The only question then is what performance indicators should be included – and which should be excluded in your dashboard? The answer to that question is not too many to make your management job too complicated, but just enough to be meaningful and actionable.

By actionable I mean that if you can’t take action on the data that is being displayed then it is worthless and needs to be eliminated. A good example would be to number the purchase orders processed monthly/annually.  Unless this number is tied to buyers (purchase order processed/per buyer) then it isn’t relevant or actionable. Get my point?

On the other hand, tracking your inventory performance is mission critical.  Just the other day we noticed that two of our client’s inventories (operating room and pharmacy) were holding twice as much inventory as their peers. This fact was reported to our client’s materials manager for action. Another area of importance to track is your value analysis team’s attendance, since this is a key indicator (among others) of your value analysis teams’ vitality and cohesiveness.

The beauty of a dashboard is that it doesn’t take a lot of time to manage, if you automate all of your metrics to be displayed automatically.  All you need to do then is check it once a day or even once a week to make sure that you are still in control of your supply chain activities.  It sure beats worrying about where your next operational challenge is coming from; the information is all right there at your fingertips for you to make decisions to avert a catastrophe. 

This is because healthcare organizations “face a balancing act as they try to carry enough inventory to meet their customer’s demand while minimizing the inventory and storage cost”, as commented on in a recent article in Supply Chain Brain Magazine. Specifically, we find three inventory indicators as critical to our analysis: (i) inventory value as a percentage of net revenues, (ii) inventory turns, and (iii) cost per activity.

Using this formula, a typical 150-bed hospital’s operating room inventory would have three indicators: 1.3% inventory value to net revenues; seven inventory turns annually; and inventory value per procedure of $292.05. Based on our benchmarks this hospital theoretically could reduce its operating room inventory by $39,899 annually.

Now, why do we go through all this work to decide on an appropriate inventory value for a hospital? Well, it comes down to this; the more information we have to base our decision on, the more consistent and dependable our decisions become. We can almost eliminate guessing from the calculation!

Since deciding on how much inventory can be saved for a hospital is the first step in any well-designed inventory reduction strategy we think it makes sense for supply chain managers to go through these extra steps to triangulate their inventory indicators to get it right the first time. Otherwise, you could expend a lot of time and energy only to discover that your inventories are in balance after all! 

Over the last 20 years, for supply chain professionals to be successful, they must have hundreds of metrics at their fingertips to measure their department’s efficiency and effectiveness, since there is little margin for error in this fast paced business we find ourselves in. Meaning, we can’t depend on old and worn-out systems of the past to keep us informed in real time what is happening in our supply chain world.

The term for this information/knowledge gathering process is called SUPPLY BUSINESS INTELLIGNCE (SBI) or the identifying, extracting and analyzing of supply chain data to help us make better decisions. Its goal is to provide us with historical, current and predictive views of our supply chain operations for the purpose of reporting, analytics, data mining, and benchmarking.

SBI has, at its foundation, the use of technology to focus on what their competitors are doing to improve their supply chain operations. For instance, we recently were talking to one of our clients about why their SBI Dashboard was showing that their bathing system cost was twice as high per patient day as their peers.  After some investigation our client discovered that their nurses were mixing disposable and reusable linens (i.e. towels) to bath their patients that wasn’t a best practice at their competitors. This intelligence led our client to retrain their nursing in the proper protocol for bathing their patients to get their cost back into line.

How would you know this was occurring if this was your hospital?  The answer is without SBI, this utilization misalignment would have gone unnoticed for years. That’s why it is a supply chain imperative for hospitals, systems and IDNs to have visibility (historical, current and predictive views) together with insight (competitive intelligence) into their supply chain operations.  To do less than what is suggested herein is to put your supply chain operations at risk of falling behind on timely and critical supply business intelligence (internal and external) on how to maximize and optimized your supply chain business.  

I have provided this long quote from Skrob versus paraphrasing it since I believe it hits the nail on the head regarding creating supply chain programs, services and systems that are built to last. I myself, too often, follow the “Ready, Fire, Aim” formula only to be disappointed with the results. So it’s easy for me to relate to what Skrob is talking about.

Conversely, when I take the time to sit down and plan a new program, service of software product with my team from start to finish, as I did with our recent launch of our “Upping your Value Analysis Game” video training program, I don’t need to go back and “Aim” later. It’s done, finished, and complete and I can move onto other projects.

Why I brought up this topic this week is that I heard from two supply chain managers last week that were unhappy that two of their supply chain systems had broken down (e.g., clinical trials and linen management) causing them grief, because they were never systematized in the first place. 

This is what happens when you “Ready, Fire, Aim” when building a new program, service or system. Now these supply chain managers need to take time out of their busy day to go back and fix (or “Aim” again) their systems when it would have been much easier and less time consuming to get it right the first time. 

Need I say more!  “Ready, Fire, Aim” never works over the long-term if you want to have your programs, services and systems that are built to last. Spending time and making the effort to creating new supply chain structures is the only reasonable approach when creating new programs, services and systems that will pass the test of time. More importantly, it will keep you from continually fixing, tinkering and rebuilding things that should have had a solid foundation in the first place.  Don’t become Mr., Miss. or Mrs. fix it! 

Well, without keeping you in suspense any longer “The X-Factor” that we have identified is that one individual in a hospital, system or IDN who takes pride and ownership over their value analysis program and keeps the momentum going with their value analysis teams in good times and bad.

In some healthcare organizations this individual is the director of materials management or value analysis, in other organizations it is the chief executive officer, chief financial offer, chief operating officer or vice president of support services.  These champions can be found in almost any level of your healthcare organization, but they all have one thing in common; they understand the importance of value analysis and never let it become stale, overwhelmed, intimidated or irrelevant in their healthcare organization.  They keep striving for excellence!

Just the other day one of these value analysis champions told my vice president of operations that he was going to reintroduce a topic on his value analysis agenda that was previously rejected because he never gives up, never gives in and never is discouraged by disappointments in the past. He is always moving forward to save more money for his hospital’s value analysis program even when the odds are stacked against him.

This is the attitude of an individual (The X-Factor) who is the glue that holds a value analysis program together: Tough, but fair, dogged, but flexible and protective, but not defensive of his or her value analysis team(s)’ challenges. These are the attributes of leadership that must be integrated into every successful value analysis team(s) that is going to survive and thrive in the 21^st Century.  There is no substitute for leadership!

That’s what “The X-Factor” is all about — LEADERSHIP! If you don’t have it from one or more individuals in your healthcare organization to sustain and maintain your value analysis® team(s) at peak performance, then your value analysis program is predestined to remain in its present state of mediocrity as your performance standard.  Don’t let this happen to you!

We can say this with confidence, since this is how we do business every day.  We deal with billions of bits of data coming into our office from clients that expect us to deliver their Dashboard value analysis analytics within 15-days of receiving all of their data. This chore couldn’t be accomplished without us being organized to save.

This philosophy of “You must be organized to save, if you want to save big” came about after observing how hundreds of hospitals, systems and IDNs saved money. The biggest flaw that we have seen is that these healthcare organizations aren’t systematically attacking their biggest savings opportunities utilizing the power of technology to do so.

Just the other day a Dashboard client of ours remarked that he couldn’t believe that a competing hospital, that he visited recently, had six employees doing the same value analysis analytical work that he does with our system with no full-time equivalents. He thought it was a big waste of time and people power for this hospital to try to do semi-manually what could be done systematically and automatically if they had the right power tools to become even more efficient and effective.

The point here is that there is an easy way and hard way to making organizing to save a habit. The easy way is to automate all of your savings with power tools that systematically ferret out and then help you to accelerate the implementation and tracking of those savings.  The hard way is to continue to employ semi-manual tools that just keep you from becoming more efficient in organizing your supply chain expense management chores. It’s your choice, the easy or the hard way!

There couldn't be a better time to
up your value analysis game!

Value analysis has a 35-year history of saving money in healthcare, but it has gained even more importance, credibility and momentum now that The Patient Protection and Affordable Care Act has been signed into law.  This is because saving money (and making it stick) is now mission critical for any and all healthcare organizations' fiscal fitness and survival.