We’re seven myths into our list of 10 common misunderstandings about group purchasing organizations (GPOs). Here’s part 1 and part 2. These last three address perhaps the most important concern: what is working with a GPO really going to be like for my end-users and for me?
Here are 3 myths and a truth about GPOs.
8) A GPO means switching suppliers and that is always painful.
Corporate procurement initiatives are about saving money, so yes, some changes will be necessary. But in our experience, companies tend to be happy with their new suppliers. A GPO will have processes that smooth supplier rollouts to new customers.
9) My internal departments won’t be happy about having low-bid suppliers imposed on them.
Because of the total cost philosophy, a good GPO’s preferred suppliers are likely to be best in class, not corner-cutting low bidders. Members don’t have to worry about contract enforcement; the GPO provides that service. If you think you will have less leverage with your new GPO suppliers, you’re wrong. Because of a GPO’s buying power, you’ll be regarded as one of your suppliers’ largest, most important customers.
10) Why would I want to risk reducing my own relevance by outsourcing procurement?
As a hybrid outsourced solution, a GPO actually addresses this concern rather than creating it. By partnering with a GPO, the procurement function expands the scope of its control and enhances its relevance to the organization.
Okay, this one’s not a myth: GPOs don’t provide a comprehensive procurement outsourcing strategy.
The GPO model is not about covering every one of the 150 to 200 different areas of indirect spend. Rather, a GPO focuses on driving value on a broad set of categories that can have a meaningful impact for a large number of participants. Partnering with a GPO not only generates hard-dollar savings in the selected categories, but also enables corporate procurement to redirect freed-up resources to focus on other, more strategic areas.
Interested in the unique appeal of a modern GPO? Read more about them by downloading “Welcome to the Post-Sourcing Era,” the latest report by Corporate United.