The best part about benchmarking is that you can drive your hospital’s supply expense savings even higher without even leaving your desk. This has been our experience over the last 15 years where we have conducted thousands of benchmarking studies for our clients using our Utilizer® Dashboard this has open up a whole new world of savings for them.

One of the key elements that we have found that is holding back effective benchmarking in healthcare today is the lack of benchmarking partners. Yes, we know that every hospital belongs to one or two benchmarking services but the benchmarks that are provided by these sources are, for the most part, at the 30,000 foot level which are meaningless to supply chain professionals. However, these are services, not partners – there is a difference!

To effectively benchmark with a real impact on your bottom line, supply chain professionals need benchmarks at the SKU (stockkeeping unit) or ground level to have meaningful and actionable results. These customized benchmarks can best be developed with partners from your own national, regional or local GPO membership. Or, you can sign up with a supply chain benchmarking specialist who already has the relative data to compare your hospital, system or IDN at the SKU level with your peers to make your benchmarking job as easy and hassle free as possible. 

When I was told by an inventory specialist a few months back that a hospital’s inventory assets can have a value, on any given year, of up to 28% of a hospital’s total supply spend it took me by surprise. I always knew that a hospital’s inventories where a valuable asset, but I never realized the extent, breadth and depth of their impact on a hospital’s bottom line.

This little known fact, as I said, was an eye opener since if these liquid, but very vulnerable assets are piling up in your hospital’s closets, overflowing on your selves, carts and in your warehouse they aren’t earning investment dollars in your hospital’s bank, or paying for needed services that their cash value could put to good use. Then they absolutely will be a drain and drag on your bottom line.  There is no other way to think about this issue!

That’s why it is so critically important for supply chain managers to effectively manage and control all of your hospital’s official inventories over $100,000.  Although, based on the poor results found in our quarterly surveys of how hospitals are managing their inventory assets we have a long way to go before, we as an industry, can say that we have complete control over one of our hospital’s most vulnerable assets.

One of the best ways I know if to ensure that you protect these vulnerable assets, as I said, is for supply chain management to control them. At most hospitals in the country, this isn’t happening.  This job traditionally has been outsourced to your hospital’s department managers (e.g. operating room, laboratory, cath lab, emergency room, etc.) who very rarely, if ever, do a decent job of managing their own inventories.

Now that every penny saved counts in healthcare, I challenge you in 2012 to make hospital-wide inventory management a mission critical priority for your supply chain department. By doing so, you will protect one of your hospital’s most vulnerable assets and at the same time raise your status, value and recognition at your healthcare organization.

Yet, I discipline myself to do so every year for a few days, since I know that planning is the only way to win in the hospital supply chain game. I start by looking at my statistics (sales, savings, profits, losses, etc.) for this year vs. last year. I then look at the trends over the last five or six years to make sure we are going in the right direction.

In your situation you should be looking at your trends too, year over year, for the last few years.  For example, are your GPO savings growing, flat or deteriorating?  Is your hospitals’ official inventories shrinking or getting larger and by what percent?  Is your value analysis savings — beyond price — keeping pace with inflation (which is running about 3.5% this year)? What was your cost avoidance savings this year vs. last year? What was your labor turnover rate last year vs. national average? You get the idea?

Now, with this information in hand you can start to develop a picture of the health of your supply chain operations and start to formulate a plan to correct any and all deficiencies that you have uncovered. For instance, at most hospitals, systems and IDNs their GPO savings are flat or deteriorating over the last few years, so this challenge needs to be addressed — not ignored! I can tell you that most hospitals are turning the faucet on wider with their utilization savings to compensate for losses in their GPO savings that you should also be considering. 

What I have just described is a mini-lesson on how to get started with your own planning to win in the hospital supply chain game. As I mentioned, I spend days in my planning sessions with my staff analyzing the environment we live and work in while looking for threats to overcome and opportunities to capitalize on. This is the foundation of all planning exercises!

Yes, planning is hard boring work, but the payoffs are huge for you and me if we take our planning seriously. It keeps your supply chain organization from becoming complacent, confortable and reactive vs. proactive. Most importantly, planning provides you with the strategies, tactics and techniques to overcome any threat or take advantage of any opportunity that is on the horizon.  Don’t start the New Year without it!

1. Write Work Specifications:  The most important tip I can give you is to write your own work specifications for any new or re-       newal purchase service contracts that comes across your desk. If you accept the vendors’ contact – as is – you are probably buying services that you don’t need and want.  For example, one of our clients discovered they had been paying, for years, for conceirge services in their food service contract that they didn’t know existed, thereby costing them $100,000 a year.  This oversight has now been corrected, since this client now writes their own specs for their purchase service contracts without fail.

2. Include Performance Standards:  Just because you have a signed service contract with a vendor, doesn’t mean they will make their best efforts to improve your situation, since most contracts read that the contractor will meet or exceed national     standards. This statement isn’t enough to ensure the highest service quality for your hospital. To have failsafe agreements     you must include your own performance standards, such as, turnover will not exceed three-percent annually or contractor will     assume all cost of recruiting and retraining for new employees. That’s why standards and oversight are the only way to prevent your contractors from giving you below average service quality.

3.  Bid, then Negotiate a Contract:  There is a tendency to negotiate purchase service contracts with a preferred vendor. Let         me caution you against this questionable practice, since bidding is the only way I know of to keep your vendors honest, to gain    needed competitive intelligence and obtain the lowest possible cost. Naturally, it makes good business sense to negotiate after the bid to ensure all of the details of your contract are in your favor, but not beforehand.  

If you are not responsible for your hospital, system or IDNs’ purchasing service contracts at the present time, it is most likely that you will be in the very near future, therefore you might want to save these ideas in your intelligence files. However, if you are responsible for your purchase service contracts today these three tips and tricks will go a long way to guarantee that you won’t miss some big steps in getting your new and renewal purchase service contracts right the first time. 

1. Automation: It shouldn’t be a surprise to you that automating  almost everything you are doing in your supply chain business is the foremost way to optimize your supply chain resources, while lowering your cost. Yet, this seems to be the road less traveled by most supply chain departments. 

As I see it, the big reason for this not happening is that hospital, system and IDNs’ information technology departments are overwhelmed with other pressing tasks. But now with the advent of “cloud” software that is cheaper, easier to use and maintenance free there should be no reason why a supply chain department isn’t automating all of its labor intense processes. To this end, if  you aren’t investigating “cloud” software to improve your operations, now is the time to do so. 

2. Delegation: Everyone knows that delegation saves time and has a multiplier effect on your supply chain efforts.  Neverthe less, too many supply chain professionals still do most of the work of their value analysis teams. That’s not what teamwork is all about. By definition teamwork is a collaborative effort with a  group of people to achieve a stated goal, not one person doing all or most of the work. Isn’t time you have your value analysis team(s) share the workload?  This is the best way to utilize these resources, not doing their work for them.  

3.  Prioritization:  One of the best ways I have found to quickly sort what’s important, from what is less significant is to employ the 80/20 rule (80% of what’s important is in the 20% of things I have in my inbox) to decide on what to work on first, second, third, etc.  For example, if I am going to work on a savings project, it is always the one with the highest ROI that I work on first, not the one that is the easiest to implement.  This way I maximize my firm’s limited time, money and resources on the most important things first, not squander them on inconsequential projects.  

As I stated previously, there is no hospital, system or IDNs’ supply chain department, that I know of, that has unlimited time, money or resources.  Therefore, as supply chain leaders you need to devise strategies and tactics to optimize your human and physical capital to make the most of your resources.  It is my hope that these three ideas may be just what you need to help you to start utilizing your limited resources in a somewhat different, more effective and productive way. 

How Using Data-Driven Logic-Based Strategies Can Give You The Focus You Need On Your Customers To Make Savings Happen!

Uncovering Savings Opportunities In The 21^st Century Requires You To Use  Predictive Analytics (data mining) To Understand Your Customer’s Behavior – then modify them.

In the 20^th century supply chain professionals were fixated on price savings to reduce the cost of acquisition of their products, services and technologies, thereby making a big dent in their healthcare organization’s cost composition by partnering with their GPOs. Now that these “no-brainer” savings have run their course, it’s the optimum time for supply chain professionals to move from a price focused to data-driven, logic-based strategies and tactics to continue to make savings happen! 

I would guess that 80% of the hospitals and healthcare systems in the country have purchased new material management information systems within the last five years. From my viewpoint these systems are only being utilized to house raw purchasing data as opposed to utilizing them as fuel for value studies of their customers’ behaviors where literally acres of diamonds can be found in savings. 

How To Uncover Your Customer’s Behaviors That Are Hidden From Your View

The precise science of data mining using predictive analytics (or the analysis of trends, patterns, movements or directions of customer behaviors) requires four steps:

1.       Segmenting Your Customers Into Groups With Shared Characteristics Or Buying Preferences

This means isolating all of your customers who have purchased the same commodities (e.g., pacemakers, I.V. sets or catheter care kits) for the last 12 months by department.

2.       Organize These Groupings By Order Of Importance (80/20 rule)

Sort all of your customer group’s purchases by descending dollar, and then isolate those 20% of your customers that purchase 80% of the commodities into neat piles.

3.       Analyze Your Customer’s Purchasing Data To Reveal Savings Opportunities

Once step one and two have been completed, analyze your data for unfavorable trends, patterns, movements or directions that aren’t logical from you 20% customer pile.  For example:

·         Why is your operating room purchasing disposable and reusable hand towels too?

·         Why are you purchasing 57 different patient gowns?

·         Why are you using disposable and reusable oxisensors?

These findings and many more unpredictable discoveries will jump off the page at you without you breaking a sweat.

4.    Decide With Your Customers What Behaviors Need To Be Modified, Eliminated or Value Justified.

Once you have discovered, through your analysis, the various unfavorable trends, patterns, movements and directions in your customers’ behaviors you then need to meet with these customers to understand the WHAT, WHEN, WHY, HOW AND WHO of these buying decisions. Then, with your customers decide what behaviors need to be modified, eliminated or value justified.   

The structure that I have outlined for you herein to uncover unfavorable customer behaviors which are now hidden from view will enable you to move beyond price to the next level of savings performance. 

Never Underestimate The Power Of Data!

No matter how many times I teach, preach and educate supply chain managers on the importance of data mining their raw purchasing data, few take my advice because it is – hard work. Let me state with no qualifications that data-driven, logic-based strategies and tactics, focused on your customer’s behaviors, is the future of supply chain management in the 21^st century. Sophisticated analytical tools are available to perform this challenging work that you must master if you are to stay relevant, credible and employable in the ever changing and fast paced world of supply chain management. 

1. Value Analysis Analytics