What a GPO Is and How It Helps Organizations

Procurement teams across various industries strive to streamline procedures, cut costs, and prioritize tasks that provide the most value to their companies. However, reaching these goals can be challenging due to the complexities of the procurement process. By partnering with a group purchasing organization (GPO), procurement teams can strengthen their supply chains and optimize the purchasing process. Let’s define what a GPO is and how it can help organizations achieve their goals.

What Is a GPO?

A group purchasing organization (GPO) leverages the collective purchasing power of its members to secure better prices, enhanced services, and superior account representation from vendors and suppliers. Small to medium-sized businesses across industries purchase a wide range of goods and services, from office supplies to telecom and shipping assistance. These smaller businesses typically pay higher prices for these products due to lower purchasing volumes compared to large corporations. By partnering with a GPO, organizations can obtain volume discounts, increase their buying power, and streamline their purchasing processes.

How GPOs Work

GPOs do not purchase products or make purchasing decisions for businesses. Instead, they act as intermediaries between organizations and suppliers, negotiating deals to provide the best pricing and contract terms for their members. Successful GPOs create an ecosystem where all parties benefit. By capitalizing on the buying power of their members, businesses gain access to the industry’s best deals, leading to significant savings on essential products and services. Suppliers also benefit from GPOs, as they acquire new clients and expand sales volumes, resulting in growth and increased market share.

Benefits of Working With GPOs

Partnering with a GPO helps procurement leaders maximize their investments and improve overall spending management. Here are the top advantages of working with a GPO:

Reduce Procurement Costs

While reducing costs is not the only goal of procurement professionals, it remains a critical task. Working with a GPO can provide substantial savings upfront. For example, a recent industry study revealed that healthcare institutions save up to 18% in supply chain costs by working with GPOs. This cost savings is achieved by combining the purchasing power of multiple organizations, making it easier to negotiate discounts with suppliers. Reducing procurement costs also helps businesses grow by freeing up funds that can be used to enhance key areas of the business.

Save Time and Energy

The procurement process can be arduous and time-consuming. Procurement professionals often deal with multiple supplier contracts that require extensive review and solicitation. GPOs offer pre-negotiated contracts, easing the strain on purchasing teams. Reducing the hours spent searching for new suppliers and managing individual contracts frees up valuable time that can be allocated to more strategic and value-added initiatives.

Lower Purchasing Risks

GPOs thrive as their membership base grows, so they aim to provide the best services for their business partners. Working with low-value vendors can damage a GPO’s reputation. To ensure high-quality service, GPOs rigorously screen their partner suppliers to verify their credibility. As a result, GPO members face lower purchasing risks. Instead of spending time researching credible suppliers, GPOs quickly connect businesses with quality vendors.

Strengthen Your Supply Chain Against Disruptions

GPOs help organizations protect against supply chain disruptions by offering access to a wide portfolio of industry-leading suppliers. Having access to a quality supplier list makes it easier to switch vendors in the event of a disruption. Partnering with a GPO also helps optimize supply chain management by reducing the internal resources required to handle purchasing processes. GPOs act as an extension of your procurement team, helping to strengthen each aspect of your supply chain.

Gain Access to Additional Services

Some GPOs offer additional services that add value to organizations. For example, at Hubzone Depot, we provide consulting services to help businesses elevate their procurement strategies and optimize supplier management. Our technology assists companies in consolidating suppliers, ensuring compliance, and creating organized systems to monitor vendor relationships. As a result, companies maximize their purchasing power and reduce costs.

Start Working with a GPO Today

Hubzone Depot is an industry-leading group purchasing organization and procurement advisor dedicated to helping businesses optimize their procurement processes. We combine the power of technology, negotiation, and data analytics to deliver optimal results for our partners. Reach out today to learn how we can help.