Impacts and Role of Group Purchasing Organization in Healthcare Supply Chain

Abstract

Effective supply chain management is a key differen tiator and source of competitive advantage across s everal industries, yet many rapid advances in supply chain and logistics have not been well adopted in health care industry, in particular by health care providers. Healthcare providers currently spend approximately 40% of tota l cost towards procuring, managing and distributing supplies and m edical devices. Supply chain and related activities constitute the second largest expenditure for healthcare providers . Among the various stakeholders of healthcare supp ly chain, Group Purchasing Organization (GPO) are a dominant force and act as an necessary intermediary between the manufacturer, distributors, solution providers and the provider. Most hospitals in the United States h ave affiliation with one or more GPOs, making GPOs an important stakeholder in healthcare supply chains. GPOs aggregat e purchasing volume based on demand from several healthcare providers to negotiate quantity discount fro m manufacturers and offer a variety of additional ser vices such as vendor selection; product portfolio m anagement, ecommerce, contracting, data and information service s that help improve supply chain performance for pr oviders. In this paper we discuss the value of leveraging GPO s ervices by healthcare providers to enhance their su pply chain.