When you hear about group purchasing, most of us think of visiting our local wholesale club –Sam’s, Costco, BJ’s – and buying our favorite products in quantities that we may never actually use. But the reality of a group purchasing organization (GPO), is something much more useful.
It goes like this:
According to some well-known group purchasing organizations (GPOs), their business model goes back to at least the 1700’s. They were (and in some cases, still are) called cooperatives, and one of the first was founded by Benjamin Franklin. Franklin’s co-op was an insurance company where members all shared the risk. The model was such a good idea that it stood the test of time. That’s right, dear multifamily reader – group purchasing is still around today (and so is Franklin’s cooperative).
While a lot has changed, the premise is still the same. A single organization will negotiate contracts with vendors to provide discounted prices. Then it will provide those prices to its members, promising the vendors higher sales. Beyond that is where the nuances begin, from industry-based GPOs to subscription fees. Regardless of the details, joining a GPO is a money-saver, and that’s something your organization can take to the bank.
So now that you know what a group purchasing organization is, why join one? Here are five good reasons.
1. Your company will save money
This one is obvious. Joining a group purchasing organization, by definition, will actually save you money on thousands of items. Even if you think you have a great discount with your favorite store, it’s probably not as great as you think, especially if you’re the only one who’s in on it. By rule, the more buyers, the less something costs.
2. Fewer “errand” trips
Most 21st century GPOs operate with an online component. That means you can order online and the item shows up at your door. There’s no driving, parking or aisle-wandering. Don’t forget those wild goose chases to find that “one thing.” Aside from the time a shopping trip wastes, there are also incidentals like mileage costs that can add up. And then there’s the issue of closing a perfectly good business office during normal business hours. That’s where the real cost of lost business comes in.
3. More accurate invoicing
Many GPO models are set up on an invoicing system instead of onsite purchasing. That means suppliers send an itemized invoice instead of an easily losable store receipt. Suppliers then send invoices by snail mail, so they can be more easily collected and approved. In addition, some GPOs offer electronic invoicing, and that adds even more accuracy. As much as we tend to trust human interaction, there are fewer mistakes when there are fewer humans involved.
4. Lower credit card fees
The majority of all business purchases are completed using credit or debit cards. In the case of credit cards or credit lines, interest is accruing every second and if it’s not paid on time, there are extra fees. Then, there are annual fees just for the privilege of using the card. That’s a lot of extra money going out the door. With GPOs, you can usually pay as a single entity (i.e. PMC) instead of issuing credit cards to each property for each individual purchase. Most suppliers offer 30-day terms. Some offer a discount if you pay early.
5. More productivity
Anyone can tell you that shopping online saves time (see the item above about fewer errand trips) on driving, shopping and product hunts. All that time could certainly be put to better use, from administrative work to quality resident time. Some GPOs offer ongoing product subscriptions too, so your favorite products show up on time every month and you never have to worry about out-of-stock issues or product shortages again.
While the idea of the group purchasing organization might seem old fashion or constricting to some, it’s really just a classic, financial no-brainer. You save money, you get what you want, and it shows up at your property. In almost every case, it’s just smarter.
To learn more about how you can better manage your property’s spending, read this eBook.