Using A GPO Model To Fight Inflation? Insights From Our Second Interview With A Senior Procurement Executive

How to Use A GPO Model To Fight Inflation

In the last article, we heard from Senior Vice President & Global Chief Procurement Officer at Cigna Express Scripts, Tony Abate, regarding his steps for dealing with inflation.

In this article, we hear takeaways from a recent CPO Roundtable discussion from Michael Koontz, VP, Strategic Sourcing & Business Leader for American Tire Distributors (ATD) Sourcing Solutions. I think you will find his approach to battling inflation innovative and unique.

Before we get to Michael’s fight-inflation strategy, let’s first provide some background information on his company. ATD operates more than 130 distribution centers, including 24 in Canada, serving close to 80,000 customers across North America. Employing 4,000 associates in the U.S. and 600 north of the 49th, ATD offers an “unsurpassed breadth and depth of inventory, frequent delivery and value-added services to tire and automotive service customers.”

Their selection as one of Forbes’ 2021 America's Best Mid-Sized Employers and the reception of a Gold Stevie® Award in the Transportation Company of the Year category of the American Business Awards® provides testimony to their high level of service and success as a company.

An Innovative Model

According to Michael, inflation is “five times more difficult for small businesses.

The same conclusion is echoed in a January 2022 Ipsos/MetLife/U.S. Chamber of Commerce poll. According to the poll, "inflation and supply chain challenges continue to bedevil small business owners,” with “concerns around inflation and supply chain” intensifying rather than decreasing.

Based on the above, ATD had to do something to support its network of 650 franchises. Enter ATD Sourcing Solutions.

A division of the ATD parent, the new company that Michael heads up is based on a group purchasing organization (GPO) model. Through this division, dealers leverage the expertise of the ATD strategic sourcing group to get volume or “strength in numbers” savings that helps to offset the impact of inflation. Of course, the ATD Sourcing Solutions group adds value well beyond negotiating a volume discount for goods and services.

Focusing on the business's distribution and data analytics sides, the company provides their dealers with convenient access to their expertise through an online e-commerce technology for B2B purchasing.

Case Example: Converting Costs Into Revenue

Oil filters, oil sensors, propane, uniforms – both direct and indirect are some of the items the division sources for their network. By leveraging the strategic sourcing category leader's expertise at ATD, franchisees can now drive more significant cost savings.

For example, franchisees paid between $200 and $300 per month to pump out their old oil and antifreeze. Instead of paying for that service, a service is now paying them $300 to $500 per month to pump out the oil, filters etc., weekly.

Stage Two – No More Retail

Given the success of this initial phase of the program supporting their franchisees, in stage 2, ATD Sourcing Solutions plans to make its services available to its 13,000 independent dealers.

Providing franchisees and dealers with this new, direct pathway to procuring the goods and services they need on a cost-effective basis means that they no longer have to "buy" retail through places like Amazon and Lowes.

Dawn Tiura, President and CEO, SIG

Dawn Tiura, CEO and President of SIG, SIG University and Future of Sourcing Digital Publication, has over 26 years leadership experience, with the past 22 years focused on the sourcing and outsourcing industry. In 2007, Dawn joined SIG as CEO, but has been active in SIG as a speaker and trusted advisor since 1999, bringing the latest developments in sourcing and outsourcing to SIG members. Prior to joining SIG, Dawn held leadership positions as CEO of Denali Group and before that as a partner in a CPA firm. Dawn is actively involved on a number of boards promoting civic, health and children's issues in the Jacksonville, Florida area. Dawn is a licensed CPA and has a BA from the University of Michigan and an MS in taxation from Golden Gate University. Dawn brings to SIG a culture of brainstorming and internal innovation.