The Elusive Group Buy: GPOs, Healthcare and Beyond (Part 1)

The concept of group buying is one that many seasoned procurement buyers and managers often get excited about, given the leverage such an initiative might bring in getting suppliers to sharpen their pencils (and ideally improve service levels). Yet the number of effective group buys (different from leveraged contracts!) are tiny in the scheme of overall corporate spending. Might this be changing? Over on HealthCare Matters, my colleague Tom Finn recently covered Healthcare GPO Premier's Success with Group Buying Initiatives.

Noting a recent Premier announcement on its program, Tom captures the elements of the news from the announcement: "Traditional group buy[ing] programs, which deliver value through voluntary, coordinated, volume-driven purchasing opportunities ... [result in] savings averaging 18 percent beyond Premier's ... group purchasing agreement's pricing." Further, "Group buy program events offer participants value-adds such as early shipment, special financing rates, trade-in programs, preventative maintenance, training, service programs and extended warranties."

Commenting on the program and leveraged buys in general, Tom suggests that "regardless of the procurement context, most anytime demand can be committed to suppliers, better pricing/deals can be achieved. It seems that all the GPOs have developed their own approach to soliciting such commitments from their members. And when these programs are focused and managed by category experts, they work. The technologies required to proactively identify demand, aggregate it and simulate a "buy" for the purpose of discovering and/or evaluating the market opportunity at a particular moment of time is, of course, the ultimate trajectory for these programs. And that day is coming sooner than most of us may think."

What might that technology look like? Stay tuned as we investigate.

- Jason Busch

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