The GPO - Group Purchasing Organization

I hope that you have enjoyed the article "Demystifying Group Purchasing Organizations."

One additional item that I would like to add to the article via this blog is a quick list of the advantages and disadvantages of GPO's.

Advantages of using a GPO:

1. Can give a smaller company "big company pricing"
2. Can save a lot of work by having instant access to a favorable contract, rather than having to go through an exhaustive sourcing process
3. Can offer an ally to work on complaints that would otherwise be "too small" or "too low of a priority" for some suppliers

Disadvantages of using a GPO:

1. Can reduce the amount of control a purchasing department has over its purchasing decisions
2. Can require an investment that may not be recouped if you are unable to get end users to use the GPO contracts
3. Can highlight weaknesses in the purchasing department's processes (which can be an advantage if you capitalize on them and implement improvements)

But, all in all, my personal opinion is that using a GPO should at least be investigated. If the deal doesn't make sense, then by all means walk away. But, if management ever asks how your pricing is, you'll be able to provide a smart answer and demonstrate that you've investigated some options.

What are your thoughts on the use of a GPO?

Please comment.

NOTE TO PURCHTIPS READERS: Today was the first time in quite a while that I linked to my blog from PurchTips. If you haven't stopped by this space recently, I usually post to this blog about 3x per week. My posts here are less formal and of varying length than my PurchTips articles, but hopefully just as valuable to purchasing professionals like you. So, if you find PurchTips helpful, I encourage you to stop by regularly (or, if you're a more techy type, subscribe to the RSS Site Feed) to get even more frequent insights into purchasing and supply management.

Respectfully,
Charles Dominick, SPSM
President
Next Level Purchasing, Inc.
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