If you feel like you’ve exhausted every avenue for finding cost savings, a Group Purchasing Organization could be the answer to your challenge.
There’s a gripping scene in the last chapters of Jules Verne’s Around the World in Eighty Days where the ever-dapper hero, Phileas Fogg, finds himself on a steamboat from New York to Ireland. Going full steam against hurricane winds, the vessel runs out of coal after a few days but Fogg, desperate to get to London in time to win a wager, buys the steamer from the captain and launches a desperate plan.
He instructs the crew to feed the furnace with all the wooden parts of the ship – the cabins, bunks, masts, rafts, spars were all burned, followed by the decking itself in a “perfect rage for demolition”. By the time they reach Queenstown the steamship has been reduced to an iron hull and an engine.
Procurement and supply management professionals on the never-ending hunt for cost savings can face a similar situation. Through the identification of efficiencies, negotiations with suppliers and more drastic cost-cutting initiatives, the wooden decking of the steamship (your organization) can be rapidly stripped away until suddenly you’re left with nothing but the hull.
In an immature procurement function, it’s very easy for procurement professionals to look good by posting impressive savings figures month after month. But as your function matures and savings opportunities become harder to find, your track record suddenly doesn’t look so hot.
Where to from here? Well, that’s where innovative thinking comes in. Finding further savings after all of the obvious avenues have been exhausted takes creativity and out-of-the-box solutions. If you do plan on going back to your supplier base to negotiate lower prices, you’ll need to offer them something in return for a better deal.
Volume, volume, volume
If you’re in a situation where you need further costs savings, but your suppliers genuinely cannot budge on price, there’s one sure-fire lever to reach for – volume.
Most businesses end up paying more than they need to because they only spend a modest amount in a particular category and will never unlock the power of bulk discounts. But not every organization has the resources – or warehouse space – to ramp up their purchase volume on their own. But what if there was a way to get the discounts of “bulk” without having to buy more?
Joining a Group Purchasing Organization (GPO) gives members access to savings you would never be able to negotiate on your own. Your organization joins a group of others buying the same thing, meaning you can leverage your collective purchase and buy in bulk as a group to create buying power.
GPOs help businesses of all sizes save on indirect and direct spend. The savings are found not just through bulk discounts, but through efficiencies (such as cutting down on search time and issuing RFPs) and administrative cost savings.
Collective buying decreases suppliers’ overheads, which drives further savings for the purchasing organization. Imagine, for example, a cashier who takes five minutes to process an order. 1000 single-item orders would require 5000 minutes of labor, whereas a single order of 1000 items requires five minutes of labor.
Looking for some facts and figures?
We get it – you’re a procurement pro, and procurement pros want to see hard numbers rather than fluffy promises of savings. We can’t speak for every GPO out there, but we can prove the value of GPO membership with our own figures.
UNA is a GPO with a combined $100 billion in buying power. We help procurement professionals:
- Boost their bottom line with deep discounts we negotiate to save an average of 22% on direct and indirect spend.
- Gain access to steeply discounted agreements (better contracts) that would typically be out of reach.
- Unlock exclusive savings on products and services including 80% off office supplies, 26% off hotels, 20% off parcel shipping, and more.
- Save time through pre-negotiated contracts to get started with new suppliers in 30 days or less.
- Keep prices stable with agreements to ensure rates don’t increase.
- We provide a free cost analysis across your highest categories of spend and offer procurement tips and support.
OK, but how much does GPO membership cost?
Every GPO is structured differently. Some GPOs charge members a fee for their services, while other GPOs, like UNA, are paid by the suppliers themselves. We, in turn, use that fee to fund our program, so that it’s always free for our members.
Membership with a GPO creates an advantage for the member that they couldn’t get on their own. If you’re running out of cost savings ideas and want to unlock the buying power driven by bulk pricing, a GPO could be the solution needed to keep your steamship sailing along.
Interested in learning more? Contact UNA to discuss the benefits of Group Purchasing.