An entity that is created to leverage the purchasing power of a group of businesses to obtain discounts from vendors based on their collective buying power.
Many GPOs are funded by administrative fees that are paid by those vendors that the respective GPO oversees. Some GPOs are funded by fees paid by the buying members. Still other GPOs are funded by a combination of both of these methods. These fees can be set as a percentage of the purchase or set as an annual flat rate. Some GPOs set mandatory participation levels for their members, while others are completely voluntary. Members participate based on their purchasing needs and their level of confidence in what should be competitive pricing negotiated by their GPOs.
Group purchasing is used in many industries and countries to purchase raw materials and supplies, but it is common practice in the grocery industry, healthcare, electronics, industrial manufacturing and agricultural industries. GPOs are also known as Group Buying Networks (GPN).
Source: Staffing Industry Analysts