Finding a way to manage expenses is very important in the business world today. One area in which businesses spend more money than they need to is on the purchase of materials and raw goods, which will eventually be converted into a final product. For those that are looking to save money, being part of a GPO is a great option. A GPO, or group purchasing organization, is a group that you can choose to purchase certain products as a larger group as opposed to individually. Saving money with a GPO is very possible for a few different reasons.
Bulk Discounts
One of the main reasons that you can save money with a GPO is because you will be making a bulk purchase. In general, purchasing items in bulk is more affordable on a per-unit basis than buying items in smaller quantities. This can be seen at warehouse supply stores but also is true with commercial supply purchases.
Unfortunately, smaller businesses may not have the working capital to make large orders or have the warehouse space to hold them. Further, some materials purchased could also expire if they are not used within a certain amount of time. However, when you are part of a GPO, you will be part of a larger order and will be able to obtain only the quantity that you need at a more affordable price.
More Negotiation Power
While it is beneficial to save money through the use of a bulk order, the use of a GPO can also help you to save money as you will collectively have more negotiation power. Being able to successfully negotiate with vendors and suppliers is very important and it could help you to reduce operating costs. If you are not a larger purchaser, your negotiation power may be limited. However, as part of a GPO, you will collectively have more negotiation power. This could allow the entire group to benefit further through a reduced price per unit.
Reduced Overhead Costs
While there are plenty of direct ways that you can save money with a GPO, there are some indirect ways as well. Through the use of a GPO, you can also reduce your overhead costs. The process of managing inventory, placing orders and tracking the status of orders is an important task for any business as it can help to manage working capital and keep a company efficient. However, it often requires that a business dedicates some working hours to this task each week. With a GPO, many of these tasks will be consolidated and can be reduced, which will allow you to free up resources to use on different areas of your business.
Repayment Terms
Being able to properly manage working capital is very important. Generally, the longer that you are able to pay back bills the more you will be able to control your cash flow. Most small businesses will find that their payments are due within a short period of time of products being delivered. Depending on the terms that you have to provide to your customers, this could cause a cash crunch. With a GPO, you can receive extended repayment terms which can reduce some stress on your business.
Learn of New Products
As you are developing products for your ultimate customers, you likely are used to using certain materials and inventory in your process. However, you may not always have an opportunity to consider other options for your material supplies. When you are part of a GPO, you will get to meet and build relationships with other owners in your field. This could help you to learn more about different material options that are available in the market. Depending on the situation, these could be higher-quality products or other options that are more affordable, both of which could help you improve your bottom line.
The business world today is quite competitive and finding ways to reduce costs while also providing great products and services is very important. One way that you can save money for your business is by being part of a Group Purchasing Organization, or GPO. It can help you to reduce your operating and purchasing costs in several ways.
