Creating value doesn’t end as soon as you join a group purchasing organization. There are still steps your business can take to contribute to your value, even after a GPO has begun to manage a category.
There are four elements to continue creating value when a GPO is managing a category: Compliance, Optimize Usage, Business Initiatives, and Key Manufacturer. These internal activities will drive additional category value.
- Gather non-compliant spend – Cost of non-compliance are getting higher and should no longer be an after thought. A recent report by GlobalScape says that the annual cost of non-compliance to businesses now runs an average of $14.8 million, a 45% increase since 2011.
- Compliance opportunity areas – Once non-compliance spend is identified, your GPO will analyze and cross reference in order for the supplier to provide the same items and drive more spend to the preferred agreement.
- Follow-up with buyers to create compliance to the program – the buyer can have required conditions which must be met when implementing a program. Following-up with buyers and ensuring that all requirements are met will avoid any unforeseen obstacles.
2. Optimize Usage
- Determine areas where products can be altered – A product that is valuable today may not be as valuable tomorrow. That is why it is important to reevaluate a product and see what alterations can be made to increase value.
- Work with suppliers and your GPO to find alternatives – There is always a cheaper, quicker, more efficient option. Alternatives are out there and working with suppliers and your GPO can help you find them faster.
- Implement changes with users – As changes arise be sure to implement them with users so that everyone has the most current data available.
3. Business Initiatives
- Vending, inventory management – Well managed vending / inventory provides a channel of communication between manufacturers, distributors and retailers that allows for better customer service, improved quality, reduction of costs and increased sales.
- Technology and catalog management – Another way to create value for your users beyond price and supplier, technology/catalog management allows for transparency and is an efficient way to see opportunities in real time.
- Work with your GPO to identify opportunity areas – Just because a GPO is managing a category, doesn’t mean all your bases are covered. Work with your GPO to uncover potential saving opportunities whether that be within other indirect categories or by leveraging spend within the group purchasing organization.
4. Build Manufacturer Relationships
- Identify manufacturers that are unique to your company to create partnerships – Narrow down the best candidates that are uniquely suited to boost your company’s inventory at a lower rate. A manufacturer that specializes in your company’s product will have the knowledge and the resources to provide your company with the best service.
Want to better understand the different options to managing indirect spend? Check out this blog!
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