Prime Advantage Blog

The Top Seven Myths about Buying Groups

Mike McDonald on Jan 19, 2016 6:00:00 AM

seven-myths-buying-groupsMyths pervade our existence. Some people think you need to drink eight glasses of water every day. But in reality, you should just drink when you’re thirsty. Some people think that if you shave your hair, it will grow back thicker and darker. Nope, that’s not actually happening. And some of us even think we only use 10% of our brains. Okay, maybe that one’s true for me. Nevertheless, myths are everywhere. Fall victim to them and you might find yourself making some questionable decisions.

The world of group purchasing organizations (GPOs) is no different. Plenty of misconceptions about them linger, which could potentially misguide a given company into missing out on the many riches that buying groups can provide. Here are some of the more common ones we’ve heard through the years here at Prime Advantage. Allow me to debunk the GPO myths:

Myth #1:  GPOs only cover standard “off the shelf” categories and products.

Buying groups do cover these types of categories and products, but they can also cover many core spend categories as well. Each buying group has a different mix of supplier offerings depending on the industries they play in and how they’re structured.

Myth #2:  Buying groups will displace purchasing departments.

This is incorrect as well. Buying groups do not in any way assume the role of the purchasing department for their members; that is still done in-house at the member company. A buying group is a resource for purchasing departments to accomplish even more, but they do not have a say in what transactions are actually occurring. 

Myth #3: You have to purchase from every supplier in the buying group.

Nope, you have the complete flexibility to purchase or not purchase from any supplier that you choose. Members can opt-in or opt-out of each negotiated Supplier program. Suppliers are motivated to create attractive programs to win your business, but that decision is ultimately yours. 

Myth #4: Joining a buying group will reduce your level of customer service.

It’s actually quite the opposite. Being a member in a buying group is a tool that purchasing professionals use to accomplish even more. Because you’re in a buying group, you become that much more important to the Supplier, enabling them to offer you even more. 

Myth #5: Every member that is part of the GPO gets the same price from each supplier.

True and False. It actually depends on the buying group and the spend categories they cover. When dealing with direct goods, often times each member still has the control to negotiate the pricing and value-added services they are seeking from any supplier. They have access to a rebate based on group volume in those circumstances. 

Myth #6: The suppliers and members can only contact each other through the buying group. 

Not true either. Even if you’re part of a buying group, it’s still business as usual. Members and Suppliers still transact and correspond directly with one another.  

Myth #7: GPOs are distributors for their suppliers. 

Not at all. Buying groups may have resources that can certainly help facilitate relationships between buyers and sellers; however, the sale still happens directly between the supplier and the member. 

As you can see, GPOs are sometimes a little misunderstood. But after getting clarity on how they operate, you might discover that joining one could be a huge benefit to your company.

Member Benefits Infographic

Topics: Buying Groups and Group Purchasing Organizations, Supply Chain, Procurement

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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