Executive Briefings

Group Procurement Organizations, Distributors Should Work Hand in Hand

While not as prevalent today as in the past, there has been tension between group purchasing organizations (GPOs) and distributors over the years. A good deal of the tension was the result of a misunderstanding as to the roles each plays in the supply chain. For instance, many distributors believed - and may still believe - that they are in competition with GPOs.

That is not the case. In fact, instead of competing, distributors often can benefit from their association with GPOs. This is because the distributor remains a key element in the supply chain: the manufactured products are distributed and sold by the distributor and the distributor receives their typical fees and commissions for providing these services.

A group purchasing organization helps its members realize savings on scores of different products and supplies by aggregating member purchasing power. The GPO negotiates discounts from manufacturers and suppliers, which are then passed on to members.

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That is not the case. In fact, instead of competing, distributors often can benefit from their association with GPOs. This is because the distributor remains a key element in the supply chain: the manufactured products are distributed and sold by the distributor and the distributor receives their typical fees and commissions for providing these services.

A group purchasing organization helps its members realize savings on scores of different products and supplies by aggregating member purchasing power. The GPO negotiates discounts from manufacturers and suppliers, which are then passed on to members.

Read Full Article