If saving your business time and money was on your resolution list this year, then perhaps you’ve already been looking for ways to set savings into motion. To help you narrow in on a cost efficient procurement strategy, we are answering some of the most frequently asked questions that we’ve encountered in regards to Cooperatives and GPOs so that you can have your most profitable and efficient year in 2017.
What is a purchasing cooperative?
A Cooperative (Co-Op) is a form of vertically-specific businesses and organizations owned and managed by the people who provide or use its goods and services. Members pay a fee to be a part of the co-op and receive discounts in exchange on specific products.
What are the benefits of cooperative purchasing?
These Co-Op groups create industry-specific competition in the market, reduce costs, and deliver services that more ‘profit-driven’ companies might deem unprofitable. According to the Chron.com, “Cooperative businesses are owned and controlled by members, not by absentee investors. The board of directors is elected from the cooperative’s membership to represent the interests of the members. The members are the users or consumers of the cooperative’s products or services.” Members of cooperative businesses pay lower or stabilized prices for products because of the buying power of the Co-Op. The profits of the cooperative business are transferred to the members based on the percentage of ownership or investment.
What is a group purchasing organization?
A GPO is a buying group that facilitates many different businesses or organizations, typically through many different verticals, aligning the purchasing of products or services, which enables them to benefit from discounted or group rates. GPOs represent hundreds, if not thousands, of businesses when negotiating contracts with suppliers to offer greater efficiency and lower costs to their members by leveraging their combined purchasing power. GPOs such as UNA Purchasing Solutions, also provide their members the added benefits such as supply chain management and a procurement partnership, which we will elaborate more in the next section.
What are the advantages of a GPO?
When you partner with a GPO like UNA Purchasing Solutions, there is no membership fee to enjoy the discount for business purchasing needs. Sign up is quick, and there is no commitment terms or required purchasing volume.
As mentioned above, UNA Purchasing also offers supply chain management by standardizing and streamlining your purchasing. Along with a procurement partnership, cost comparison analysis, and data analytics, GPOs serve as a strategic purchasing partner to ensure your company’s efficiency and success. These and many more member benefits are offered for free as an advantage of being a member of UNA Purchasing Solutions.
What is the difference between a Co-Op and a GPO?
While both groups combined the needs of many to secure lower prices, they do go about it in different ways. The significant difference between a purchasing cooperative and a group purchasing organization is their purpose as an organization. Co-Ops are run by their members, sharing both in profit and loss. Their purpose is to unite people in a jointly owned, vertically focused and operated business resulting in lower prices on their offered services or goods. In a GPO, members have individual needs and place their orders with the suppliers, applying their purchasing code given by the GPO to obtain the goods at the contracted lower rate. Their purpose is to leverage thousands of companies’ committed volume to secure discounts on their purchasing needs. In a Co-Op, you can purchase only what the group sells and can only benefit from a discount if you are a paying or stakeholding member. In a GPO, they act as a facilitator between the member and the supplier. There is typically a wide variety of vendors and contracts to choose from for your purchasing needs, and with UNA Purchasing specifically, you do not need to pay a fee to receive the benefits of cost reduction.
How GPOs and Co-Ops work together for your benefit
In particular cases, Co-Ops and GPOs can collaborate to form a partnership yielding higher benefits for their members. If there are gaps in the Co-Op contract portfolio, a GPO partnership could bridge the gap to offer vendor benefits to their members. For example, one GPO might have an industry-specific contract that is unique in the marketplace, such as a shipping or food distribution contract. Due to the relational upkeep with the supplier, difficulty in negotiating based on committed volume, and ongoing procurement upkeep, a partnership with a GPO could provide significant value and savings to any Co-Op that had this specific need. Our team has run into this a few times over the years, and it’s been a joy working with several Co-Ops, bringing solutions to their members that they wouldn’t have otherwise. All in all, both options are suitable it just depends on the needs and goals of that particular business.