Procure Analytics was founded to address the complex challenges of a frequently ignored indirect spend category: maintenance, repair, and operations supplies (MRO). Understanding how group purchasing organizations work and their benefits can help enterprises save money, time, and headache when it comes to MRO supplies.
Procure Analytics is a group purchasing organization (GPO) for MRO, i.e., indirect materials needed to keep operations running.
What is a Group Purchasing Organization?
Working as an entity, a GPO helps many businesses which buy similar products by leveraging their aggregate purchasing power to establish superior pricing and terms with vendors.
For enterprises in need of MRO supplies, there are a variety of reasons that make partnering with a GPO useful, no matter the size of your organization. At Procure Analytics, we help small companies purchase like large companies, and allow even the largest of companies achieve purchasing power they wouldn’t have on their own.
Top Benefits of Partnering With a Group Purchasing Organization
Reduce Spend Costs
Partnering with a GPO is an effective, rapid, and easy way to cut costs. How? By providing immediate access to GPO-negotiated pricing, often with suppliers through whom the member is already purchasing. Additionally, GPOs like Procure Analytics will work with member companies to drive further cost reduction through data-driven value identification. This can take the form of tail spend rationalization, supplier consolidation, and lower cost alternatives. Members often have access to value-added services, such as inventory management solutions, that otherwise would only be available at cost to even the largest customers. GPOs like Procure Analytics offer all these benefits at no cost to their members.
Group Purchasing Organizations Offer Supplier Rebates
Some group purchasing organizations like Procure Analytics include rebates for members in their agreements with suppliers. Procurement teams at these member companies optimize spend to receive rebates on top of superior pricing, increasing their total savings.
Many member companies would not otherwise be able to access these rebates or would receive a smaller rebate outside of the group purchasing organization’s supplier agreement. Additionally, Procure Analytics works closely with their members to optimize their purchases to maximize their rebates.
Not all GPOs include rebates in their benefits to member companies. When rebates are included in group purchasing agreements, they often take the form of spend compliance or preferred manufacturer rebates. Procure Analytics goes beyond offering rebates on MRO spend through their supplier programs by consulting members on continuous ways to increase rebate savings.
Optimizing Local Level Purchases Through Consolidation
The procurement team at an organization’s headquarters often has limited time and resources. A small team typically manages large strategic indirect spend categories, leaving little bandwidth to manage tail spend categories like MRO. As a result, local sites may be left on their own to purchase many MRO items. Even if companies have purchasing agreements in place, purchasing managers may go outside of existing contracts and procure items through local suppliers.
When sites purchase through local suppliers or outside of a company-wide contract, the procurement team often lacks visibility into what local sites are buying. When sites purchase items ad hoc, they spend administrative time price shopping low-dollar items, increasing the item’s total cost of ownership. The procurement team at HQ may know the price paid for a site’s batteries or toilet paper, but not know how much time a local purchasing manager spent acquiring those items. This method of decentralized tail spend procurement increases administrative costs and decreases transparency.
Procure Analytics gives member companies an easy way for local teams to purchase the MRO items they need without running down to the local store or price shopping several suppliers. Through the PA program, procurement teams gain visibility into what their local sites purchase as well as analytics for current and future savings opportunities. Not only does this cut back on the time it takes to find and purchase items, it streamlines the entire procurement process and ensures sites purchase at the same price across the board.
Group Purchasing Organization Negotiates Supplier Contracts on Behalf of Collective Membership
Supplier contract negotiation is a familiar process to procurement professionals, but it is highly time-intensive. Running through an RFP process on larger spend categories like direct materials makes sense – though the procurement team spends time reviewing bids and negotiating with suppliers, the products account for a significant portion of the company’s spend.
With nonstrategic categories like MRO, the value of time spent to savings gained by reviewing RFPs and negotiating with suppliers often isn’t enough for procurement teams to handle alone. Some teams will negotiate a portion of their MRO spend under a contract, leaving the remainder to local purchasing teams. Where the category’s spend is low compared its overall spend cube, outsourcing the contract negotiation to a group purchasing organization aligns with procurement teams’ best interests.
Rather than spend time going back and forth with scores of suppliers over small categories, the procurement team relies on the GPO to handle negotiations on behalf of member company interests. Often, a procurement team gains much better pricing and terms than they would be able to negotiate with their standalone spend.
GPOs like Procure Analytics leverage the entirety of their members’ buying power and incorporate additional vendor services in the contract benefits. When a procurement team saves money, gains service levels, maximizes rebates, and optimizes resources by partnering with a GPO, they elevate tail spend to a strategic category.
Group Purchasing Organizations Mitigate Supply Chain Risks
Often, unforeseen product demand surges constrain supply chains. The most prominent and widespread recent example was the sudden rise in demand for MRO items like personal protective equipment (PPE) at the beginning of COVID-19. Businesses that never needed crates of face masks and hand sanitizer before suddenly required them in order to continue essential operations in a safe environment. Procurement teams scrambled to source these constrained items.
For procurement teams connected to Procure Analytics’ group purchasing program, the task of sourcing critical items was outsourced to the GPO. Group purchasing organizations like Procure Analytics build a network of strong supplier relationships to rely on in times of supply chain constraints. Procure Analytics formed a COVID-19 sourcing task force to help member companies find what they needed from any available supplier in the GPO’s network, even if the member was not connected to that specific supplier.
GPOs enable procurement teams to leverage the organization’s full suite of supplier relationships. Working with a GPO like Procure Analytics further reduces supply chain risk by gaining an proactive, high-service partner dedicated to helping the member company in times of crisis.
Group Purchasing Organization Negotiates Supplier Contracts on Behalf of Collective Membership
Procurement teams are often limited in resources and juggle multiple responsibilities. With only so many people on the team and a limited number of hours in the day, expanding the resources of a procurement team without adding to the bottom line is an appealing prospect.
Working with GPOs like Procure Analytics give procurement teams access to additional resources and partners who will review spend and look for additional ways to save on MRO spend. Saving on an indirect, nonstrategic category like MRO is not a once-and-done project. Optimizing MRO spend requires continuous alignment between central procurement leadership and site-level buyers. Alone, a procurement team may not have the resources to continue pursuing MRO savings opportunities, thus accepting a smaller savings threshold. When companies join a hands-on GPO like Procure Analytics, their procurement teams rely on the GPO’s expertise and resources to consult on MRO value-add projects and drive continuous savings growth.
Group Purchasing Organizations Offer Member Companies Visibility Into Nonstrategic Spending
Typically, the procurement team at an organization’s headquarters don’t have visibility into what all sites are buying and spend data may be fragmented in disparate systems. Tracking the purchase history of one product such as AA batteries across multiple sites can feel like more trouble than it is worth to a corporate procurement team.
Even just five sites may purchase AA batteries from fifteen different suppliers depending on price and local buyer preference. Some purchases are manually entered, leading to misspelled descriptions, bad taxonomy, or missing invoice data. All these errors fracture spend visibility of just one item – AA batteries – into seemingly endless mismatching data points.
GPOs like Procure Analytics offer solutions to this lack of transparency in two ways. When a company signs on as a member, they gain access to an advanced spend analytics platform that offers visibility into what their local sites are purchasing through the GPO. Procurement teams can access spend and savings reporting at any time and use the analytics insights to track compliance and reduce maverick spend.
Secondly, Procure Analytics’ team is able to review purchasing data to clean up mismatched descriptions and identify the best items to purchase moving forward. While most companies charge for data validation, GPOs like Procure Analytics offer this for free to member companies through supplier and SKU consolidation value-added services.
Why Procure Analytics Is the Group Purchasing Organization for Your MRO Needs
At Procure Analytics, we are committed to creating value for organizations through our growing leverage, services, and support.
- We help companies avoid the RFP process so they don’t have to worry about negotiating their own contracts, which saves valuable time
- Our contracts offer better terms and pricing for organizations than they could access on their own
- We provide an implementation team dedicated to new member companies’ success by driving adoption and compliance
- We hold regularly scheduled 1:1 meetings to coordinate strategic initiatives between member companies and suppliers
- We conduct quarterly business reviews to track progress and identify further savings opportunities
- Our contracts, services, and resources are at no cost to the member company
We work hard to reduce cost and complexity to help our member companies manage tail spend. We have proven our ability to deliver savings and ongoing value for members, which is why our retention rate remains at more than 99%. From the moment a member company joins the program, our goal is to deliver continuous value through better pricing and terms, collaborative supplier relationships, value-added services, and hands-on support. We offer all of this at no cost to our member companies.
If you’re interested in working with Procure Analytics, schedule an introductory call with our team and we can start with a benchmarking process to determine your upfront savings. Once organizations can see the potential returns from working with a GPO, they can join as members.
Group Purchasing Organization FAQs
What Are Group Purchasing Organizations?
Group purchasing organizations are negotiators and advocates between suppliers and a large collection of buyers. By signing companies up as members, GPOs pool multiple companies’ spend as leverage to negotiate better pricing, terms, and services with suppliers.
Organizations benefit by saving time and money compared to their previous contracts and procurement processes, while suppliers gain new customers and increased revenues from existing customers.
Why Use a Group Purchasing Organization?
Using a GPO is a smart strategy to reduce costs and divert resources from nonstrategic spend categories such as MRO supplies. Leveraging the contracts and services of a GPO, procurement teams can more easily manage tail spend, gain visibility into local purchasing habits, eliminate the RFP cycle headache, and find consistent savings.
How Do Group Purchasing Organizations Make Money?
With all these benefits available to members for free, you may be wondering if Procure Analytics is too good to be true! This certainly isn’t the case, and our goal is to provide members with as much transparency as possible about group purchasing organizations. GPOs make money mainly in two different ways:
- Some GPOs may charge a membership fee to the members who join.
- Other GPOs, including Procure Analytics, don’t charge a membership fee. Instead, they charge suppliers an administrative fee. This is a nominal transaction paid to the GPO based on revenue brought to the supplier through the program.