spend for businesses of all shapes and sizes. By leveraging group purchasing, you increase your buying power.