10 Group Purchasing Myths Debunked
If you’re confused about what “group purchasing” really means, you’re not alone. Group purchasing can be complicated, especially when there are so many popular misconceptions about the role and impact of group purchasing organizations (GPO). Working to understand GPOs is a worthwhile endeavor that can save your organization time and money. In this article, get the facts about GPOs and learn the reality behind 10 group purchasing myth.
Debunking 10 Group Purchasing Myths
GPOs are commonly misunderstood as only benefiting certain businesses or industries. Often, GPOs are misconstrued as cost-inefficient, due to membership fees or inflexible policies. The reality is that GPOs can have money-saving advantages for a vast range of businesses, regardless of size or sector. Below are 10 group purchasing myths, and the truth behind them.
MYTH: GPOs are only beneficial for large corporations
REALITY: The discounted pricing, increased negotiating power, and streamlined procurement processes offered by GPOs can be advantageous for businesses of any scale. The cost savings of GPOs can be especially beneficial for small businesses, who tend to pay more for goods and services due to their size. By partnering with a GPO, small businesses can take advantage of the purchasing power of the collective to enjoy lower prices than they would be able to obtain individually.
MYTH: Joining a GPO means losing control over supplier choices
REALITY: Members of a GPO do not lose control over supplier choices because GPOs offer a wide range of vendors for businesses to choose from within each category, locally and nationally. This way, businesses enjoy the cost savings of a GPO while still having the freedom to choose which suppliers to engage with based on their specific needs and preferences.
MYTH: GPOs only focus on price savings and compromise on quality
REALITY: Price savings are not the only criteria that GPOs consider in vetting suppliers. Quality, distribution radius and logistics, sustainability and innovation, to name a few, are also important aspects of the suppliers GPOs choose to partner with. This takes the burden of researching the latest and greatest suppliers off individual businesses, saving them valuable time and resources.
MYTH: GPOs are limited to certain industries or sectors.
REALITY: While GPOs are perhaps best known as entities operating in healthcare, group purchasing efforts exist across many industries and sectors. Fields where group purchasing is most common include hospitality, manufacturing, foodservice, electronics, and agriculture. The proliferation of group purchasing into different sectors means that GPOs can cater to diverse procurement needs and offer specialized contracts tailored to specific industries.
MYTH: GPOs charge high membership fees negating procurement savings
REALITY: It is important to note that not all GPOs charge membership fees. At CPS, for instance, members can join at no cost. When a supplier partnership is made with a business, a GPO makes profit by charging a small, fixed GPO fee. These fees are offset by the substantial cost savings achieved through discounted pricing, inflation and improved supplier terms. Plus, businesses save valuable time vetting suppliers and negotiating contracts.
MYTH: GPOs are rigid and inflexible in accommodating unique business requirements
REALITY: GPOs understand the unique needs and requirements of businesses. They often provide flexibility in contract terms, supplier selection, and customizing solutions to accommodate specific business preferences and goals.
MYTH: GPOs only benefit businesses in terms of procurement savings
REALITY: Cost savings are far from the only benefit provided by GPOs. Group purchasing helps save businesses time by vetting suppliers, negotiating contracts and ongoing supplier support as needed. Additionally, GPOs may offer advantages like access to industry expertise, networking opportunities and educational resources.
MYTH: GPOs are complex and time-consuming to implement
REALITY: A primary goal of GPOs is to simplify procurement processes – not make them more complex. Getting started with a GPO is as simple as signing up for membership. When a business becomes part of a GPO, they are supported by account managers who work to understand the unique needs and desires of the business and identify opportunities for cost savings.
MYTH: GPOs are only relevant for direct materials procurement
REALITY: While GPOs are commonly associated with direct materials procurement, they may also offer benefits for categories such as transportation, sustainability, waste management, culinary support, training, utility audits, IT services, and more. At CPS, vendors go far beyond direct materials into areas like memory care services and emergency preparedness systems, staying on top of the latest innovations in senior living.
MYTH: GPOs replace current staff and compete for jobs
REALITY: GPOs are designed to complement and support existing staff, acting as an additional resource rather than a replacement. By leveraging the specialized expertise and extensive supplier networks of GPOs, organizations' procurement efforts are streamlined and optimized. This partnership ultimately enhances efficiency, enabling teams to focus on high-value activities while benefiting from cost savings, better supplier relationships and simplified procurement processes.
CPS makes it simple
Understanding group purchasing is tricky, but benefiting from the cost savings of a GPO is simple. At CPS, a leading national group purchasing organization dedicated to the senior living market, you can join free of cost. And once you’re a member, our experienced team will work creatively to save you time and money while anticipating your community’s evolving needs. Learn more about the advantages of being a CPS member here.
This blog was written with the assistance of ChatGPT.
OpenAI. (2023). ChatGPT (June 22 version) [Large language model]. https://chat.openai.com.