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The Modern Group Purchasing Organization: Leveraging Spend, Increasing Value

  • Broadcast in Business
Jon Hansen

Jon Hansen

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In the United States, a group purchasing organization (or GPO) is an entity that is created to leverage the purchasing power of businesses to obtain discounts from vendors based on the collective buying power of the GPO members. Many GPOs are funded by administrative fees that are paid by the vendors that GPOs oversee. Some GPOs are funded by fees paid by the buying members. Some GPOs are funded by a combination of both of these methods. These fees can be set as a percentage of the purchase or set as an annual flat rate. Some GPOs set mandatory participation levels for their members, while others are completely voluntary. Members participate based on their purchasing needs and their level of confidence in what should be competitive pricing negotiated by their GPOs. Group purchasing is used in many industries to purchase raw materials and supplies, but it is common practice in the grocery industry, health care, electronics, industrial manufacturing and agricultural industries. The above is the technical or literal description of a buying group. While accurate, and beyond the leveraging of purchasing power, does it really illustrate the true impact of GPOs since they were first introduced in the health care industry in 1910? Joining me today to look beyond the basic, albeit important cost savings of GPOs to examine their greater impact on business and the economy in general is Corporate United’s Vice President and 2009 Supply and Demand Chain Executive “Pro To Know” David Clevenger.

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