8 Important Factors to Consider When Choosing a GPO

In case you do not know, working with a group purchasing organization (GPO) can help your business grow.

For one, they ensure that you have a steady supply of whatever you need for your business. Second, group purchasing allows you to avail products and services without shelling out a significant amount.

Simply put, partnering with a GPO helps improve your business operations' efficiency.

So, what is a GPO? A GPO is designed to do the heavy lifting when accessing the best suppliers and contracts. Similar to supplier relationships, choosing a suitable GPO is essential in creating an effective procurement approach.

Types of Group Purchasing Organizations

Now, we'll walk you through the different types of group purchasing organizations:

●  Vertical Market: Focuses only on one industry or vertical. Examples of these are food service, automotive industry, food service, electrical, and so on. This type of group purchasing organization lets you buy items specific to your enterprise at discounted rates.

●  Horizontal Market: GPO members here exist in various industries but buy similar goods and services. Membership grants savings on indirect spending. It also frees up some time for organizations to focus on other strategic spending areas.

●  Master Buyer: Makes up a single buying organization that usually has specific contracts with vendors. It lets other companies buy off those current contracts.

8 Things to Consider When Choosing a GPO

After you've chosen the type of GPO, that's right for you, knowing the GPO relationship is of the utmost importance. Here are some of the essential things that you need to consider when choosing a GPO.

Transparency

Ideally, you need to look for a GPO that provides complete transparency regarding pricing, fees, and membership. It would also help if you could look into their partner suppliers and purchasing expectations.

Having a GPO focused on members gives more flexibility and autonomy on contracting specific SKUs.

Also, make sure that you know the details on how everything works upfront. That way, there will be no surprises on the backend after purchasing begins.

Supply chain savings

Before joining any GPO, you can run an analysis. That way, you'll know the actual savings a specific organization can produce.

Organizations should also know the costs they need to pay for the products and services and the amount of savings a GPO offers.

It would be best to consider every single factor that affects the pricing of products and services. Usually, a deep analysis of costs includes distribution, shipping, and other logistic expenses.

Customer and advisory services

Another essential component when you join a GPO is the services and expertise behind managing contracts and driving cost savings.

Another vital aspect revolves around advisory and support services. These can help you guide your operations in the right direction and meet your customer's needs.

Contracting model

There are various GPOs, and their contracting model usually varies. Therefore, not all contracting models are the same.

Some GPOs might be able to offer just a single contract in a specific product area. So, know what particular contracting model your specific GPO has, then compare it with other GPOs.

Culture and service

Ideally, your organization's culture should be reflected in your partnership with a GPO.

For instance, are they working with suppliers that source sustainably? Are they aware of the green and social procurement initiatives? Do they also give back to communities?

Usually, the right GPO spends a lot of time validating suppliers and ensuring that they're the right fit. Doing so can lead to a win-win situation for your organization.

There are also a lot of options in procurement, and speed is an essential factor. Ideally, a group purchasing organization should let you connect with a contract almost immediately. As a result, your business can start saving within days or weeks instead of months.

Multifamily industry

Joining a specific GPO in a multifamily industry means that you gain access to many products directly related to your company's everyday needs.

So, if you own a chain of pharmacies, you get to receive a supply of antibiotics from different manufacturers.

This type of GPO allows you to save on industry-specific items. In fact, some companies used to have these items in stock. This helps you boost the efficiency of the production process when you leverage such GPO.

Distribution options

Centers should also evaluate various distribution options that are offered by GPOs. This is to know which particular model works best for them.

This includes what distributors GPOs usually work with, their serviceable area, and what products each distributor is handing.

Centers should be able to evaluate their needs depending on service levels. This includes the number of deliveries and inventory management assistance.

Right vendors

GPOs provide more than just group discounts on supplies. They should also offer additional contracted services like equipment, continuing education, special financing, custom contracts, and supply spend analysis.

Does your preferred GPO have the right vendors? You need to know what type of vendors to the GPOs you have in mind.

They must have the right vendor so that you don't need to go through vetting them. You might also need to check a list of GPO vendors and read their reviews. Doing so helps you to know them better.

As a business owner, GPOs can help you save costs and deliver the best products and services to your clients. Hopefully, the business factors listed above can help you make the right choice for a partner GPO.