The business world has been extremely competitive in recent years. As most industries have seen a rise in competition and very volatile supply costs, finding a way to reduce expenses and improve efficiencies is very important. One way that a company can do this today is by becoming a part of a group purchasing organization, or GPO. A GPO is an organization that will purchase supplies and inventory in bulk and then shares the purchased assets among the group members. Being a member of one of these organizations offers a lot of value and benefits to businesses, managers, and owners.
Reduce Supply Costs
One of the reasons that companies should consider joining a group purchasing organization is that it can help you reduce your expenses. Overall, GPOs can help reduce costs in several ways. One of the main ways they can do this is by allowing you to take advantage of bulk purchasing benefits. When purchasing any type of product, you are normally able to save money on a per-unit basis if you make a larger purchase.
Unfortunately, many businesses are limited on how much inventory they can buy at once based on working capital and storage constraints as well as the risk of products going to waste. If you are a member of a GPO, you will be able to aggregate your purchase with others. This will allow you to buy only what you need but also receive a reduction in your inventory costs. This can help you reduce your total production costs, which can increase profitability or allow you to pass on savings to customers to be more competitive.
Working Capital Relief
Managing working capital is a challenge and a very important task for any business today. Even an organization that is profitable and growing will find that managing the timing between receiving and paying out cash is difficult. When you are a member of a group purchasing organization, you could get working capital relief that can help you manage your business and remain profitable. With a GPO, the consolidated buying group will have more influence than each individual member. This could help you negotiate better payment terms, which can free up working capital. It can also allow you to offer extended terms to your customers, which will continue to make your company more competitive.
Save Time for Business
Another advantage of being part of a GPO is that it can help you save time. If you are going out and trying to find vendors for your business, there will be a lot of work that is needed to be done to enter into a contract. This includes doing diligence on the vendor, checking sources to ensure they have a good reputation, and negotiating contracts. If you are part of a GPO, all of this work will be done for you. It will provide you an opportunity to review work they have done on the vendors in the past to ensure you are comfortable with the vendor selection, but it can greatly reduce the amount of direct work that needs to be done.
Manage Overhead Costs
The use of a GPO can also help you better manage your overhead costs. The GPO provides you with a lot of services beyond simply receiving discounts on supplies. The GPO will be able to handle quality inspection, inventory tracking, ordering, and invoice payment. If you are not a part of the GPO, this could require you to hire additional people and invest in software programs to help keep your business and inventory control system in place. Due to this, you could experience a noticeable decline in overall operating costs when you do become a member of a GPO.
As you are looking to improve your business, having a strong command of your supply chain and inventory costs is very important. One way that you can do this is by becoming a member of a group purchasing organization. Being a member of a GPO offers a range of benefits and advantages that can help to reduce costs and make your company as efficient as possible.