Not Your Grandfather's GPO

Supply management executives are discovering fresh value in group purchasing organizations and unlocking new savings through buying consortia


Like Corporate United, LSN continues to support its members, while continuing to grow the consortium membership by providing value to new members. And Burton confirms Mitchell's prediction and member desires that GPOs will tackle more and more strategic categories. "We are also interested in identifying ways and situations where we can potentially leverage aggregated spend in categories that we do not currently offer," Burton concludes.


SIDEBAR: How Big An Opportunity?

If you don't count the healthcare industry's GPO spend, analysts and industry experts suggest that the aggregated spend through today's procurement outsourcing (with GPOs being a subset of this spend) reaches as much as $556 million. "The numbers we're seeing for global market size from the different analyst groups for procurement outsourcing are from just under $300 million to $400 million for 2005 (Everest Group says $297 million and Nelson Hall says $340 million, while IDC has estimated $556 million), with growth numbers anywhere between 20 percent to 30 percent per year," says Henry Hwong, vice president of marketing for Provade, a provider of managed procurement solutions.

"For 2006, Nelson Hall estimates $420 million and Everest projects $380 million. Compared to other more mature areas of BPO (e.g., human resources and finance and accounting), the procurement outsourcing market is relatively small, but dynamic."


About the Author: Julie Murphree is the founding editor of Supply & Demand Chain Executive. She has written countless articles and spoken on such subjects as negotiations, business management issues, and supply and demand chain management. www.JulieMurphree.com.

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