OMNIA Partners Blog

How to Get Better Deals with Your Suppliers

Posted by OMNIA Partners on March 31, 2016

buying-powerEveryone wants more for less. We want more output for less work, more action for less discussion, and more products for less money. When it comes to the latter, we're often hamstrung on the optimal price we can attain by the amount of volume we need to purchase. But what if I told you there was a way to get better deals without changing any of your buying habits? Sounds like a fantasy, but it is in fact the reality for members of group purchasing organizations (GPOs).

A good analogy for how this works is the evolution of the tennis racket. In their infancy, tennis rackets were wooden, brittle and had small oval heads. Today, tennis rackets are made of carbon fiber composites, are extremely sturdy and have oversized faces. And naturally, the ball soars much, much farther when playing with a modern-day racket. Procuring through the collective power of a buying group is just like swinging a state-of-the-art tennis racket. Your money, the "ball" in this case, goes a long, long way. And on the flipside, purchasing alone is like smacking the ball around with that old frail racket -- your offer is much softer and likely to fall short of its mark.

This is all made possible by the simple concept of economies of scale. Larger enterprises usually enjoy cost advantages because increasing size of operation allows for fixed costs to be spread out over more units. A GPO taps into this by aggregating the buying power of all of its constituents so that the supplier treats the collective as one entity. And thus, the supplier offers the pricing usually reserved for a mega customer. Think about Starbucks versus a mom and pop coffee shop. Starbucks is getting much better deals from its suppliers because it's ordering truckload after truckload of supplies, while poor mom and pop are ordering by the mere case. GPOs can give small and mid-sized companies the appearance of an international conglomerate, in the eyes of their suppliers.

And when we say, "better deal," we don't just mean pricing. We mean it in every sense of the phrase. When your supplier views you as a big-time customer, they roll out the big-time treatment. You often receive higher-quality customer service, improve your spot in the queue and benefit from more favorable delivery arrangements -- all while not having to order a single additional ounce of supply. GPOs also sweeten the deal by keeping you from having to spend countless hours shopping for the best option because GPOs have already done that legwork for you with their pre-negotiated supplier agreements.

So next time you go to the bargaining table with your supplier, imagine what it would be like if you had a sea of people behind you, all working together for a common purpose. That table can turn quite in your favor when you have a GPO in your corner.

Topics: Group Purchasing Organization, Supply Chain Management

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