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Group Purchasing Organisations (GPOs)

A purchasing group usually provides additional power to the members of the group in their negotiations with suppliers (Nollet and Beaulieu).

Information about Group Purchasing Organisations (GPOs)

The contemporary environment put pressures on many organisations to re-examine their procurement strategies in order to generate additional savings. Membership in GPOs is one of such strategies. It involves a transfer of some central activities (e.g. bidding, supplier evaluation, negotiation and contract management) to an independent entity (Nollet and Beaulieu, 2005). PGOs usually provide additional power to group members in their negotiations, thus allowing them to achieve more favourable conditions than they would have obtained individually (Rozemeijer, 2000). GPOs also help to reduce administrative costs since the negotiation process is performed by only one organisation instead of many (Essig, 2000). There are two main types of GPOs structures. One is the co-operative structure, where purchases are performed by the group and distributed among members. The other is a third party structure which is a distinct organisation negotiating and writing contracts according to a mandate set by its members (Hendrick, 1997).

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