In a press release this week Enporion announced that it was going down the leveraged contract route. According to the announcement, Enporion "is now making its Enporion Sourced Agreements available for rapid savings results ... The advantages of joining an existing sourcing agreement are numerous. Speed-to-value can be achieved by joining an aggregated sourcing agreement, representing one of the quickest ways to deliver sourcing savings to the bottom line ... For any company that wants to quickly achieve savings, joining an existing sourcing agreement makes sense." I had the chance to talk to a couple of the folks on the Enporion team following the announcement and found out a few additional tidbits. First, the initial contracts cover six categories including MRO, safety equipment, office products, cleaning, office furniture. Second, Enporion really has embraced a classic GPO model where they are compensated by suppliers based on volume -- but at the same time, as Enporion's marketplace volume in a given category grows, the savings will increase for customers as well (there are not tiers or tranches in the contract agreements based on committed volume/spend or company size like those of many other GPOs).
Given the fact that Enporion is still a small player in the overall Spend Management market, their success one way of the other from a leveraged contract standpoint will not exactly be indicative of the overall trend towards GPO business models outside of healthcare. But if we look at their traction in the coming months alongside other GPOs like Corporate United, we should be able to glean a fairly accurate assessment of the potential for leveraged contracts growth in the North American market. Personally, I believe that while GPOs can provide a quick win for companies in certain categories, they should always be evaluated as part of a portfolio strategy that should also take into consideration category sourcing and category outsourcing as other options. I look forward to checking in with Enporion in the coming weeks and months to learn more about the traction that they're realizing with this model along with how customers are reacting to it.
- Jason Busch