A group purchasing organization (GPO) is a collection of businesses that make purchases together in order to receive the best price.
By combining their purchasing power, a GPO is able to negotiate better discounts from vendors for all kinds of services like GPO healthcare.
These are benefits that can be passed on to the owners of the business and the employees.
Just as importantly are the social aspects of the group and making personal relationships with fellow GPO members.
By bargaining as an entity, the group will be more able to deal with problems that may arise with contracts or other disputes.
The collective power of the GPO is greater than the sum of its parts and can lead to good outcomes that businesses would not be able to negotiate on their own.
It is not always easy to get a GPO membership, but the benefits typically outweigh the costs.
By understanding the dynamics of a GPO, you will be better suited to make the decision of whether a GPO is worth it for your business or organization.
Some of the most important aspects of a GPO are addressed below. Whether or not it is the right for your organization, it is important to carefully analyze the data points and relevant outcomes.
A GPO is useful in a number of ways for a business.
If you are interested in analytics for your business, then a GPO offers the latest insights into what your business is doing.
Analytics are particularly useful because they can determine the Pareto spread for your business and allow you to focus on the customers and processes that make your business the most money.
A Pareto distribution leads to the realization that not all resources are spread evenly.
Pareto realized that typically there were clusters around the 80/20 distribution, and this extended across many fields.
For example, 20% of the customers tend to produce around 80% of the revenue for a business.
In order to cut costs and improve efficiency, it is important for companies to hone in specifically on these customers and dedicate the most time and effort to serving their needs.
A big part of a GPO is using analytics to get information about the company that would otherwise be counter-intuitive.
This is why so many businesses have started using GPOs.
It should be noted that Pareto distributions are not limited to customer distributions.
They can also apply to many of the aspects of the business. For example, around 20% of a business’s processes produces 80% of the profit.
In order for businesses to maximize their efficiency, it is important to focus on the processes that give them the most return for their investment.
It should also be noted that GPO analysis does not stop at Pareto distributions.
The data can be used at many different facets of a business. A GPO is also particularly useful for matters of finance.
It can provide services about accounts payable and common best business practices.
This is why many companies have engaged in the use of a GPO of further their business.
It is an asset to have a dedicated team working to make the company better.
Being in a GPO means making connections that would otherwise not be available.
It is a great opportunity to further the business and meet people that could possibly be assets to the business.
The social connection is a big part of GPO membership.
Common affiliation allows members of a GPO to meet and network.
This can provide valuable insights into what the costs and associated business contracts look like in other regions.
If a part of your business is disproportionately more expensive, then this is a great way to find out.
Negotiating contracts is an important part of business and a GPO can enhance positive outcomes.
Another benefit of the GPO service is the utilization of short and long term profit maximization goals.
These partnerships extend to many different areas. In fact, being a member of a GPO allows you to possibly negotiate discounts on a number of products and services that you might not otherwise have the opportunity to.
It is clear that many of the GPO benefits come from the social advantages that are conferred on the group.
It is important to maximize these advantages to their full potential.
GPO upfront cost reality
Many businesses are initially unwilling to invest in a GPO because they are focused exclusively on upfront costs.
The truth is that a GPO can be an expensive endeavor, so it’s not surprising that some businesses are initially unwilling to pull the trigger.
However, it is important that view a GPO as an entire package that can provide benefits to the company.
In terms of connections, analytics services, discounts, savings, and common business adherence, there nothing that can beat a GPO when it comes to long-term value.
However, many business people are unfortunately short-sighted when it comes to their business costs.
They don’t properly account for the benefits that can be accrued through GPO membership. There are discounts available for employees’ dental care, computers, and everything in between. If your business is rapidly expanding, then these services will be invaluable to you and your employees.
As with many things in business, it pays to think long-term. Much of the value from being in a GPO comes from the benefits you receive on the back-end.
These are cost savings that take a while to materialize. Joining a GPO is putting the health of your business first.
Overall, deciding whether or not to invest in a GPO is a decision that each business will have to make for themselves.
Decide if any potential costs outweigh the total benefits.
It might be the case that a GPO offers services that you feel that you or your company don’t need. Paying for these can seem like a real chore.
However, it is important to look at a GPO as a collaborative system. You only get out of it what you put into it.