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Source1 Purchasing: The ABC's of PSOs vs. GPOs

Source1 negotiates low prices and passes all of the rebates and discounts to their purchasing partners. The company competes with market leaders by forming new partnerships and managing a client portfolio with over 3,000 customers.

BOYNTON BEACH, FLA. – With so many players in the game, the business of purchasing can become an administrative and managerial challenge for the lodging, foodservice and hospitality industries. What’s right for their business and who has the operators’ best interests at heart?

Much of that depends on what type of organization an operator uses to help make its purchasing decisions. But with the landscape varied and evolving from Group Purchasing Organizations (GPO) to Purchasing Services Organizations (PSO), what are the differences and how can operators be sure what’s best for their operation?

Source1 Purchasing is one example of a PSO that is changing operators’ purchasing landscape for the better. With $7 billion in purchasing power, Source1 specializes in providing cost management, savings, and operational efficiencies for the lodging, hospitality and entertainment industries, helping operators increase profits through purchasing. Unlike a GPO, this innovative approach improves the purchasing experience and passes the promotions, rebates and savings directly to the operators.

“Source1 came into business from the operator’s side of the equation. Our overarching principle is partnership,” said Scott Hoffmire, President and CEO, Source1 Purchasing, “We guide our members to get the most value from our program and connect them to savings through service and support.”

That philosophy seems to be working. Source1 negotiates low prices and passes all of the rebates and discounts to their purchasing partners. The company competes with market leaders by forming new partnerships and managing a client portfolio with over 3,000 customers. Additionally, Source1 has experienced over 99.55% customer retention for the past five years with a customer satisfaction rate of 98.5% for seven years. Purchasing partnerships provide respect and support, and for organizations like Source1, there are no long-term contracts but handshake agreements, knowing that customers can vote with their feet – just as a provider’s guest might also do. Keeping customers happy is critical.

Another key differentiator between a PSO and GPO is that with a PSO there are no compliance minimums.  A PSO moves its members along the compliance continuum, guiding them to buy more from the program only if it suits the operators’ best interests, not the GPO’s. With a PSO, the primary benefit will always accrue to the operator.

For quite some time, GPOs have been helping businesses combine their purchasing power with others to reap the benefits of better discounts through economies of scale. However, while the GPO model has worked for a long time, it does have its shortcomings and restrictions. Among others, it can create problems in obtaining the best pricing and services once a vendor has been chosen by the GPO.

Lately the landscape has changed even more, with some distributors even getting into the purchasing arena. Yet, while Hoffmire explains that distributors play an important role in purchasing, operators should be reminded that distributors are designed and compensated to sell, not service.

“A PSO is an advocate for the operator and a neutral intermediary,” said Hoffmire. “We have no axe to grind in terms of what we’ll recommend. If something’s not right for our partner’s business, we’ll never make that purchasing recommendation.”

Source1 provides an engaged and dedicated customer service team, business reviews and other analytic tools to improve purchasing practices and unlock value in the supply chain. And a PSO provides non-food contracts and programs, unlike a distributor.

“We respect our members and their brands, and the things that make them special,” said Hoffmire. “In short, their success is our success, and what’s best for their business is our goal,” he concluded.

Since its founding in 1997, the award-winning Source1 team has created solutions that empower operators of all sizes to reduce costs, ensure consistent product quality, and achieve higher customer satisfaction.

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