Every supply chain professional is looking for that magic bullet to squeeze a few more dollars out of their supply chain expenses this fiscal year. However, let me tell you a secret I have learned in my long supply chain career about saving money. There are no magic bullets; just proven strategies, tactics, and techniques that strengthen your supply expense management efforts. Here are five that we recommend for you to employ for this purpose.
1. Invest in Advanced Value Analysis Training: For the most part, the preponderance of value analysis programs today in our nation’s hospitals, systems, and IDNs are home grown. Therefore, their value analysis teams haven’t had one hour of advanced training in the art and science of value analysis. To improve your value analysis program, invest in classic value analysis training, as originally taught by Larry Miles, the father of value analysis.
2. Conduct an Audit and Assessment: Do you know where your new price, standardization, and utilization savings are hidden? Trust me when I tell you there are 7% to 15% in new supply chain savings just waiting to be harvested at your healthcare organization. If you decide to wait until you stumble over these illusive savings, this will only continue to hurt your healthcare organization’s bottom line.
3. Take Advantage of Technology: If you don’t have technology to pinpoint your price, standardization, and supply utilization savings opportunities, with certainty, then you are at a big disadvantage. This is because all of your easy-to-achieve savings are history. You need exacting tools to mine for these new and better savings.
4. Invest in Technology Where it Counts: Use a return on investment calculator to decide where you are going to invest in new technology for supply chain expense management. Too often, new technology is glitzy, but doesn’t meet your expectation even in the short run. If you can’t guarantee a quick ROI for new technology, then maybe it is not worth the effort after all.
5. Introduce the Best Practice of Savings Validation: If you want to make sure that the savings that were projected, promised, or guaranteed happened as planned, then you must inspect that those savings materialized. We call this savings validation. Otherwise, you could actually lose as much as 26% to 46%, based on SVAH’s research, on your new GPO and local contracts.
Saving money on your supply expenses doesn’t need to be a mystery or secret. It just involves strategies, tactics, and techniques, like we have outlined above, to keep your savings engine well lubricated. There are no shortcuts, magic bullets, or shiny objects that can hasten this process. Remember this advice the next time you are excited about a new vendor or GPO expense cutting offer that seems too good to be true.