What are GPOs? And should your hotel sign up for one?
Improve your #ProcurementStrategy – Learn about the pros and cons of #GPOs and determine if they are the right choice for your company.
As a small or medium-sized business owner in the hospitality industry, cutting costs can be challenging without the scale of larger corporations. Group Purchasing Organizations (GPOs) provide a solution.
What is a GPO?
GPOs optimize shared purchases for companies, offering improved commercial conditions and negotiating discounts with suppliers. Originally focused on healthcare, GPOs now benefit various sectors, including #hospitality.
Pros:
– Lower Prices: GPOs wield bargaining power, enabling small and medium businesses to negotiate lower prices for supplies.
– Wider Product Range: Businesses gain access to diverse products and services through extensive GPO networks.
– Reduced Administrative Costs: Streamlined procurement saves time and resources.
– Expert Advice: Some GPOs offer valuable guidance on sourcing and negotiation.
Cons:
– Loss of Control: Joining a GPO may mean relinquishing some purchasing control, which can be challenging for autonomy-minded managers.
– Limited Flexibility: Standardized contracts limit negotiation flexibility.
– Limited Product Selection: GPOs may not cater to all SME needs, requiring careful consideration.
– High Volume Commitments: Sometimes GPOs require participants to buy most of their supplies with them, which of course can be stifling.
– Poor Customer Service: Unfortunately, many legacy GPOs are known to have poorer customer service. We hope that changes soon!
– Potential Conflicts: Conflicts between GPO member needs and supplier interests can arise.
Lilo’s recommendations:
– Choose Wisely: Thoroughly research GPOs based on size, scope, and needs.
– Understand Contracts: Carefully review GPO contracts for alignment with business goals.
– Stay Involved: Active participation in GPO activities ensures a voice in procurement decisions.
– Explore Alternatives: Consider other cost-saving methods, such as direct supplier negotiation or online marketplaces.
Lilo gives you the best of both worlds – we have negotiated prices with many local and national suppliers, and we enable you to keep working with your GPOs. It is a win – win.