Business 101: GPO’s Explained

Procurement is arguably one of the most important elements of running a business. Almost all other daily activities rely on this flow of outside goods coming into the business. That being said, the procurement process itself can be a challenge, especially when it comes to keeping costs down. This is where group purchasing organizations – or GPO’s – come in. If you are new to this idea, then read on to learn more.

What is a GPO?

A group purchasing organization allows several companies to come together to buy equipment and supplies in bulk, which often makes their purchases a lot cheaper. This is all carried out through another business; that business is the GPO.

For example, Procure Analytics is a GPO that strives to make it easier for independent companies to receive their supplies at the best price. They also have an informative blog with articles that go into more detail on how GPOs reduce MRO costs. It offers better value because, often, smaller businesses cannot take advantage of the savings offered when purchasing in bulk. Instead, smaller companies can come together to combine their purchasing power and receive these savings cutting their bottom line and helping to increase profits. All of this is in the aim of growing your business and making it more successful.

The Benefits of GPOS

There are a few advantages to using a GPO, not least the savings it can produce, although this has already been mentioned above. It can also save time and effort on the part of your employees. Finding and negotiating with vendors has historically been incredibly tedious and time-consuming, this task is removed when using a group purchasing organization. Finally, a GPO can also provide a valuable tool when it comes to supply chain management. Often, supply chains are heavily affected by factors outside of your control which can lead to shortages and stress. When using a group purchasing organization, this is not your concern. You will still receive the goods that you need at the best price.

Vertical or Horizontal?

The two main types of group purchasing organizations are horizontal or vertical. Although they are somewhat similar, the main difference between the two types comes down to market segment and specialization. For example, a horizontal group purchasing organization is broader and tends to have clients in different industries and areas. They, therefore, deal in non-specific goods which have multiple uses across all of these industries. On the other hand, vertical GPOS tends to operate within a specific industry to procure specialized items. This means that they supply certain goods which fulfill the particular needs of the clients.

The Bottom Line

Working with third parties to procure goods and/or services is, frankly, an unavoidable aspect of running a business for more people. GPOs simply allow smaller businesses to access the services or supplies that they need and might not otherwise have access to. Consider your costs and your current supply chain, could using a GPO benefit you, either in the time or money it could save you and your business?

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About Dequiana Jackson

Dequiana Jackson, Founder of Inspired Marketing, Inc., helps overachieving women entrepreneurs conquer limiting beliefs and create marketing plans that win. This includes one-on-one marketing plan development, digital product creation, web design and content marketing. Dequiana is the author of Know Your Business: How to Attract Ideal Clients & Sell More and runs the award-winning blog, Entrepreneur-Resources.net.

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