As a perpetually resource stretched function, procurement and purchasing professionals don't have time to waste when it comes to optimizing spend management. OMNIA Partners has compiled the most common and frequently asked questions about GPOs / buying groups and answered them in one convenient spot.
Do you have a GPO question that didn't make the list below?
A: Group Purchasing Organizations create and manage contracts for indirect services and goods, and direct materials and commodities that are mutually beneficial to both the GPO suppliers and members.
To do this, GPOs first create a membership base that's comprised of companies looking to channel their spend using the GPO's agreements. The combined spend of these member companies creates leverage. It's this leverage that continues to attract GPO supplier partners and motivates them to offer their best pricing and service levels to GPO members.
As spend increases, a GPO can continue to strategically source more agreements with suppliers that have the ability to provide better pricing and agreements than GPO members could achieve on their own. GPO suppliers will actually forgo margin opportunities because their involvement in a GPO will greatly reduce the amount of money they need to spend acquiring new business.
At the end of the day, members rely on GPOs to help solve their procurement and sourcing concerns and suppliers rely on GPOs to build strong buyer relationships with a diverse portfolio of companies from many industries.
GPO membership ultimately allows both parties to save time, money, resources and simplify the buying process so they can concentrate on the projects that are most important to their respective companies and bottom lines.
A: A GPO is a Group Purchasing Organization. As Group Purchasing Organization members continue to use GPO contracts – that are being constantly managed by the GPO – value increases for both members and suppliers.
More member spend means more spend flowing through agreements, which allows GPOs to negotiate even deeper discounts and continue to improve terms and conditions with suppliers. And as these supplier relationships mature, a GPO can likely further mitigate risk by engaging multiple people at various levels throughout supplier organizations.
While it's true that this level of engagement saves all GPO participants money, time and resources, a GPO goes beyond those impressive benefits to produce sustainable value. This is because even if savings diminish over time, a GPO will be constantly looking for new ways to enhance agreements and supplier performance.
Suppliers who engage at this deeper level will also see sustainable value. The large, diverse portfolio of members they get access to, the long-term relationships they build, the collaborative engagement they see and the in-depth industry knowledge they receive will continue to pay dividends.
A: GPOs thrive in industries with a large volume of companies that occupy the space, like manufacturing. By combining the spend of these companies the members' buying power becomes greater.
A: Because all GPOs provide access to leveraged agreements, the level of contract management is the differentiator. An advanced GPO manages the lifecycle of supplier contracts by:
- Monitoring changing buying patterns in the market
- Continually seeking opportunities for improvement and potential savings
- Ensuring that the terms of the contract are being followed
- Reviewing and auditing price files
- Implementing a thorough supplier relationship management program
These activities require an extensive time investment when performed correctly, and being part of a GPO removes that time expenditure from member companies.
Additionally, the most sophisticated GPOs have partner-based relationships with their suppliers that focus on the total value of the contract instead of simply offering the lowest price.
A: Each year, it's increasingly clear that many companies continue to deal with resource constraints making it nearly impossible to maintain in-depth category expertise. At OMNIA Partners, Private Sector we serve as an extension of our members’ teams, enabling them to achieve their spend management goals while also freeing up their time and resources to focus on strategic initiatives while increasing their spend influence.
Immediate cost savings, ease of implementation and ongoing program management are the foundation of the OMNIA Partners GPO model and have been instrumental in establishing us as the premier GPO in the market. As we continue to grow and gain more leverage, we create a climate where our programs improve in perpetuity and deliver ongoing sustainable value to our members.
A: As the number of members join a GPO grows it provides suppliers the opportunity to earn more business - extending their sales operations and increasing their marketshare.
A: The OMNIA Partners portfolio continuously evolves to ensure an array of standard & non-standard categories are available. We offer a wide depth & breadth of programs – even often unmanaged categories.
A: OMNIA Partners will become an extension of your procurement team, not a substitution. Strategic Sourcing is still done in-house by your company and OMNIA Partners does not in any way assume the role of the purchasing department. We serve as an additional resource for sourcing teams to increase productivity and efficiency. By joining a GPO, a company’s procurement function actually expands its scope of control, as well as enhances its strategic relevance to the organization.
“We can take advantage of what OMNIA Partners has already negotiated so we can focus on areas where we don’t currently have a presence. It’s taking our small team and growing it to a large team.”
- Paul Stasco, Senior Director of Corporate Supply Chain, Curtiss-Wright
A: This question illustrates an important advantage of OMNIA Partners. In the engagement process, new members determine which pre-negotiated agreements they want to participate in. There's no requirement or obligation for a member to partake in any given agreement. However, OMNIA Partners is a resource that creates value for its members in numerous ways aside from savings.
A: Members of OMNIA Partners always have complete autonomy to purchase from any supplier they choose. There's no obligation and no minimum. Members have the choice to opt in or opt out of each pre-negotiated supplier offering. This motivates suppliers to create attractive programs to provide additional value. Members can leverage category offerings and other resources based on their unique needs and where they find the most value can be driven.
A: OMNIA Partners operates within a flexible framework that allows members to enjoy all the benefits of group leverage while retaining the ability to negotiate adjustments and incorporate options that address specific needs. Our members participate in structuring our supplier agreements so that we can create options best suited for their goals, no matter how unique those goals may be.
A: By joining OMNIA Partners, your company will be bypassing time-consuming RFP and sourcing procedures while gaining the flexibility to impact other areas of spend so that you can focus on more strategic initiatives. We also help create change management timelines and implementation plans to improve performance and to help you achieve savings faster and maintain continuous program compliance. Because we shoulder so much of the process, OMNIA Partners saves you a substantial amount of time and headaches in the end.
A: GPO Contracts are pre-negotiated or pre-leveraged contracts with supplier partners that create cost savings for strategic spending. GPO contracts are:
- Vetted by similar organizations for a common goal
- Act as an extension of the organization to manage categories in the best interest of their members
- Allow for configuration to support unique requirements
- Have terms and conditions to stay within market pricing throughout the duration of the agreement
A: Members of OMNIA Partners have realized significant double-digit savings. A GPO can influence 18-25% more savings than the DIY model, with 500 sourcing hours saved per category.
A: Typically, a GPO is funded via membership fees, administrative fees or some combination of the two. A membership fee can be a one-time payment that's paid upon joining the GPO. Alternately, the membership fee can be structured as an annual dues-based payment. In some cases, GPOs waive membership fees if a member participates in a certain number of agreements or surpasses a spend threshold.
Suppliers always pay GPOs administrative fees. Regardless of whether the fee is a flat rate or based on the amount of spend passing through the agreement, a GPO's funding structure is always transparent to its members. For example, OMNIA Partners does not require a membership fee, minimum order or spend obligation in order to join the collective membership and benefit from the leverage.