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Group Buys: Good for the Supplier and Good for the Buyer
As manufacturers tighten their belts, GPOs could represent an untapped opportunity to increase revenues; the case for tapping into a group purchase organization
March 26, 2009 — The struggling economy has taken its toll on everyone, and suppliers are no exception. Current economic challenges are forcing medical product manufacturers to search for opportunities to maintain or reduce production costs and lower marketing expenses. As manufacturers tighten their belts and reduce expenses, they need to seek new opportunities to increase revenue in order to stay financially sound.
Group purchasing organizations (GPOs) provide an important resource for manufacturers looking to boost their sales. According to the Health Industry Group Purchasing Association (HIGPA), hospitals make about 72 percent of purchases using GPO contracts. Group purchasing organizations represent a large body of potential customers — in fact, HIGPA notes that between 96 and 98 percent of hospitals use GPO contracts for their purchasing functions.
For example, the GPO where I work, Novation, the leading health care contracting services company of VHA Inc., University HealthSystem Consortium (UHC) and Provista, LLC, has nearly 2,500 member hospitals. In 2007, its projected purchasing volume reached $35 billion. Considering the immense purchasing power of group purchasing organizations, manufacturers should seek ways to tap into their opportunities.
Group buys allow suppliers to utilize the purchasing power of group purchasing organizations and better predict production. Essentially, GPOs coordinate large purchases of capital equipment over a set time period. Capital equipment group buys provide members with additional savings off of list price for major equipment purchases. At the same time, suppliers are able to better plan their production volume, secure sales, lower cost of sales time due to prequalified leads, grow customer base and potentially gain market share.
The Nuts and Bolts of Group Buys
The success of group buys relies on offering the right equipment at the right time to address hospital needs. GPOs work with health care organizations and suppliers to develop timely group buy offerings in order to provide members equipment when they need it at the best price possible. Product categories for group buys are determined through analysis of member capital budget data and through member market research.
Using information on planned member purchases, portfolio executives work closely with equipment suppliers to maximize savings beyond the GPOs contract price during the group buy period. The price offered in a group buy is always competitive, often verified as "best price paid" through data available from third-party resources such as MD Buyline and ECRI Institute. In addition, GPOs like Novation use tools such as Attainia to determine member organization's capital purchasing needs. The end result of these negotiations is a large purchase of capital equipment at a discounted price.
Group purchasing organizations (GPOs) provide an important resource for manufacturers looking to boost their sales. According to the Health Industry Group Purchasing Association (HIGPA), hospitals make about 72 percent of purchases using GPO contracts. Group purchasing organizations represent a large body of potential customers — in fact, HIGPA notes that between 96 and 98 percent of hospitals use GPO contracts for their purchasing functions.
For example, the GPO where I work, Novation, the leading health care contracting services company of VHA Inc., University HealthSystem Consortium (UHC) and Provista, LLC, has nearly 2,500 member hospitals. In 2007, its projected purchasing volume reached $35 billion. Considering the immense purchasing power of group purchasing organizations, manufacturers should seek ways to tap into their opportunities.
Group buys allow suppliers to utilize the purchasing power of group purchasing organizations and better predict production. Essentially, GPOs coordinate large purchases of capital equipment over a set time period. Capital equipment group buys provide members with additional savings off of list price for major equipment purchases. At the same time, suppliers are able to better plan their production volume, secure sales, lower cost of sales time due to prequalified leads, grow customer base and potentially gain market share.
The Nuts and Bolts of Group Buys
The success of group buys relies on offering the right equipment at the right time to address hospital needs. GPOs work with health care organizations and suppliers to develop timely group buy offerings in order to provide members equipment when they need it at the best price possible. Product categories for group buys are determined through analysis of member capital budget data and through member market research.
Using information on planned member purchases, portfolio executives work closely with equipment suppliers to maximize savings beyond the GPOs contract price during the group buy period. The price offered in a group buy is always competitive, often verified as "best price paid" through data available from third-party resources such as MD Buyline and ECRI Institute. In addition, GPOs like Novation use tools such as Attainia to determine member organization's capital purchasing needs. The end result of these negotiations is a large purchase of capital equipment at a discounted price.
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