AN ORGANISATION THAT HAS A
RELATIONSHIP WITH A TMC MIGHT NOT WANT TO GO TO A GPO
THE GPO ROBERT KISSICK, CHIEF EXECUTIVE, 2BUY2
A GPO pulls together the spend of multiple organisations and looks at similarities in the services they are using, what they are spending and defines a specification. It goes to the marketplace, engages with suppliers and brings stakeholders back in to evaluate the cost and the suppliers against the required criteria. We find that two types of companies generally use our kind of services: either those that don’t have a procurement function and want to build one but the cost of putting a procurement person in place is prohibitive; or a disparate organisation, such as the Church of England. There are 15,800 churches across England, each responsible for their own purchasing, and they are looking for a way to benefit from economies of scale. Everything in procurement comes down to identifying what the requirement is, so a lot of work goes into the initial process, identifying the similarities and differences in what organisations need and whether accommodating the points of difference would compromise the
end result. That work is fundamental but time consuming, which is why a lot of organisations that intend to set up their own buying group fail. You also have to take into account factors such as imbalance of spend or power within the group; relationship management has to ensure there is a win for everybody or disgruntlement can stop the process in its tracks. Another challenge is choosing a supplier. If there are five organisations collaborating and five potential suppliers and two of them come out close in the tender with one costing £30,000 less than the other, but the cost of changing to that organisation is £100,000, you have to build that into the process. We have done a number of
framework contracts with multiple suppliers and groups so that we can best leverage spend, such as the office products framework we have for churches and groups of schools. We work with businesses that tried to do this themselves for years and failed. But having an external organisation gives them the glue to be able to work together.
KAVITA COOPER, PROCUREMENT CONSULTANT, NOVO-K Procurement comes down to money and risk, and GPO buying can be quite good for lower risk items, where organisations want to see the benefit but don’t need anything too bespoke. They are a good place to start when organisations want to collect data, especially with the huge focus on duty-of-care. They can put a contract in place quickly and have a good agreement with competitive pricing. GPOs sign up each party on a different contract under a framework agreement, so although spend is aggregated, companies should see their MI reporting quite quickly. GPOs are popular in the US and there is growing interest in the UK. We would recommend them when companies are looking at a procurement approach: do we go out to tender or do we stay with the incumbent? Do we look at just one supplier, or do we look at a framework? GPOs are one option and should form part of a procurement strategy. Sometimes companies have to meet certain value thresholds to join a group and GPOs will not tailor a platform, so it works better for those that conform to a particular profile. Also, contracts for GPOs tend to be longer, sometimes up to seven years, so you may sign up to something and later the market price shifts. GPOs have huge deals with hotels, rail
and air, but a lot of TMCs have considerable buying power and an organisation that has a relationship with a TMC might not want to opt for a GPO.
I work with so many organisations that
don’t have any contract, so they don’t have duty-of-care for employees or volunteers. Working with a GPO means at least you have a contract in place and that is always better than nothing.
buyingbusinesstravel.com
2019
MARCH/APRIL
53
THE CONSULTANT
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