Picking the right GPO partner for your business

If you’re familiar with Group Purchasing Organizations (GPOs) you know that there are a lot of them out there. It may seem that these GPOs come in all different shapes and sizes, or maybe they all look the same.  So, let’s talk about what a GPO is, how to determine if GPO’s are a good option for your organization, and if yes, how to choose the best fit amongst the crowd and what the value could be.

Group Purchasing Organizations are business entities that leverage the purchasing power of their members to negotiate preferred pricing and terms with suppliers that would typically be better than each individual would be able to get on their own. Generally, GPOs focus on common use items and services such as office supplies, safety supplies, travel management, etc. The key benefits to joining are reducing cost and administrative burden while improving service levels and rapidly bringing spend under management.

The first GPO was established in 1910 by the Hospital Bureau of New York and to this day GPOs are very prominent within the healthcare industry. However, GPOs are now commonplace across industries especially within indirect spend categories.  Since there are so many options let’s dive into what I believe are the most important criteria to help you select the best partner for your organization.

1. First and most importantly, the categories covered under the GPO need to align to your spend profile. This is why there are industry-focused GPOs such as healthcare and fleet that have specialized in categories such as surgical supplies or truck parts. There are also GPOs that work to cover traditional areas of indirect spend – i.e. spend that almost any company’s operations will have. Prior to partnering with a GPO, a thorough spend analysis should be conducted to understand the opportunity the GPO will be able to provide.
2. The first question procurement traditionally asks whenever an opportunity is presented is how much will I save? A lot of GPOs will present traditional savings by category but is that the actual savings that you’ll see if you move over to a GPO program? Every company’s spend profile is different and your GPO partner needs to be able to save money on the things you’re actually purchasing. A lot of GPO programs have been structured as a one-size-fits-all coupon book which most likely will not provide you with the most value. It’s best to ensure that the program also has the ability to customize to your unique needs and requirements.
3. On the same line as the coupon book concept. A coupon or a catalog is only good if you actually use it. Is the GPO program something that you simply signed up for and hoped that your organization would use? Many times, savings are based on consolidating spend or transitioning suppliers. A true GPO partner should be equipped to manage the implementation cycle for each GPO supplier, securing buy in from all stakeholders. This will ensure that the savings presented are actually realized.
4. Now that we’ve covered the basics, what else does your potential GPO partner have that can drive value? Some GPO partners have technology solutions to enhance your purchasing experience. Think source-to-pay technologies, catalog solutions and contract management to further improve compliance and streamline purchasing. What do they do post implementation? Many GPO’s take a “set it and forget it” approach, leaving implementation, adoption, and value-realization up to the member. A good partner will have continuous improvement programs, analyzing your spend to ensure what was initially set up is still meeting your needs and, if not, making adjustments. They should be monitoring your spend, the savings achieved, and your compliance levels.
5. As with any partner, account management is always important. GPOs have several layers of account management: the management of the GPO member, and how the GPO manages their suppliers. The key to a GPO program’s success is collaboration and it’s your GPO partner’s job to foster that collaboration. This will enable development of programs that are best fits for all parties. Your GPO provider should be making sure they’re doing everything possible to ensure the success of the program, including treating their suppliers as true partners and maintaining a meaningful value proposition back to the supplier.

A GPO partner can quickly and efficiently drive substantial value to your organization, often serving as an effective, low touch way to bring indirect spend under management. Hopefully this gives you more insight into what GPOs are, how they operate and how you can select the best fit partner for your organization. For more on GPOs check out this blog. and see what Corcentric has to offer for Indirect GPOs.