OMNIA Partners Blog

10 GPO Myths, Debunked [Part 2]

Posted by Ara Arslanian on September 08, 2013

If you read the first four busted myths about group purchasing organizations (GPOs), you know that a GPO really is a good option for achieving savings on your indirect categories.

But what about those concerns that you’re not really getting the whole picture when you work with a GPO? Or that your team will resent you for it?

Here are 3 more incorrect assumptions about GPOs.

5) GPOs are compensated through supplier rebates, but the customer can't see the amount.

Not true. Most GPOs operate on administrative fees applied to gross sales that are incorporated into the pricing offered to members. The compensation is transparent to participants.

6) GPOs are geared to encourage more purchasing, not less, which is the best path to savings.

Not so. Successful demand management strategies are not developed by procurement in a vacuum. Functional spend owners work with their supply partners to better understand the needs of their end users and create approaches that satisfy their requirements while reducing excess usage. GPOs facilitate these discussions by providing benchmarks across their membership so individual members can establish achievable metrics.

7) A GPO is going to come between my team and our suppliers and seem like a threat.

GPOs are sensitive to the perception that they are going to be viewed as an impediment or a competitor. That is simply not the case. The participants control the GPO, not vice versa. Think of the GPO as extra hands who are taking on selected non-core categories, thereby enabling your team to focus on higher-value strategic sourcing.

Want a sneak peek into the last three? Download “Welcome to the Post-Sourcing Era.”

Topics: Group Purchasing Organization, Procurement

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