David against Goliath. That’s what it’s like when a medium-sized business tries to get a good discount from a top tier supplier.
It’s a bit like buying a nice car from a dealership. You’re fully aware that you’re overpaying. You know the markup is immense, but they don’t need your business. So even if you stick to your guns and try to negotiate, you’re limited.
Unless they’re desperate to get rid of the vehicle, you only have so much power. Whether it’s not being able to get a raise or an indirect spend discount, you know that feeling of helplessness.
If that rings a bell, or if you struggle with any of the following this blog is for you:
- You don’t have enough volume in a particular category to get the discounts you want
- You’re managing a category you’re not an expert in
- You can’t get your selected suppliers to play ball
- Your RFP/RFQ goes ignored
- You want below-industry-rate increases and inflation
Here’s what do when you have limited buying power.
Procurement Strategy: the Plight of the Mid-Sized Business
Maybe you’ve approached a big dog supplier and tried to get an agreement – only to be dismissed. Perhaps you haven’t even had the conversation yet because you’re afraid of being laughed at.
You could also be juggling multiple providers within a particular category. For example, if your team travels a lot, you don’t have time to negotiate a corporate hotel agreement with each place you stay. Even if you did, you wouldn’t have enough volume with each hotel chain to guarantee significant savings.
Whatever the case, for most procurement professionals, there comes a time when you need more buying power.
Especially if you’re managing a lot of indirect spend costs. Like shipping, MRO & JanSan, travel, or office supplies, you’re probably not an expert in each category. Which only makes your job more complicated, not to mention overwhelming.
It’s the plight of the mid-sized company. The challenge is, you’re big enough to be scaling and have growing procurement needs. But you don’t have a fully developed procurement team in place yet. The more your business grows, the more your costs increase, but you don’t have the contract negotiation power of a Fortune 500 company.
In other words, you’re expected to save more, but you don’t have a lot of options for making it happen. Sound about right? Don’t panic. Help may be closer than you think.
How GPOs Increase Your Buying Power
For categories where you want to decrease spend, but you have few resources, a Group Purchasing Organization (GPO) is perfect.
A GPO is a buying solution. Since most businesses need limited indirect spend supplies, you end up paying more because you don’t qualify for bulk discounts. But when you join a group of other similar buyers, you create group buying power. The GPO uses this membership base to negotiate volume-based discounts with their suppliers.
For example, since UNA does a couple million in spend in office supplies alone, top providers like Office Depot give us deep discounts. (See our most popular suppliers here.) Working with us is a risk-free, no-cost way to increase your savings.
How Businesses Benefit from Partnering With a GPO
- Decrease your spend in multiple categories – UNA saves companies an average of 22% per year
- Access exclusive contracts that aren’t available to the general business community
- Leverage pre-negotiated agreements that you wouldn’t be able to obtain on your own
- Get increased supplier accountability, GPOs help monitor providers and ensure they remain compliant
- Reduce your workload – since GPOs negotiate the agreements, you’re freed up to focus on more complex categories and contracts
- Access top-notch suppliers, you'll finally be able to work with your industry's best
- Work with category specialists who will provide the expertise you need, and help you make the most of your contracts
- Get better customer service, GPOs help mediate conflicts with suppliers and make sure you get what you need
Simply put, working with a Group Purchasing Organization helps your business scale and grow. Not every GPO is free though, so bear that in mind as you look around.
If you want better contracts, with less work, we can help.
UNA is a free buying solution that provides billions in purchasing power, and a vast portfolio of contracts. You'll never pay admin fees, and you can pick which suppliers you want a la carte. You're not required to use any agreements, and you can cancel any time.