Manufacturing companies join a Group Purchasing Organization (GPO) to help solve procurement and sourcing concerns. GPOs are able to assist in these areas by aggregating the purchasing power of businesses to obtain discounts and rebates from its vendors. The buyers in a GPO such as Prime Advantage are referred to as "Members," and the vendors are called "Suppliers." For Members, the primary goal is cost savings, but there are many other benefits drawn from being part of a large network. For Suppliers, the advantages come through increased market share and deeper relationships in the customer's organization.
Three Main Types of GPOs
|Master Buyer||Vertical Market||Horizontal Market|
|One chief buying organization with vendor contracts.||A GPO focused on one specific industry.||A GPO in many industries that use similar products and services.|
Find out more about the types of buying groups.
Industries Where GPOs Exist
GPOs operate in specific industries such as healthcare, hospitality, foodservice, electrical, plumbing, non-profits, and industrial manufacturing. What enables GPOs to thrive in these sectors is the sheer number of small and mid-market companies that occupy the space. By combining the spend of these companies, both the Members' buying power and the Suppliers' market share become greater. However, if an industry is consolidated with only a few market leaders, a GPO may not be as effective.
Example of a Manufacturing GPO
Prime Advantage is the leading GPO for mid-market manufacturing firms in a variety of business segments. Prime Advantage's Members manufacture products and equipment in packaging, truck and trailer, foodservice, HVAC, food processing and confectioners. Its Members buy their raw materials, components, services and supplies under programs Prime Advantage has negotiated with its Endorsed Suppliers. Prime Advantage Members reduce costs as well as mitigate supplier risk within their supply chains by partnering with these pre-qualified and audited Endorsed Suppliers.
GPOs and Cost Savings
Prime Advantage Members have realized significant average savings in these sample categories:
|Direct Goods||Indirect Goods||Services|
Common Myths of GPOs
Group purchasing organizations serve as resource to help strengthen your supply chain and impact your bottom line. However, there are several preconceived notions that exist about joining a GPO. Find out more about buying group myths.