Debunking 5 common myths about group purchasing organizations

Image of balance scale with myth on one side and truth on the other relating to myths about GPOs

There are many misconceptions about group purchasing organizations. The truth is group purchasing is a great option for construction companies – especially those looking to scale and increase revenue year over year. The benefits and resources provided by GPOs offer builders opportunities they don’t have on their own.

What is a group purchasing organization?

A group purchasing organization uses the buying power of a collection of businesses – in this case home builders – to negotiate better pricing, service levels and account representation from material vendors and manufacturers. These groups simplify the purchasing process for their members and allow them to compete with large national companies.

GPOs have the power to negotiate better discounts while continuously improving terms and conditions with vendors. This is highly beneficial for builders because it saves them valuable time, money and resources.

Builders who average 10 home starts per year with an annual revenue of $5.1 million can average a direct savings cost of $44,625 by becoming a member of CBUSA, the leading group purchasing network for professional home builders.

So, why are there reservations when it comes to joining purchasing groups? We’re addressing the five most common GPO myths and putting them to rest.

Myth: GPOs will replace purchasing departments

GPOs like CBUSA won’t replace your purchasing department. Rather, they’ll act as an added resource for your team. They’re here help you save money on materials you’re already purchasing but they don’t have any control over transactions you’re making.

Luis Jauregui, CBUSA member and owner of Jauregui Architecture said it best.

“It’s like CBUSA is an extension of my team,” Luis said. “A smaller company can have CBUSA providing the support to make the process of purchasing way easier.”

CBUSA is a partner in your success and will leverage supplier relationships to help your purchasing professionals accomplish more.

Myth: Builders must buy from every supplier in the GPO

As a member of a GPO, you still have the option to work with whichever suppliers you choose. And in many cases, you’ll have the opportunity to save money while continuing to buy from vendors you’re already working with.

As a CBUSA member, you can pick and choose the supplier programs you want to be a part of. CBUSA will continue to bring you the best programs out there to save you money, but it’s your decision as to which cost savings opportunities you’d like to use.

If there are brand partners you’re not currently working with, CBUSA can run a comparison to show you how much you could save by switching. Local chapter representatives will work with you to make the brand switch if it makes sense. And that’s the exact approach Alan Degen, director of operations at New Leaf Builders decided to take.

“We started switching more and more products over time,” Alan said. “Very quickly my hesitations with CBUSA were squashed. This was a very easy product change, and it was very lucrative and beneficial for us. So, we started making changes as it made sense to us.”

Myth: Joining a GPO will reduce the quality of client experience

It’s just the opposite. By joining a GPO, you gain access to the knowledge and expertise of fellow construction professionals. You’ll have the opportunity to exchange best practices for not only building, but also for how to provide the best experience for clients.

As a CBUSA member who joined in 2019, Randy Reitz, co-founder of Urban Nest Homes, has seen the impact these builder relationships can have on the success of a business.

“It has probably been to date one of the best things we’ve done for our company,” Randy said. “We benefited not only from cost savings and purchasing but also from camaraderie and mentoring relationships with other established builders.”

Joining forces with the best of the best in the construction industry will give you a competitive advantage in every facet of your business.

Myth: Becoming a member of a GPO costs too much time and money

The right GPO will actually help you save time and money.

Although some purchasing groups, including CBUSA, require a one-time registration fee and monthly membership fee, the amount pales in comparison to the savings you’ll receive. The minimal fees associated with membership allow CBUSA employees to manage local vendors and brand partners on your behalf. 

CBUSA will also save you time through more efficient purchasing processes. And while there is some upfront time investment needed to establish your membership and suppliers, the near- and long-term savings to your company are well worth the initial investment.

Myth: Getting started with a GPO is complicated

Not true. Getting started with a GPO is much easier than you think. For CBUSA, you’ll simply complete a membership inquiry, and someone from the team will be in touch.

From there, you’ll set up an introductory meeting to discuss your business and overall goals to determine if CBUSA is the right fit for your company. If you decide to move forward, the process moves quickly, and you’ll start to see savings as soon as you make and report purchases.

Are you ready to experience the power of group purchasing? Become a builder of choice with CBUSA

As a member of CBUSA, you’ll have access to our network of preferred local vendors who love working with builders that pay on time. You’ll also enjoy other perks like:

  • Optimized material planning and purchasing
  • The best deals on the best brands
  • Valuable time saved on negotiating

Become a member

About The Author

Chelsea Cole

Chelsea Cole Chelsea Cole is a senior content marketing specialist at Buildertrend