I wanted to share some information here that I share on my face-to-face calls as often as possible.
If you are in the commercial cleaning world at all, you have probably noticed the rapidly increasing costs of goods. Much of this is because of transportation costs, but wage increases, scarcity of skilled labor and raw material costs are all part of the reason as well. To help combat price increases, it’s all about the contracts!
If you are a larger user, negotiating your own contracts is fairly simple. You work in conjunction with a preferred manufacturer and your chosen local distributor, share your projected usage/volume of the consumable supplies (paper, soap, sanitizer, chemical, liners) and get deviated pricing support (it means you’re special and get better pricing than other people…)
But what do you do if you’re at a small school, a church, or maybe a small business? There aren’t a lot of manufacturer’s clamoring for your business, and sometimes it seems like you’d be better off buying at a big box store than dealing with a commercial distributor.
Enter today’s hero – Cooperative Purchasing (aka Group Purchasing Organizations).
GPO 101
If you’ve never used a GPO, here’s how they work:
A large lead public agency starts a formal Request for Quote (RFQ) process, publicizing their request for certain items and quantities. Various vendors and suppliers offer their best pricing, discounts and services at negotiated rates. These offers, or bids, are then awarded based on a fair and impartial rubric, and the winning suppliers are notified. From here is where people like you come in. You’re not a large lead public agency yourself, but using a GPO, you can join with a group to adopt the same pricing the initial agency received during the RFQ/bid process. As a group member, your volume is counted into the combined purchasing power of the entire group, and you can purchase as if you are an extension of the agency that started it all. Most GPO’s are free to join and operate as a membership, rather than using signed contracts.
Why do I like GPO’s?
As a sales consultant that makes a living from selling cleaning supplies at a profit, you might imagine that a GPO would not be in my best interest. True, there are some drawbacks. A GPO does cost money to run, and typically doesn’t charge their members. Those expenses are charged to the suppliers, sometimes as a rebate or additional discount in exchange for the business written up under the terms of the GPO. Aligning an account with GPO also locks in a relatively low level of profitability for the supplier as part of the discounting process. This removes the opportunity to take advantage of a shortage and increased demand – remember how much gloves and disinfectant cost during early 2020?
Even with those drawbacks, I love using GPOs. My favorite GPOs often publish information about highlighted manufacturers. I know my own space (commercial cleaning) pretty well, but I often learn about other niches covered by GPOs, like classroom technology, advances in utility furniture, or the latest in software developments. Having this information available makes me more of a resource to my customers. I might call on a school administration to talk about trash can liners, but find out they really need to replace their old whiteboards before thinking about anything else. In those cases, I’ll tell them about the benefits of joining a GPO, and may even share the name of a good classroom technology provider (“smart boards”, for instance). Then they can solve multiple needs at with less cost and few meetings. The diminished profitability on paper is worth it to me to have more value as a solutions provider.
If you’d like to know more about which GPO’s I like, or share information about your own success stories, let’s linked up in LinkedIn: www.linkedin.com/chrislpeters.