Here’s How a GPO Might Lower Your Commercial Cleaning Supply Costs
If there’s one constant in the commercial cleaning industry, it’s that supply costs can be a somewhat unpredictable and significant part of the budget. Your payroll, lease, utilities, and marketing costs can be relatively steady and easy to plan for. But with supplies, you never know when you’ll need to order something different, or if there’s a spill that uses up extra supplies. So, what is a GPO, and what does it have to do with all of this?
A GPO is short for a group purchasing organization. They are probably most well-known in either the healthcare or restaurant industry, but there are consumer versions, as well. Costco, for example, buys products in bulk packaging. In turn, they sell these items at a discount to their members. You may walk out with a case of chips rather than one bag, but the per-bag price is significantly less expensive.
An industry GPO works much the same way, though the organization doesn’t physically distribute products. Instead, it’s a membership organization that negotiates contracts for supplies at rates that individual businesses couldn’t manage on their own. In turn, manufacturers provide these products to businesses at a discount because they know members of the GPO will purchase them. You might think of it as the economy of scale or even a cooperative to some degree.
At first glance, this seems like a winning situation. But other than a great way to save money on supply costs, what else can a GPO do for you? You probably guessed there’s more to it, so let’s sweep up the details.
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What a GPO can do for your commercial cleaning business?
That’s a good question. That may depend on the specific group. According to industry research group IBISWorld, there are more than 730 GPOs Some are industry-specific, while others are generalized and work across “spend categories,” such as services, office supplies, facility supplies, or shipping.
In almost all cases, a GPO will save you money on goods and services. How? They create a collective buying power by negotiating a contract and enter into an agreement with certain suppliers. You pay your membership fee and order supplies through the GPO or your distributor at a discount. Again, the basic premise is pretty simple. You get a discount because your business, along with hundreds of others, agrees to purchase supplies from a group of specific manufacturers.
The question then is, what is a buyer’s group going to do to stand out? What makes one the right choice for your business? The first thing to consider is that any GPO will likely have exclusive contracts with suppliers for better purchasing power. So, if your favorite cleaning supplies are manufactured by, say, Betco, you’ll want to ensure the GPO offers their products. Or you have to be willing to switch to something similar.
Outside of the initial membership fee (which you get back soon enough in savings), that’s the only downside to joining a GPO.
Still, what should you look for in a GPO?
This depends partly on your purchasing volume, but at a minimum, you want one that offers excellent customer service and is available to answer your questions and concerns. Some groups provide a dedicated account manager for members, so you have a point person to contact. Of course, it’s always important to remember that price and value are not the same things. You may get more value by paying a slightly higher GPO membership fee. Ultimately, that’s your decision, but it is something to consider.
Here are some of the benefits a good group purchasing organization can offer:
- Commercial cleaning businesses aligned with a GPO may receive better product support from manufacturers due to their premium contracts.
- Some suppliers will recruit group purchasing members to test new products or equipment.
- With a guaranteed contract, a manufacturer can lower their own costs and pass those savings on to its members.
- In the event of supply shortages, a GPO can work on behalf of members to procure the needed items.
- An organization can save businesses a lot of time that would otherwise be spent scouring the market for the best prices on products or shipping fees.
Okay, so with hundreds of GPOs out there, what is a GPO you should know about? We’ve previously profiled the National Service Alliance (NSA) on The Business of Cleaning podcast. They have partnerships with approximately 90 manufacturers, distributors, and business service suppliers.
Certainly, though, it’s always worth exploring to find the right situation for your business. And even if you decide not to join a group purchasing organization, you’ll have the information you need to make the right choice.
If you are ready to bring your cleaning organization to the next level, take advantage of a free call with Janitorial Manager to see how our software can make you a more successful janitorial operation.
