Properly managing indirect categories effectively can be difficult as procurement teams continue to shrink and savings goals continue to grow. Learn ways a GPO can help augment your procurement strategy and manage indirect categories more effectively.
As a procurement professional, seeking third-party resource support to manage your indirect categories may initially seem unnecessary. Procurement professionals may find themselves saying,
“I’ve got sufficient leverage on my own to get good pricing.”
“I have processes that take care of all my strategic sourcing.”
“I know I’m getting a good deal because I ran an RFP in the past few years.”
These are all common responses we hear in our initial stages of conversations when talking to potential new Members and those new to the group purchasing organization (GPO) model.
All of the above statements are true to a degree, but with so many indirect categories for each individual stakeholder to own (CoVest sees an average of 15 categories / sub-categories per person, with spend ranging from $30M to >$100M each), doing this correctly for each category is not simple.
A GPO serves as an extension of your procurement team, not a replacement, and can offset commodity categories to allow you to focus on more strategic categories. A trusted GPO partner can augment your procurement process by providing the leverage, resources, and analytics to achieve next level results.
Look for a GPO that aligns with your company values, priorities and size to obtain more leveraged pricing you need.
CoVest focuses on combining the spend of Members that are in and of themselves very large corporations. With this combined buying power of over 80 Fortune 1000 and FTSE 500 companies, CoVest offers best-in-class pricing that is far beyond what a company can achieve on its own.
Read the fine print.
Does the GPO require spend commitments to obtain a certain level of customer service or access to the desired contract? What types of rebates are offered to Members and is it straightforward?
CoVest makes commitments so that our Members are not required to do so – no tiers, no complex rebate situations, manufacturer direct pricing and no spend commitments. Through our consultative approach and focus on large, production-based companies, we have the ability to spend a significant amount of time and resources to serving our Members.
Beyond leveraged pricing, a GPO can help manage indirect categories more effectively by serving as an extension of your team. Offload the task of managing commodities, data heavy, high-item count categories so you can focus on more strategic activities.
CoVest proactively manages the category by providing comprehensive reporting, category analytics, alternatives opportunities, spend categorization, and additional reporting to all Members continually.
Manufacturer cost support, OEM relationships and pricing deviations are another resource avenue for procurement professionals when embarking on the road to a GPO partnership. A strong GPO partner will go deeper into the supply chain and engage manufacturers for unique offerings and savings to pass along directly to Members. Both our OEM and distribution supplier partners love the visibility into the supply chain driven from the data and our relationships and reward our Members accordingly. This equals savings beyond the first year of the contract and additional opportunities for SKU consolidation, standardization and savings.
Support in the implementation process is also a key success factor for category development. To negotiate a good contract, but not to implement sufficiently will undo all the progress made. The sourcing engagement needs to include a well-executed implementation. CoVest will sit alongside in the implementation to ensure both buyer and supplier are keeping to their deadlines and are gaining momentum with category adoption. In addition to a dedicated Implementation Manager, CoVest deploys a robust Member support team including a Member Engagement Manager, Program Manager, Analyst and Reporting Team, and Marketing Communications team to support your savings goals.
Allocate the appropriate skillsets and resources: specifically, analytics. With the copious amounts of purchasing data, it can be challenging and incredibly time consuming to sift through and provide meaningful insights into your supply chain. Look for a data expert partner who has the skills and dedication to comb through mountains of data.
For accurate like-for-like SKU matches you will need to perform cross referencing. This can be a long arduous task if done manually. CoVest has built a proprietary spend engine which provides extensive industry knowledge and current market rates through ongoing benchmarking analyses and cross-referencing activities down to the SKU level line item, ensuring confidence and transparency in your contract competitiveness. For over a decade CoVest has served companies from the Fortune 1000 & FTSE 500 with their Facility Supplies & Services requirements. This gives us significant ability to profile the spend of all the member data we have analyzed through an automated process. Where we don’t have that information, we will put in the hard yards to ensure your data set is complete.
Once negotiated, contracted & implemented, what does your compliance to the program look like? Poor compliance can impact expected savings by under-utilizing new pricing terms you have put in place, and also place the supplier under pressure to honor the terms of the contract without the expected revenue. CoVest provides these reports with full line-level detail in order to identify leakage, work with the Member to address challenges, provide program communication support and compliance awareness workflows, and ultimately drive more compliant spend to your program, yielding greater savings.
A GPO can provide better pricing and terms through its multi-company leveraged approach. When considering a GPO, identify a trusted group purchasing organization partner with a strong supplier network to provide the right supplies and services that align with your organization’s needs. Quality analytics, market intelligence, resource support and manufacturer relationships are key characteristics in forming a partnership with a GPO, and in turn, will improve supply chain visibility, increase program adoption and compliance and yield greater long-term savings goals.
Contact us today to start the discussion on ways we can help manage indirect categories more effectively!
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