GROUP PURCHASING ORGANISATIONS EXPLAINED
You’ve heard the term, ‘there’s power in numbers’ and that is exactly how a Group Purchasing Organisation (GPO) works. A GPO aggregates the spend of all its member companies and leverages buying power of larger entities for spend categories where you have smaller volumes or little negotiating power. This method then motivates suppliers to provide the GPO members with ‘bulk pricing’. As the GPO increases its members, the more competitive the prices will become, therefore continually providing great savings that a lone SME may not be able to achieve.
Becoming a member of a GPO is not just a ‘quick fix’, it effectively acts as an extension of your purchasing department, improving operational efficiencies by removing the need for internal procurement administration and supplier contract management and will continually monitor your suppliers to ensure your savings are maintained.
A group purchasing organisation typically targets a company’s indirect spend, mainly categories such as; office supplies, IT equipment, print, telecoms etc., primarily low-volume categories often with one-off or infrequent orders that go out to a wide range of suppliers. Due to the low volume of purchasing, companies can end up paying more for these everyday business overheads.
Joining a Group Purchasing Organisation will connect you with companies who are buying within the same categories and enable you to leverage your collective purchases and increase your buying power.
1 - Membership
Companies join a Group Purchasing Organisation
2 - SUPPLIER NEGOTIATION
GPO utilises their many member companies collective spend to leverage market leading pricing from trusted suppliers
3 - MEMBER SAVINGS
The GPO will manage the members transition to their trusted suppliers, granting them access to immediate savings
Group Purchasing Organisations will have a range of different pricing structures. Predominantly, GPOs will charge a signup fee or an annual membership fee, this is usually to ensure the client is committed to the transaction resulting in it being 100% effective. Some GPOs receive a small commission from suppliers themselves, on most occasions, below 1% to ensure this does not impact pricing.
ProSource is a series of group purchasing frameworks and is a service offering of the procurement consultancy, Procura. ProSource member companies that have already subscribed are seeing substantial improvements in profitability and are benefiting from the lower prices that come with aggregated purchasing power. After a fast-track joining process, members have immediate access to lower prices from our pre-sourced, pre-selected suppliers, so they can start saving from day one.
There are many benefits to joining a GPO, the key ones are as follows:
- Immediate cost savings in core categories.
- Increase profit without increasing sales.
- Access to ‘bulk pricing’ without increasing purchasing volumes.
- Operational efficiency – remove the need for internal procurement administration and supplier contract management in core categories.
If your business has a turnover of £10m+ and you don’t have the time, resources or buying power to ensure you are securing the best deals and maximising profitability, contact ProSource.
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