Advantages of Working with a Company in a GPO

There are many GPO advantages to working with a vendor who is part of a Group Purchasing Organization (also sometimes referred to as Group Buying Organization), that passes along savings to its paying members by using their purchasing power over goods and services.  Costco or Sam’s Club are examples of a consumer equivalent.

The first GPO was established in 1910 to buy medical supplies and pharmaceuticals for hospitals.  Since then, there are more than 600 GPOs across the country serving many industries and helping their members not only with reduced prices, but also services such as best practices, budgeting and invoicing.

Types

There are 2 types of GPOs:

1. Vertical GPOs, serving specific industries.
2. Horizontal GPOs, which serve businesses across different sectors.

Benefits

The benefits of working with a Group Purchasing Organization (GPO) primarily center around cost savings and operational efficiencies. Here’s a detailed look at the advantages:

1. Cost Savings: GPOs negotiate lower prices with suppliers by leveraging the collective purchasing power of its members, which individual companies sometimes can’t achieve on their own. This can result in significant cost reductions for products and services.
2. Cost Comparison: GPOs enable members to quickly perform cost analysis of vendors and suppliers within the GPO which saves valuable time and resources.
3. Risk Mitigation: GPOs help mitigate risks associated with supplier reliability and contract compliance by pre-vetting suppliers and negotiating contracts.
4. Access to Pre-Negotiated Contracts: Members can take advantage of contracts that are already negotiated, which can speed up the procurement process and provide immediate savings.
5. Speed to Savings: The pre-negotiated contracts and streamlined processes can lead to quicker realization of savings.

Disadvantages

Some of the disadvantages of working with a GPO include:

1. Less choice of suppliers because your preferred supplier may not be on the list.
2. Contract requirements which can include minimum purchases and other restrictions.
3. Less control because you have to comply with requirements for supply chain purchasing.

RFT partners with many different GPOs so we can offer better pricing to customers who may not be able to afford new installations or systems otherwise.

Conclusion

While GPOs offer many benefits, it’s important to note they may not be suitable for every company. Businesses should assess their specific needs and determine if a GPO aligns with their procurement strategies and goals.