When it comes to corporate cost reduction and procurement strategy, you have several things to consider. First, is getting the best price on your indirect and direct spend – easier said than done. Second, is making sure that rates remain stable and prices don’t unreasonably increase.
There are a million approaches to reducing procurement spend. But there’s one that no one talks about. It’s an unconventional, yet effective method. An approach typically only organizations in healthcare use.
This post covers that unexplored saving solution. It’s a tactic that both reduces your cost and keeps your prices low.
Reducing Indirect & Direct Spend Procurement Costs
So what is this secret sauce cost reduction method that only healthcare uses? It’s the Group Purchasing Organization (GPO) model.
When you join a GPO, you join a group of buyers who are purchasing from a curated portfolio of suppliers. It’s a bit like Costco for business, minus the membership fees. You get “bulk” rates without increasing your volume.
And while some GPOs charge members a fee for their services, other GPOs (like UNA) are no-cost. Suppliers cover costs because they want the increased volume. So the purchasing benefits are free for any business.
It’s a brilliant corporate cost reduction strategy. Since your organization probably doesn’t have high volume needs in every category, you won’t be able to negotiate the same discounts a GPO can.
How Joining a GPO Reduces Your Spend
- Increases your buying power, and gives you access to better, pre-negotiated contracts than you could obtain on your own
- Provides below-industry average pricing, for example, UNA saves businesses an average of 22% on direct and indirect spend
- Pairs you with category specialists who will make sure you’re getting the best price – so you don’t have to have an in-house expert for every category
Simply put, joining a GPO helps small and mid-sized businesses get the same pricing and value-added services as a fortune 500 company. Learn more about how GPOs work.
How GPOs Ensure Your Low Prices Stay Low
You’ve jumped through all the hoops of vendor research, RFPs/RFQs, and contract negotiation, to get the best price. But as you know all too well, that doesn’t mean it will remain the best price.
Of course, for your complex products/services, you’ll have to monitor your agreements closely to make sure there aren't unwarranted increases. But do you need to put that same level of work into more straightforward commodity agreements?
No. At least not if you’re sourcing through a GPO. When a GPO provides your indirect spend contracts like MRO, shipping, travel, office supplies, and JanSan they’ll help monitor those contracts for you.
For example, when you partner with UNA, agreements are already written and negotiated. Which means you can start saving in 30 days or less. Plus, our category executives and specialists will audit your suppliers to make sure they remain compliant.
You retain complete control, but we’ll be there for you as a true partner, fighting for you, throughout the process. Bonus, because everything is pre-negotiated, it helps you avoid unnecessary Request for Proposals (RFPs). You won’t have to go out to bid for the sake of driving down costs.
Working with a GPO like UNA not only gets you the lowest price, but it guarantees you’ll keep the lowest price.
Simply put, joining a GPO helps small and mid-sized businesses get the same pricing and value-added services as a fortune 500 company. Learn more about how GPOs work.
Corporate Cost Reduction: Getting the Savings and Spend Visibility You Need
Bottom line, when it comes to reducing corporate costs, you have to ask yourself a couple of questions. First, do you know what your total spend is? What about the total spend in each category? How accurate is your data?
Second, are you getting the best price? Are you sure? There have been countless times clients have told us they were getting the best price, only for us to prove we could save them more.
Third, are you keeping the best price? Is the bulk of your time and attention spent managing your most complex agreements? Or are you wasting time chasing down redundant invoices, and making sure your commodity prices are stable? If you’re struggling in any of these areas, or you want a few hours of your day back, we can help.
No one ever said working in procurement was easy. The good news is, it can be easier, especially if you’re willing to think outside the box.
