(Group Purchasing Organizations)
Access GPO #1 Case Study
When we started working with a large Steakhouse Chain almost 4 years ago, they were using an Access GPO and received some price deviations along with about $90K a year in rebates.
We reviewed the deals this client had, both through the Access GPO as well as some direct deals with manufacturers. There were numerous instances of “multi-dipping,” where the client had a direct deal with a manufacturer, but the manufacturer was also paying on a deal through the Access GPO. Although the owner of the GPO was emphatic that no “multi-dipping” was taking place, the fact was that there was a 46% “multi-dip,” where the client had direct deals with manufacturers and also received rebates from the GPO.
At this time, not only are the manufacturers no longer being multi-dipped, but the client receives over $400K a year in savings on non-food items alone. This is more than a 400% savings on the value they received in the GPO program.
This client buys about $50 million a year and receives almost $2 million in direct contract deals, where they have volume to contract directly.
The GPO model was costing this client hundreds of thousands of dollars annually because only a portion of the money manufacturers earmarked for programs was getting to them. Now, they receive 100% of all contract and rebate money that is negotiated for them. We have lowered their COGs each year they have been a client.
Access GPO #2 Case Study
We had had a client for several years when its parent company decided to engage with an Access GPO. The GPO received the client’s account numbers and started pulling data and billing manufacturers. This client used very little of the GPO’s “book of deals” as they were not items this client used in their restaurants.
About 6 months into the relationship, the first rebate check arrived, and it totaled more than $10k for one month. Half of the rebate was an administrative fee collected from the distributor, even though the client had an MDA with the distributor – the distributor was getting double-dipped. 94% of the remainder was a multi-dip on manufacturers and items where the client had direct deals.
The client returned the check to the GPO due to the lack of integrity and stopped the program.
Access GPO Case Study #3
We’ve had another client for about 6 years. This client has 8 units purchasing over $5 million annually and did not use a lot of items available through the GPO’s program. The GPO tried to get them to change their products on several occasions, but the products were geared more for the Source GPO’s clients and not the items they wanted or needed.
This client saw its rebates of $900 a month increase to more than $300K annually when we contracted directly with manufacturers for the items they used in their business (and eliminated the multi-dip.
From the above examples, the best-case scenario was a 46% multi-dip and the worst, 94%. And, the client was able to receive more financial benefit by contracting direct.