According to procurement expert, Jason Busch, there are significant advantages, beyond cost, for including Group Purchasing Organizations (GPOs) in MRO sourcing. Including GPOs in MRO sourcing can offer a number of benefits, Mr. Busch writes, particularly in the areas of lower costs, pre-negotiated contracts, reduced MRO sub-category complexity, and risk.
We agree that there is potential for a number of “quick wins” through GPOs, however, managing GPOs can come with its own challenges. For example, you may be limited in the amount of collaboration you can accomplish with a supplier or it may require an investment that might not be recouped if the GPO contract isn’t used.
GPOs are no substitute for a strong sourcing strategy underpinned by technology and organizations looking to shift significant amounts of indirect spend and MRO to GPOs should be wary about their ability to drive true bottom-line savings in a sustained way. GPOs have to make money too and we’ve seen plenty of situations where money saved was simply consumed by GPO setup and administrative fees.