A Group Purchasing Organization, or GPO, is an organization that creates and facilitates efficient, price-reducing relationships between operators and suppliers. Much like a dating service, a GPO seeks operators and suppliers and matches them according to operator needs and suppliers’ ability to meet those needs—creating a network of exchanges and relationships within an industry. In the world of impersonal GPO relationships, Source1 strives to be not just a ‘dating service,’ but a friend that personally understands operators’ needs. Although the goal of reducing costs is simple, the power of this complex network is often misunderstood.
Below are five buzzwords that will help you to better understand the GPO.
1. Value Stream
Because of the middle-man nature of the GPO, many groups are involved in different parts of what Source1 CEO Scott Hoffmire refers to as the value stream.
“Source1 does the block and tackle work—helping everyone upstream and downstream, uniquely starting with the guest,” he said. “We help everyone below and coordinate everyone above.”
Those ‘below’ are the operators, who receive the benefits of the coordination work of the suppliers upstream in the process. Although this value stream involves both the operator and supplier – to be most effective, the “energy” needs to be derived from only one party: the guest.
The role the GPO plays in this value stream involves pivoting between operators and suppliers to ensure that needs are met.
“We are the pivot: the group that makes it happen by determining client needs and turning back to the manufacturers to get the best price and quantity,” Hoffmire said.
In this case of Source1, this pivoting role proves very advantageous to all involved: because of the 3,000 operator-network accumulated by the Source1, it boasts $7 billion dollars in buying power. However, with great power comes great responsibility and care: Source1 is not only dedicated to decreased costs, but customer and operator satisfaction.
This buying power is evident in Source1’s mission to harness “the leverage of billions, the power of one.” Because low pricing is garnered by high volume leveraged buying and positive relationships with manufacturers, operators receive the best pricing on the market for a wide range of goods. Bottom line: as the GPO network grows, so do the savings.
The leverage provided by Source1 does not end with lower prices: Source1 strives to be “operators serving operators”—that is, many Source1 employees are actually garnered from the types of operations they work to serve. By understanding the needs of the operator, Source1 inherently understands the needs of the dining guest..
4. Parking lot to rooftop
With lower costs, operators can choose the optimal goods for their firms: Source1 offers food, glassware, maintenance supplies, housekeeping chemicals, and almost all necessary goods to run an establishment—“from parking lot to rooftop.” So many categories—and over 6,000 branded items with 500+ national contracts—allows for a virtually unlimited selection that can equip all aspects of an establishment.
These benefits would not be possible without a GPO; the organization acts as a catalyst that positively enriches the buying and selling experience between operations and suppliers.
“Source1 helps obtain the best pricing, discover opportunities and meet goals. We bring in products specific to making their dining customers happy,” Hoffmire said.
In the case of Source1, the goal as the catalyst and facilitator of these opportunities also includes an understanding of all levels of the process—especially everyone’s main concern: the customer.
“Our competitors just give them a price book,” Hoffmire said. “We work closely with clients to meet their needs. We are operators serving operators; and in the end, the most important person in our process is the guest.”
Written by: Gabrielle Gresge