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Move Past GPO Myths To Uncover Exceptional Value & Profit Potential

The Group Purchasing Organization (GPO) of 5-10 years ago is not the GPO of today. GPO services have evolved to offer hoteliers exceptional value and partnership like never before, and this is having a positive impact on a hotel’s business performance. Fortunately, hotels are increasingly embracing GPO offerings – according to a recent Hotel Management survey presented by Source1, titled “Exploring Procurement Power,” 91% of hotelier respondents indicated they are satisfied or extremely satisfied with the services and value provided by their GPO – and 40% said they have started using GPO services more since the pandemic started.

While the immense value of working with a GPO is gaining recognition, several myths still circulate about how today’s GPOs operate, which may cause hotels to ignore the game-changing potential of the relationship. Here are five GPO myths to finally put to rest.


Myth 1: GPOs Dictate What I’m Allowed To Buy And From Whom
Some GPOs used to have strict requirements, but many no longer do. The amount of value that a hotel extracts from a GPO is dictated by how much a hotel chooses to work with the GPO to maximize savings potential.

GPOs provide significant savings on food and beverage, delivering a large impact on a hotel’s business, and they can do a market basket to reveal potential savings. On average, a property that buys $1 million or more in food and beverage annually and is not currently on a purchasing program could save around 10% on those costs, not to mention similar savings on operating supplies and equipment.

Hotels gain a significant competitive advantage when they leverage the power of a GPO partnership and explore its breadth of capabilities beyond meaningful financial savings, from supply chain management to technology offerings. With the right GPO partnership, hotels can make more informed decisions that support their overall growth strategy and optimize operating efficiency.


Myth 2: GPOs Focus On Getting The Cheapest Products Without Paying Attention To Quality
A good GPO partner will help hotels buy the way hotels want.  Many clients today approach Source1 seeking products that meet specific sourcing goals such as “more sustainable seafood options,” “labor-saving sauces and soups,” “plant-based snack alternatives,” or “biodegradable cutlery choices.” Thanks to their connections, Source1’s sourcing teams are able to leverage relationships throughout the foodservice manufacturing and distribution world to find workable solutions.

Manufacturers often come to GPOs very early in their process of rolling out new products to share their latest innovations and uncover potential sales opportunities. The more a hotel partners with their GPO, the more they will be able to introduce hotels to the products, manufacturers, and distribution channels that are going to most effectively meet their needs. This is growing in importance to hoteliers as evidenced from the survey where 30% mentioned a lesser-known value proposition that is driving their participation with GPOs – direct access to industry-specific suppliers, vendors and distributors.


Myth 3: GPOs And Broadline Food Distributors Don’t Work Well Together
The relationship between GPOs and food distributors was once quite tense as they both jockeyed for client business, touting optimum pricing and service. The reality today is that the relationship between GPOs and food distributors is mutually beneficial. GPOs require a seamless and clean data feed in order to bill for rebates. Broadline distributors often partner with a GPO to provide a customer with the most competitive pricing in the industry. To facilitate this exchange, Buyers Edge Platform, Source1’s parent company and the largest digital procurement network in foodservice, proudly maintains over 1,000 partnerships with broadline distributors nationwide.

A good GPO partner will allow hotels the opportunity to keep their own direct agreement with their distributor, but also offer the options to participate on GPOs contracts with their preferred distributor partners.


Myth 4:  GPOs Are Glorified Rebate Processors – I Can Do That On My Own
Leading GPOs like Buyers Edge Platform leverage sophisticated technology to identify rebate-qualifying products and make sure that each operator achieves the maximum rebate value for their purchases. Many clients realize instant savings when they sign on simply by finding qualifying items that they were NOT earning rebates on because of data entry errors or mis-labelling of products.

Typically, billing for rebates is a time-consuming process and dependent on quality of invoice level data. Buyers Edge is integrated and collects data from over 1,000 distributors through electronic feeds that allows hotels to simply send the account number, and not every invoice from each distributor to collect all manufacturer rebates. The technology platforms available from many of today’s GPOs allow hotels to mine their data to ensure smarter decision-making.


Myth 5: GPOs Will Replace My Purchasing Team
GPOs work in tandem with a hotel’s current procurement strategy and should be viewed as a resource for the purchasing team. GPOs also provide technology tools to assist the hotel team with price verification, inventory and menu-costing.

Source1 considers themselves an extension of a hotel’s purchasing department to help the team run more efficiently, and they offer additional resources to better manage the procurement operation. With a GPO, hotels actually have access to a vast team working on their behalf, which takes some pressure off the purchasing department, so they can focus on other job responsibilities.

GPOs align with a hotel’s purchasing department for access to more vendors and contracts. This positioning also provides a high level of customer service, a customized purchasing program, and a solution-oriented approach to hotel business development.
 



Hotels gain a competitive advantage when they take the time to understand the immense value of working with a GPO. Avoiding GPO myths allows hotels to revolutionize their procurement strategy and better realize their profit potential.  

The editorial staff had no role in this post's creation.