Businesses today always need to look out for ways that they can be more efficient, reduce operating costs, and stay in front of the competition. One way that any business can be more competitive is by joining a group purchasing organization, or GPO. When you join a GPO, it is the power of several businesses pooling together to make purchases from suppliers. Being a member of the GPO can provide a variety of advantages to businesses of all sizes.
Inventory and supply costs are some of the most significant expenses that a business can incur as they are trying to create a final product. In most cases, a business can save a lot of money on a per-unit basis if they are willing to purchase items in bulk. Unfortunately, purchasing items in bulk can come with risks as you may not have the storage space or current orders needed to use all the supplies. This can then lead to increased waste and operating losses.
A key advantage of a group purchasing organization is that many small companies can pool together to make larger purchases together. This will allow you to get the bulk discount without having to purchase too much inventory at one time. Further, you may have access to more vendors in the market that only fulfill larger orders. This can help you gain access to higher-quality parts as well.
Reduce Tail Spend
Another advantage of being part of a GPO is that you can help to reduce your tail spend. For those that are wondering what is tail spend, it is typically defined as costs that are harder to control and not properly managed. For many businesses, tail spend can fluctuate widely and drastically impact the bottom line. Due to this, finding ways to manage it can be very helpful. As inventory and supply purchases are often a big part of tail spend, being part of a GPO can help to normalize and manage these expenses.
Manage Working Capital
The working capital of a business is typically defined as the amount of cash and other liquidity that a business has access to. As repayment terms received when paying back invoices can be shorter than terms you provide to your customers for accounts receivable, even profitable companies can have working capital stressors. Those who would like to improve their working capital position can benefit by being part of a GPO as these organizations can command longer repayment terms.
A business that is a member of a GPO will also enjoy that they are able to save time and reduce their overall overhead costs. When it comes to managing your business, having strong control over your inventory and purchase supply systems is very important. To have this control, you will likely need to give human resources and capital to it, invest in various systems and programs, and have a process in place to ensure everything is running smoothly.
For any organization, the time that goes into purchasing and managing inventory can be significant. As a member of a GPO, you will be able to avoid a lot of these costs and save a considerable amount of time. The GPO will be able to handle many of these tasks for you including negotiating contracts with vendors, tracking the status of shipment orders, and even completing quality checks on supply that is purchased. When you join a GPO and become a member, you can then instead invest your money and personnel to other areas of the business to help fuel growth and serve customer needs.
As a business owner or manager, finding a way to gain a competitive edge over the competition is very important. For businesses of all sizes, one way that you can reduce costs and improve efficiencies is by joining a group purchasing organization. Those that are members of a GPO will benefit in several ways, which can help them continue to compete well even in a challenging and competitive industry and environment.