“More for less” is the mantra of every small business. But many are missing opportunities afforded by modern technology to maximize their savings.
For lessons in boosting buying power, look to group purchasing organizations. GPOs help smaller firms compete by leveraging the collective power of their members to negotiate better prices. It’s about buying in bulk: You get better deals as you buy more, and GPOs combine small business purchases for large-scale savings.
That being said, it’s not just size that makes GPOs work. Modern GPOs use technology to optimize their procurement processes and root out inefficiencies, maximizing their own purchasing power.
What tools do GPOs use? No two are exactly alike, but many leverage:
1. Supply-side analytics
One of the biggest challenges small businesses face in the context of procurement is knowing who’s offering what for what price. The manpower it would take to track every distributor of every product is simply too great for most businesses, putting even greater buying power in the hands of firms that have the resources necessary to do that level of legwork.
GPOs invest in analytics tools in order to see the full supplier landscape. Some, like Una, even share their tools with their members, helping them make more informed decisions on what to buy, when, and from whom. Through self-service portals, top GPOs give entrepreneurs the inside scoop on supplier trends.
2. Big data
GPOs don’t just crunch numbers on individual suppliers. In order to leverage the full buying power of their members, GPOs need to see the bigger picture. And to do that, they look to historical trend data.
Healthcare GPOs are a good example. More than 95% of healthcare organizations use them because healthcare needs come in cyclical patterns. Big data helps them determine, for example, when to buy batches of flu vaccines based on consumer demand and projections for the year’s flu season. Similar patterns can be found elsewhere in business, where economic trends influence buying and investment behavior.
3. Logistics optimization
Purchasing is just the first step in procurement. Once you buy what you need, you still have to get goods to where they need to be. Logistics and supply chain optimization software can help, but they often come at a price out of reach for many small businesses.
GPOs need to turn a profit just like any other business, meaning they need to keep their supply chain running at peak efficiency. By finding the most efficient route and time to transport goods, GPOs decrease labor costs, delivery times, and equipment wear.
Logistics optimization isn’t the only way GPOs cut their transportation costs. A crucial component of procurement is communication and travel. GPOs spend enormous amounts of resources coordinating with suppliers and distributors.
Although it might seem like penny-pinching, the money saved by videoconferencing adds up. To strike deals and inspect facilities, GPOs would otherwise need to make on-site visits. Virtual visits save on everything from airfare to gas to employee time. They may not be as high-tech as some of the other software tools GPOs use, but videoconferencing tools are every bit as important in terms of efficiency.
Like the small businesses they represent, GPOs are always looking for new ways to save money. The difference is that saving their clients money on supplies is all GPOs do. That focus encourages them to invest deeply in supply chain, logistics, and communication optimization tools.
Your small business can’t afford to spend all of its time on spend analysis. Invest in efficiency, but know that the most efficient option may be to outsource procurement to a GPO that already has the tech.