The US group purchasing organization industry generates $7.3 billion in annual revenue across 560 businesses (IBISWorld, 2025). Globally, the GPO services market is projected to grow by $2.05 billion between 2024 and 2028 at a compound annual growth rate of 5.6% (Technavio, 2024). Those numbers point to something simple: more organizations are turning to group purchasing because negotiating alone costs them more than it should.

Most mid-market companies and even many large enterprises still procure indirect supplies (office products, MRO materials, telecom services, IT software) through one-off negotiations or inherited contracts that haven’t been rebid in years. They’re paying more than they need to, not because they lack procurement talent, but because they lack the purchasing volume to command competitive pricing across every category.

A Group Purchasing Organization (GPO) is a procurement model that helps businesses of every size pay less for the supplies and services they already buy. In this guide, we'll walk through how GPOs work, what they cost, where the savings come from, and how to evaluate whether one is the right fit for your organization

What Is a Group Purchasing Organization (GPO)?

A group purchasing organization is an entity that pools the purchasing volume of multiple member organizations to negotiate better pricing, terms, and conditions from suppliers.

The concept is straightforward → a single company buying $500,000 worth of office supplies has limited bargaining power. But when a GPO combines that company’s volume with hundreds of other members, the collective spend reaches tens or hundreds of millions, and suppliers offer pricing they’d never extend to an individual buyer.

GPOs focus primarily on indirect spend, the goods and services a business needs to operate but that don’t go directly into its finished product. That includes everything from maintenance supplies and safety equipment to telecom contracts and IT software. Nearly 90% of US hospitals use GPO services for procurement (HGPII, 2024), and adoption is growing across manufacturing, construction, hospitality, and dozens of other sectors. Among Fortune 1000 companies that participate in buying consortiums, 85% report savings of 10% or more (SpendMatters). The model works for organizations of nearly any size, from mid-market companies with a few hundred employees to enterprises with tens of thousands.

Membership is typically free. GPOs don’t charge members to join, and most require no purchase minimums or long-term contracts. The cost structure is covered in detail in the next section.

A Brief History of Group Purchasing Organizations

The GPO model dates back more than a century. The Hospital Bureau of New York, established in 1910, is widely recognized as the first healthcare GPO. For decades, hospitals drove the model’s growth by pooling purchases of medical supplies, pharmaceuticals, and equipment to cut costs that no single institution could reduce alone. In 1986, Congress strengthened the model by granting healthcare GPOs “Safe Harbor” protection from federal anti-kickback statutes, removing regulatory uncertainty and accelerating adoption across the sector.

Expansion beyond healthcare picked up through the 1990s and 2000s. GPOs began serving manufacturing plants, restaurant chains, school districts, and corporate offices with the same volume-based negotiation approach. Today, the US GPO industry includes 560 businesses and has grown at a 2.7% compound annual rate over the past five years (IBISWorld, 2025).

How Does a Group Purchasing Organization Work?

The GPO model runs on a three-party relationship:

• the GPO itself
• the suppliers who provide goods and services
• the member organizations who buy them.

It starts with data and volume

The GPO aggregates purchasing information across its full membership base:

• what categories members buy in
• how much they spend
• which suppliers they use
• where contracts are due for renewal.

With that combined spend as leverage, the GPO negotiates contracts with suppliers covering pricing, payment terms, service levels, and conditions that individual buyers rarely have the volume to secure on their own. A company spending $2 million a year on safety products negotiates from a position of $2 million. A GPO representing 500 members buying safety products negotiates from a position of $500 million. That volume gap drives the pricing difference.

Once contracts are in place, members purchase directly from the contracted suppliers at the GPO-negotiated price.

The GPO doesn’t hold inventory, doesn’t take possession of goods, and doesn’t fulfill orders. It provides the contract; the member and the supplier handle the transaction. According to the Healthcare Supply Chain Association (HSCA), organizations that purchase through GPOs reduce supply-chain-related buying costs by an average of 13.1%.

The relationship doesn’t end after implementation.

Many GPOs provide:

• ongoing oversight including billing audits to catch errors and overcharges
• compliance monitoring to verify that suppliers are delivering on contract terms
• price list management as product catalogs change
• periodic re-negotiation as market conditions shift.

Members retain full choice throughout. No one is forced to use every GPO contract available to them. Most organizations use a mix of GPO-negotiated agreements and independent purchasing, choosing whichever option delivers the best value in each category.

How Do GPOs Make Money?

GPOs generate revenue through administrative fees paid by suppliers, not members.

When a supplier wins a GPO contract, they agree to pay the GPO a small percentage of the sales volume generated through that agreement. For healthcare GPOs, federal regulations cap this fee at 3% of sales volume.

The model works because suppliers benefit from it too. A GPO contract gives a supplier access to hundreds or thousands of buyers without the cost of individual sales efforts.

The admin fee is a fraction of what the supplier would spend acquiring those customers one by one. For members, this means joining a GPO typically costs nothing: no membership fees, no purchase minimums, and no long-term commitments. Reputable GPOs also disclose their fee structures so members understand how the business model operates.

Types of Group Purchasing Organizations

Group purchasing organizations fall into several categories based on their scope and structure. The two primary classifications are horizontal and vertical.

1. Horizontal GPOs

Horizontal GPOs serve members across multiple industries.

They negotiate contracts for categories that nearly every business needs regardless of sector: office supplies, MRO (maintenance, repair, and operations), telecom, IT, shipping, and corporate travel.

Because they aggregate volume from many different industries, horizontal GPOs typically command larger total spend and secure competitive pricing across a broad range of everyday categories. A manufacturer, a law firm, and a hospital all buy printer paper and phone service. A horizontal GPO combines all of that volume into a single negotiating position. For organizations whose indirect spend is distributed across many common categories, horizontal GPOs usually deliver the broadest value.

2. Vertical GPOs

Vertical GPOs specialize in a single industry.

Healthcare GPOs are the best-known example, negotiating contracts for medical devices, pharmaceuticals, lab supplies, and clinical equipment that only healthcare organizations need. Foodservice GPOs do the same for restaurant chains and hospitality companies, securing pricing on food products, kitchen equipment, and dining supplies.

The advantage is depth: vertical GPOs understand an industry’s unique supply needs, compliance requirements, and supplier dynamics at a level that generalist organizations can’t match. If your purchasing is dominated by industry-specific products rather than general business supplies, a vertical GPO may be the stronger option.

3. Other Models

Two other models appear less frequently but are worth understanding.

• Regional GPOs focus on a specific geographic area, combining local supplier relationships with the aggregated volume approach. They can be especially useful for organizations that rely on local or regional vendors for part of their supply chain.
• Master buyer organizations take a different approach entirely. They act as the central purchasing entity, buying products on behalf of their members rather than simply negotiating contracts. Members purchase through the master buyer instead of directly from the supplier, which simplifies procurement logistics but reduces individual sourcing control.

For most general-business procurement needs, horizontal GPOs offer the broadest coverage. Healthcare, education, and foodservice organizations often benefit from the specialized knowledge of a vertical GPO.

Benefits of Group Purchasing Organizations

The most immediate benefit is cost reduction.

The HSCA estimates that GPOs save the US healthcare system up to $55 billion annually, with individual institutions paying 10% to 18% less on supply chain costs compared to independent purchasing.

Outside healthcare, the savings picture varies by category and contract maturity, but organizations that leverage collective purchasing power typically see 15% to 35% reductions across indirect spend categories, with documented savings success rates above 96% over the past decade. Those aren’t theoretical projections. They reflect audited contract pricing compared against prior spend.

Time savings are harder to quantify but equally significant for stretched procurement teams.

Running a competitive RFP, vetting suppliers, negotiating terms, reviewing contract language, and managing the implementation takes weeks or months of internal staff time per category.

Multiply that across eight or ten indirect spend categories and the procurement workload becomes a full-time job in itself. A GPO handles that work using category-specific expertise built across thousands of member engagements. Your team receives an optimized contract without investing hundreds of hours to get there. That time goes back to higher-value work: direct materials sourcing, strategic supplier development, or internal process improvement.

GPO membership also reduces supply chain risk on several levels.

Suppliers on a GPO’s contract portfolio have already been evaluated for quality, reliability, financial stability, and regulatory compliance. That vetting is built into membership, so your team doesn’t have to duplicate the due diligence. During supply disruptions, whether from raw material shortages, weather events, or geopolitical shifts, GPOs with broad supplier networks can redirect members to alternate sources faster than most companies can manage independently. The COVID-19 pandemic illustrated this clearly: organizations with GPO relationships had more options when their primary suppliers couldn’t deliver.

Many GPOs also provide spend analytics, benchmarking, and reporting tools that give members visibility into purchasing patterns and pricing performance relative to market averages. For organizations with limited procurement data infrastructure, this alone can surface savings opportunities that would otherwise stay hidden. You might discover you’re buying the same product at three different prices across different facilities, or that a contract you assumed was competitive is actually 20% above market.

Limitations of Group Purchasing Organizations

a. Limited Supplier Choice

GPO membership isn’t a perfect fit for every situation, and procurement professionals should weigh a few trade-offs before committing.

GPO contracts cover a curated supplier list. If your organization has an existing relationship with a vendor outside the GPO’s portfolio, you won’t get GPO-negotiated pricing for that supplier.

You can still maintain the relationship and buy from that vendor directly, but you won’t benefit from the GPO’s collective leverage on those specific purchases. For organizations with strong, long-standing supplier partnerships in certain categories, this is worth evaluating before you join.

b. High-Volume Buyers May Already Have Competitive Pricing

For very large organizations with significant volume concentrated in a single category, independent negotiating power can sometimes match or exceed GPO pricing in that specific area. A company spending $20 million annually with a single MRO distributor may already have pricing that a GPO can’t improve. But this is usually the exception, not the rule. Across a full portfolio of 10 to 15 indirect spend categories, GPO pricing almost always delivers net savings because few organizations have the resources to run competitive bids in every category simultaneously.

c. Inconsistent Category Coverage

Category coverage also varies between GPOs. Not every organization covers every spend category, and the depth of supplier relationships within a category can differ significantly. Members may need to supplement GPO contracts with independent purchasing for niche, specialized, or industry-specific items that fall outside the GPO’s portfolio.

Like any model that consolidates purchasing through a set of preferred suppliers, heavy reliance on GPO-contracted vendors without backup sourcing could reduce supply chain diversification. Managing this is straightforward: treat GPO contracts as one tool in a broader procurement approach, maintain relationships with alternative suppliers in critical categories, and review your contract portfolio periodically to confirm you’re still getting the best available pricing.

What Categories Can You Buy Through a GPO?

GPOs focus on indirect spend, the purchases that keep a business running day to day but don’t become part of the end product. The range of available categories is broader than most buyers expect.

MRO and industrial supplies are one of the highest-value GPO categories. MRO purchasing involves thousands of SKUs across dozens of product families, and price variance between suppliers can be significant. Without a GPO contract, many organizations are paying different prices for the same item at different facilities, or paying list price because nobody had time to negotiate a better rate.

Safety and PPE is closely related, especially for manufacturing and construction operations managing large employee populations across multiple sites. Standardizing safety product sourcing through a GPO contract can cut costs 10% to 20% while also improving compliance with safety specifications.

Office supplies remain one of the original GPO categories and still deliver consistent savings in the 15% to 35% range. It’s a category where most companies assume they’re already getting a good deal, but analysis frequently reveals pricing gaps, particularly for organizations that haven’t rebid their contracts in several years.

Wireless telecom is a category where GPO membership makes an outsized difference. Telecom contracts are notoriously complex, with hidden fees, annual escalators, and bundled services that obscure the true cost. GPOs with telecom expertise can audit existing agreements, identify unnecessary charges, and negotiate replacement contracts that cut wireless spend by 20% to 40%.

Software and IT expenses follow a similar pattern. Volume-based licensing and enterprise agreements respond well to collective negotiation, and many organizations are overpaying for licenses they don’t fully use.

Other common GPO categories include shipping and small parcel (where carrier contracts reward volume), packaging, hotels and car rental for corporate travel programs, janitorial and facilities supplies, and print and promotional materials.

Source: CenterPoint Group category portfolio data

Some GPOs extend beyond standard contract access and offer consulting, outsourced strategic sourcing through programs like CenterPoint Group’s Sourcing Desk™, and customized procurement support for categories outside their core portfolio.

How Much Can a Group Purchasing Organization Save You?

Savings depend on several variables, and anyone who quotes you a single number without context is oversimplifying.

The biggest factor is your current contract maturity → An organization that hasn’t renegotiated its MRO contract in five years will see larger savings than one that ran a competitive bid six months ago.

Purchasing volume matters too → Higher volume across more locations gives the GPO more leverage to work with.

Category complexity also plays a role → telecom and IT contracts tend to produce higher savings (20% to 40%) because the pricing structures are opaque and layered with unnecessary charges, hidden fees, and annual escalators that compound over time. Simpler categories like office supplies still deliver consistent 15% to 35% savings, but the gaps are usually smaller.

It helps to separate hard savings from soft savings when evaluating what a GPO can do for you.

• Hard savings are direct price reductions that show up on invoices: you were paying $12 per unit, now you pay $9.
• Soft savings cover the operational value: the hours your procurement team doesn’t spend on RFPs and supplier negotiations, billing errors caught by GPO audits, price increases flagged and pushed back before they take effect, and supply chain risk reduced by having vetted backup suppliers in place.

Both types count, but hard savings are easier to measure and present to finance or leadership when justifying the relationship.

How quickly you see results also varies:

• Organizations with less mature procurement programs, those that haven’t had time or resources to run competitive bids across every indirect spend category, tend to see the largest initial savings.
• For organizations with more sophisticated procurement operations, the savings may be smaller per category but still meaningful when aggregated across the full portfolio of indirect spend.

GPO vs. Buying Groups: What’s the Difference?

Both GPOs and buying groups aggregate purchasing volume to get better pricing, but they operate differently in structure, governance, and scope.

A GPO is managed by a dedicated organization that negotiates on behalf of its members. The GPO employs category specialists, runs the RFP process, manages supplier relationships, and presents members with ready-to-use contracts. Members choose which contracts to activate and purchase directly from the suppliers. The GPO’s expertise is what you’re gaining access to. You don’t need to participate in the negotiation process or commit time to group decision-making.

A buying group (or cooperative) is typically member-governed. The members themselves make collective purchasing decisions, often focusing on a narrower set of categories or a single supplier relationship. Some cooperatives charge membership dues or take a commission on purchases. Others operate on a shared-investment model where members contribute capital and share in any returns. The trade-off is more control over purchasing decisions in exchange for more time commitment and governance responsibility.

The distinction matters when evaluating which model fits your organization. If you want ready-made contracts across a wide range of categories with minimal internal involvement, a GPO is the better fit. If you want direct input into purchasing decisions and are willing to invest time in governance, a cooperative structure might work for you.

GPO vs. Distributors: Understanding the Difference

Some buyers confuse GPOs with distributors because both sit between the purchasing organization and the manufacturer. But they play fundamentally different roles.

A distributor buys products from manufacturers, holds inventory in warehouses, and resells them to end customers. The distributor owns the goods and makes money on the markup between wholesale and resale price. Their value is in logistics: warehousing, order fulfillment, and delivery.

A GPO never takes ownership of any product. A GPO negotiates contracts covering pricing and terms, and then members buy directly from the supplier or distributor under those terms. The GPO’s value is in the contract itself, not in moving boxes.

The two models are actually complementary. A GPO might negotiate a contract with an MRO distributor so that its members get preferred pricing on every order placed through that distributor. The distributor still handles fulfillment. The GPO secured the pricing.

How to Choose the Right GPO for Your Organization

Not all GPOs are built the same, and the right fit depends on your organization’s specific spending profile, industry, and internal procurement capacity.

Start with category coverage

A GPO is only useful in the categories where you actually spend money. Look for depth in your highest-spend indirect categories, not just a long list of contracts. If your biggest cost drivers are telecom and MRO, a GPO with strong supplier relationships in those areas matters more than one covering 50 categories at surface level.

Supplier quality is the next filter

Who are the contracted suppliers? Are they established, financially stable, and competitive in your market? A GPO with brand-name suppliers you’ve already evaluated favorably is a strong signal.

Ask about reporting and visibility

Can you track savings performance, spending patterns, and contract utilization over time? GPOs that provide spend analytics give you data to justify the relationship internally and identify new optimization opportunities.

Contract flexibility matters more than most buyers realize

Are you locked into long-term commitments or purchase minimums? The best GPOs let you use their contracts selectively, accessing only the categories where the value is clear, without requiring volume guarantees.

Evaluate the support model

Some GPOs operate as platforms: sign up, access contracts, figure it out yourself. Others provide dedicated account management, implementation support, billing audits, and ongoing program optimization. The difference between these two models is the difference between a tool and a partner.

If your organization has supplier diversity goals, ask whether the GPO is a certified diverse supplier. Working with a certified Minority Business Enterprise (MBE), for example, lets you direct spend toward diversity targets without sacrificing pricing quality.

Finally, look at track record. How long has the GPO been operating? What savings rates do they document? Can they share case studies from organizations similar to yours?

Common Misconceptions About GPOs

“GPOs are only for healthcare.”

Healthcare was the first and most visible GPO use case, but group purchasing organizations now serve manufacturing, construction, hospitality, financial services, non-profits, education, and more. The US GPO industry includes 560 businesses across sectors (IBISWorld, 2025), and the fastest growth is coming from outside healthcare as companies in other industries recognize they’ve been leaving money on the table.

“GPOs are only for large enterprises.”

GPOs serve businesses of all sizes. Smaller organizations often benefit the most because they lack the purchasing volume to negotiate competitive pricing on their own. A company with 200 employees and a mid-market company with 5,000 employees can both access the same GPO-negotiated pricing. That’s the whole point of collective leverage: the GPO treats their combined volume as one negotiating position, giving the smaller company access to pricing it could never achieve independently.

“Joining a GPO locks you into contracts.”

Most GPOs require no long-term commitment and no purchase minimums. Members choose which contracts to use and can maintain existing supplier relationships alongside GPO contracts. If a GPO contract doesn’t beat your current pricing in a given category, you simply don’t activate it. There’s no obligation to route all purchasing through the GPO.

“GPO pricing can’t beat what we’ve already negotiated.”

This may be true in one or two categories where your team has deep expertise and strong supplier relationships. But across a full portfolio of 10 to 15 indirect spend categories, GPO pricing almost always delivers net savings. The categories where you haven’t run a competitive bid recently, or where your team doesn’t have specialized knowledge of supplier pricing structures, are usually where the biggest gaps are hiding.

“GPOs replace your procurement team.”

GPOs supplement internal procurement. They don’t replace it. A GPO handles the heavy lifting on specific indirect categories so your team can focus on strategic priorities, direct materials sourcing, and higher-value work. The GPO functions as a partner and extension of your procurement group, not a substitute for it.

Final Thoughts

Group purchasing organizations exist to solve a basic imbalance: most businesses pay more than they need to for the supplies and services that keep their operations running, simply because they negotiate alone. The GPO model pools that isolated spending into collective leverage, giving organizations of any size access to pricing and terms that were once available only to the largest buyers.

The model has more than a century of history behind it, a $7.3 billion domestic industry supporting it, and adoption rates climbing across every major sector. Whether your biggest procurement challenge is MRO pricing, telecom complexity, or just not having enough time to run competitive bids across every indirect category, a GPO can close that gap.

If you want to see where group purchasing could reduce your costs, the first step is understanding what you’re currently spending and where. Request a free pricing analysis to find out where the opportunities are, or get in touch to discuss what CenterPoint Group can do for your organization.