A supply chain manager recently told us that he is only saving pennies on the dollar on his new and renewal GPO contracts, along with seeing many price increases, thus, giving credence to our observation that price savings are slowly but surely disappearing. So, where do you go to continue your healthcare organization’s double-digit savings that you have experienced for many years? The answer is to look to these expense cutting trends that are shaping the future of supply chain management:
1. Supply Utilization Management: More and more supply chain professionals are planning to attack their utilization misalignments (i.e., wasteful and inefficient consumption, misuse, misapplication, and value mismatches in their supply streams) this fiscal year. This is because there are 10 to 20 times more savings below the waterline (iceberg analogy), than there are above the waterline at most healthcare organizations.
2. Purchased Service Contract Administration: We see more healthcare organizations establishing centralizing contract administration processes than ever before. The reason for this trend is that you save at least 11% to 18% in new contract savings by reining in your purchased service contract costs.
3. Value Analysis Program Reinvention: Most value analysis programs have been focusing their efforts on vetting their hospital, system, or IDN’s new product, service, and technology requests. These are generally costing their healthcare organization money while ignoring hundreds of thousands or even millions of dollars in new savings – beyond price and standardization -annually. Now that supply chain leadership is becoming aware of this phenomenon, they are reinventing their value analysis programs to also be savings machines.
You might not be aware of it, but cost-cutting techniques fade or are institutionalized over time, hence reducing your savings yields. What was hot today (i.e., group buys, group purchasing, or commodity auctions) is cool tomorrow. That’s why you always need to be looking for new cost cutting strategies, tactics, and techniques to keep your savings momentum humming. Otherwise, you will hit the wall on your supply chain expense savings before you know it. We hope these three cost-cutting trends can be added to your own supply chain expense toolbox to shape your supply chain expense management future.
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