Prime Advantage Blog

How Group Purchasing Organizations (GPOs) Save Time and Money

Mike McDonald on Aug 11, 2016 8:30:00 AM

081116.jpegManufacturers join a Group Purchasing Organization (GPO) to help solve sourcing and procurement concerns through advice and networking. GPOs achieve this by combining the purchasing power of businesses to get discounts from its vendors. The primary goal for Members is saving on cost, although there are many other advantages of joining a big network. Suppliers benefit from the increased market share and by building better relationships with customer organizations.

There are three main types of GPOs:

  • Master buyer: This is the chief buying group with vendor contracts.
  • Vertical market: This is a GPO that is focused on one particular industry.
  • Horizontal market: This is a GPO in different industries, but they use similar products and services.   

Where do Group Purchasing Organizations (GPOs) exist?

GPOs operate in various industries, such as hospitality, electrical, healthcare, non-profits, plumbing, food service, and industrial manufacturing. The total numbers of mid-market and small companies that occupy the space enable GPOs to thrive in these sectors.

If you are a small and medium-sized manufacturer, you frequently spend a lot of money on inventory and supplies. Meanwhile, suppliers have a limited marketing budget to reach as many clients as possible. This is where Group Purchasing Organizations intervene to help both sides save time and money. Members get discounts on the supplies they need, while suppliers increase their market share. Manufacturers can enjoy significant savings if they have substantial and frequent purchases within the organization.

How a Group Purchasing Organization saves time and money for manufacturers

The following are different ways that a Group Purchasing Organization makes everything about procurement easier, faster and cost-effective.

Researching products and locating suppliers

Companies spend a lot of time looking for suppliers and researching products offered, instead of focusing on other things. A Group Purchasing Organization helps you expand your product offerings, even if you are not sure where to look. GPOs have the resources and expertise to prevent supply shortfalls and get you hard-to-find products for your business.

Ensuring compliance with applicable laws

Manufacturers often employ legal professionals to ensure products are procured within the boundaries of specified legal requirements, by determining that products are not illegally transported or sourced among other laws.  Procurement experts for GPOs have the knowledge to reduce exposure to these risks for their Members. 

Leveraging market information

Utilizing advanced analytics allows GPOs to predict and examine market trends with efficiency and accuracy that individual manufacturers cannot match. Group Purchasing Organizations help you when you need to maximize savings, eliminate product duplication, or research a competitor's buying habits.

GPOs ease the headaches of handling purchasing and vendor contracts while saving time and money for their Members. Manufacturers ultimately have more time to focus on expanding their business when they are members of a Group Purchasing Organization.

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Topics: Buying Groups and Group Purchasing Organizations

Mike McDonald

Posted by Mike McDonald

Mike is the Executive Vice President of Business Development for Prime Advantage, a Chicago based Group Purchasing Organization for mid-market manufacturers. Responsibilities include managing business development, marketing, and the GPO's Healthcare Cost Containment program. He’s been a featured speaker, published author, and recognized award winner within the supply chain community.

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