Group Purchasing Organizations (GPOs)
When small buyers aggregate their spend to gain leverage over large suppliers we call it a GPO. Once a GPO achieves this goal, it may have a platform to do much more.
Buyers tend to be small relative to suppliers in a few industries:
- Hospitals are small relative to pharmaceutical companies, medical/surgical distributors, and manufacturers
- Restaurants and hoteliers are small relative to food manufacturers/distributors and other suppliers
- Small and medium-sized businesses are small relative to large indirect goods distributors and service providers (e.g., Staples and Office Depot)
In these cases, buyers may join together to aggregate their purchasing power and negotiate better deals. In return, a supplier may get more volume.
For GPOs, I often end up addressing one, or more, common issues:
Adding Applications Around the Contract
GPOs negotiate contracts, some offer this service only. Some have leveraged this start into offering a more complete source to settle solution.
Ensuring Supplier Value
GPOs must ensure suppliers see at least the volume benefit of competing for the GPO’s business and hopefully much more. If suppliers do not receive value, they will not play.
Real Category and Collaborative Expertise
For GPOs, and platforms generally, to succeed they must remove costs from an industry’s supply chain, not simply shift costs between buyers and suppliers. Real, detailed business process expertise is required for this to happen.
Aggregate buying power for better prices, greater volume for suppliers in the healthcare and all other segments.
Here are some examples: