As an entrepreneur, running your small business can be daunting. Aside from constantly driving sales, you need to ensure the quality of your products, customer service, employee engagement, and more. As such, it is essential to look for ways to streamline your processes to save costs, one of which is to be part of a group purchasing organization (GPO). Keep on reading to learn more about it.
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What is GPO?
What is a GPO? It is wherein an organization collects orders for a particular supply from various merchants, including you. The rationale here is to accumulate enough orders that will meet a manufacturer’s required minimum order quantity. That way, the GPO will be able to order a supply in bulk and have discounts. Aside from discounts, GPOs partner with known manufacturers. Think of them like your middle man. That’s why you can rest assured that you are acquiring your products from the manufacturers. The best part? You can use your savings to make your business grow.
13 Benefits of Using a GPO
Every small business needs certain things for it to function. As a business owner, these services and supplies can quickly add up. GPOs usually work with preferred suppliers that will allow you to get the best deals so that your business can succeed.
Here are the ten ways a GPO can benefit your small business:
More prominent organizations or a group of combined organizations that have similar needs can directly negotiate with manufacturers. This allows them to secure the best prices for several categories.
Apart from that, they’re also more successful in securing monetary perks such as rebates and other cost savings. Hence, they can save up on expenses and use them to grow their startup. This is based on the volume of business that they’re doing with each supplier. Suppliers can then streamline their sales operations to negotiate pricing with GPO rather than executing deals with various organizations.
Reduction of transaction costs
Apart from the cost savings, small companies can also see a significant reduction in transaction costs. This is because it decreases the average time that’s spent on a transaction as well as clerical errors. GPOs help small businesses by simplifying the entire order process. Doing so enables you to establish a reduced, fixed pricing and decrease the amount of time sourcing.
Improved supplier management
Another significant benefit is enhanced supplier management. Your small business is now working with the suppliers like a large company.
Supplier management is where a GPO can strategically manage all interactions with a supplier. Doing so ensures that value is received for every dollar that your organization spends with these suppliers. This includes building policies, negotiating and delivering goods and services according to your contract. It also ensures that your suppliers are bringing long-term value at a consistent level.
Taking advantage of pricing discounts has a direct impact on your profits. Smaller companies have every trick in the book to enhance profits, as well as cash flow. That’s why using GPOs has an immediate impact. A decrease in purchasing costs also leads to an increase in profits without having to boost sales. What are some small business marketing mistakes that you need to be aware of?
Partner in procurement
GPOs should also work as your internal procurement department’s extension. It should know its place while complimenting your existing sourcing strategy. A great GPO should also strive to come along with the processes that you’ve already created. It can be an additional resource for effective sourcing, supplier and contract management, and a partner with years of procurement experience that spans various business types.
Keep in mind that not every GPO offers free membership. That’s why finding one can be beneficial- it is of value to the members when they are offered free memberships. Moreover, manufacturers and suppliers are willing to extend their discounts with GPOs that have a vast network; for instance, a pharmaceutical company that has links to various pharmacy chains and hospitals. When considering a GPO, look for one that provides free membership and a wide range of supply partners, and substantial buying power.
GPOs provide category management that aids in identifying how a business can save. A GPO will keep its members updated on a manufacturer’s offering and service enhancements by reviewing regular suppliers. That way, they become abreast of the services and approaches that suppliers are taking. Nonetheless, a GPO should not serve as a barrier between a supplier and a merchant.
Lower purchasing risk and quality service
GPOs are also striving for the longevity of keeping members. Because of this, the pressure to support the members is high. GPOs subject prospective suppliers to an entire vetting process to provide members with the best quality of suppliers. This is to ensure the supplier’s credibility and value. In return, members have a lower purchasing risk. Meanwhile, working with suppliers that are the “cheapest” option offers very little value and can affect the GPO’s standing.
If you’re a small to midsize business, premiere pricing from larger suppliers might seem impossible. Fortunately, GPOs provide you the inside track to better pricing and top-tier service that compensates for any admin fees. It also gives you access to additional contracts and resources that you wouldn’t be offered otherwise.
GPOs these days provide more than just contracts. A lot of organizations are offering value-added solutions of their own. This can range from consulting services to culinary engagement or audit services. Joining GPOs provides businesses with a bevy of resources, making it easier to grow and optimize their savings. Suppliers can then use these services to create new marketing vehicles. This improves the usage of their products and services and therefore demonstrates their value on GPO members.
Aligning with your GPO partner doesn’t just help save operators money, but it can also help them save time and valuable resources on their end. GPOs are managing supplier contracts for operators. That’s why they’re spending less time sourcing, negotiating, and maintaining these agreements. Many GPOs will even help them with any distribution or fulfillment issues, bringing back the focus on what matters most to customers.
Regional and minority vendors
Because their members have diverse needs, GPOs make contracts beyond national brands. Many of them have a wide selection of regional vendors and minority-owned suppliers. Smaller, local, and unique suppliers will also gain more exposure. This presents sales opportunities from GPOs that wouldn’t otherwise have been available on their own.
Organizations will also benefit from GPOs that understand, as well as welcome, collaboration. By bringing various professionals together, organizations can share best practices and exchange information. Bringing together business owners with varying needs and budgets allows an exchange of experience. This includes sourcing tips, recent experiences, and even horror stories with their peers.
Over to You
GPOs place your small business in the same environment as your larger competitors. It even gets rid of the advantages that its size provides them. Although not a single GPO can offer a universal solution to your company’s needs, they can still help you save on procurement costs. Plus, you do not have to think of where to look for the right suppliers because a GPO can do it for you. You can also cut overhead costs and create valuable relationships with key vendors. Remember to embrace the potential of GPOs. That way, you will get to discover how your business will be able to support its individual goals, along with the collective’s purchasing power. Good luck!
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