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5 GPO Myths…Debunked

(Or: What You Always Wanted to Know But Were Afraid to Ask About Group Purchasing Organizations)

Have some preconceived notions about group purchasing organizations?

Definition: A xxx…

Have some preconceived notions about group purchasing organizations?

GPO definition: An organization that applies leverage to all aspects of the procurement process – from sourcing through supplier management and supplier collaboration – supplementing existing procurement efforts.

Have some preconceived notions about group purchasing organizations?

GPO definition: An organization that applies leverage to all aspects of the procurement process – from sourcing through supplier management and supplier collaboration – supplementing existing procurement efforts.

We’re here to address them one by one.

If GPOs are so great, why haven’t even more companies signed on?

Actually, GPO participation may be higher than you realize.

Actually, GPO participation may be higher than you realize.

15 to 20% of the Fortune 1000 currently uses a horizontal GPOs, and they are seeing real savings of more than 10%. (According to a 2011 Spend Matters study)

A GPO isn’t always right for every company, though. Some may not be a good fit due to a less collaborative culture.

A GPO isn’t always right for every company, though. Some may not be a good fit due to a less collaborative culture.

But in terms of industry type, there aren’t many that couldn’t benefit from a GPO.

A GPO can’t accommodate my unique requirements.

In fact, GPOs operate within a flexible framework that allows participants to:

• Enjoy all the benefits of leverage… while

• retaining the ability to negotiate adjustments… and

• incorporate options that address specific needs.

GPOs understand the need for flexibility. Consequently, GPO members participate fully in the structuring of the supplier agreements.

A GPO will lock me in.

Participating members aren’t obligated to utilize a GPO holistically.

Participating members aren’t obligated to utilize a GPO holistically.

Members leverage the category offerings and other services based on their unique needs and where the most value can be driven.

We can realize greater savings on our own in some of these categories.

This point actually illustrates an important advantage of GPOs.

When engaging with a GPO, you decide which of the pre-negotiated agreements you’ll participate in based on the available savings.

This point actually illustrates an important advantage of GPOs.

When engaging with a GPO, you decide which of the pre-negotiated agreements you’ll participate in based on the available savings.

There is no requirement for you to participate in all or even most of the categories offered.

Of the 25-30 categories, let’s say you identify:

• 5 categories that are clear choices, and

• 5 more where the savings are good but not quite as high.

Of the 25-30 categories, let’s say you identify:

• 5 categories that are clear choices, and

• 5 more where the savings are good but not quite as high.

It will still make sense to shift all 10 categories to the GPO.

This is because in addition to the hard savings, you’re:

Bypassing the time-consuming RFP and sourcing processes… and

Gaining the flexibility to impact other areas of spend and focus on more strategic initiatives.

GPOs are compensated through supplier rebates, but the customer can’t see the amount.

Not true.

Not true.

Most GPOs operate on administrative fees applied to gross sales that are incorporated into the pricing offered to members.

The compensation is transparent to participants.

So, what do you think?

These debunked myths have shown that a GPO really is a good option for achieving savings on your indirect categories.

So now what?

1 Read “How Revamped Group Purchasing Concepts Can Add Profit”

Download “Welcome to the Post-Sourcing Era: How Procurement Can Remain Relevant”

2

corporateunited.com • cuachieveblog.com • 440.895.0938 • info@corporateunited.com

Get info about the nation’s largest group purchasing organization and

Corporate United enables more than 230 member companies to expertly manage their indirect spend categories. By providing category lifecycle management for more than 30 leveraged agreements, Corporate United offers an enhanced approach to ongoing contract and supplier management. We are committed to providing members and suppliers with a collaborative community to help them achieve more.

corporateunited.com • cuachieveblog.com • 440.895.0938 • info@corporateunited.com