“The faster you put savings automation in place, the faster you can attain your next level of savings beyond price.”
The name of the cost management game is all about gaining the best price and then optimizing your contract products further to reduce waste, inefficiencies, and feature-rich elements. This sounds straightforward but in most cases is not so easy when you think about the over 750 major categories that need to be cost managed on an ongoing basis. The interesting thing about all these product categories and the thousands of products within them is the fact that they are all in place now and thus you must find the categories and then the products within them that are causing cost overruns. This is where savings automation comes into play.
Time is the Challenge
Who has the time to chase down savings in 750 product categories? No one does, but if those savings come to you then you can sort through the highest to the lowest savings opportunities and find a few diamonds in your own backyard. The big X-Factor here is time and resources. In a perfect world, you would just take care of all of these as each contract comes up for renewal, but we all know that rarely happens. You need to have more specifics than just a contract renewal to trigger cost optimization in your product categories. Plus, who is to say whether there are any savings opportunities in one contract or the other – we need better proof as to not spin our wheels on savings that are not there.
Savings Automation Gives You a Constant Flow of Valid Savings Opportunities
The easiest pathway for you is to set up an automated system that makes all the savings opportunities come to you beyond what your group purchasing organizations (GPOs) give you on new pricing opportunities. This automation would be focused on waste, inefficient use, and feature-rich products, as well as life cycle shortfalls. These are the next big level of savings that are eluding VA and supply chain professionals that need to be systematically identified. Once your savings automation system pinpoints these dollars, then you can employ your value analysis teams to attain the savings.
Before you set up your savings automation systems or deploy any tools, I thought I would give you a few important things to know about savings automation.
What You Need to Know About Savings Automation
1. There is No Leap of Faith Needed to Deploy Savings Automation – Doubting Thomas’s are a dime a dozen in our healthcare industry. Sometimes I think it is too easy for our customers, stakeholders, department heads, and managers to verbally shoot down all viable savings opportunities. With savings automation, you will have a proven system that will show real and valid savings opportunities every time. This will give you a strategic advantage in knowing that the savings are real or at minimum something different is happening that is causing costs to increase.
2. Spreadsheets are Not Automation – Forget about spreadsheets. They are limited and will blow up (even today) when you deal with the multitude of data that you will need for your savings automation system. One reason why outside organizations like SVAH Solutions can help healthcare organizations with savings automation is that we set up separate data warehouses with our client’s data. We then configure, cleanse, and plug in the necessary data elements to make the savings automation work. You can’t do that on a spreadsheet folks, and especially not on an ongoing basis.
3. It Must Be Ongoing, Not a One-Time Event – Savings automation is not just a one-time event but an ongoing reporting system that will be updated on a monthly or at minimum quarterly basis with data that will be valid and up-to-date for you and your customers. That will keep you in touch with what exactly is going on as well as the ebb and flow of your supply chain savings opportunities. This is very important because sometimes savings automation will highlight things that need to be addressed right away. Once they are addressed, you can then track those changes to ensure that the savings have occurred. You are not going to address every single savings opportunity at once. You will need to be more strategic than that, but the good news is that you no longer have to start from scratch on any savings opportunity or contracting workup.
Most healthcare organizations employ spend management and your GPOs pinpoint standardization and new price opportunities which gives you an advantage in the savings automation zone already. But there is more automation that can be employed to help you go beyond what your GPOs are providing you and help you wring the towel dry on your savings beyond price. Your next level of major savings is not in the same reports you have been getting from your GPO. They will be in the form of savings automation reporting that will pinpoint waste, inefficient use, and life cycle optimization opportunities. The faster you put savings automation in place, the faster you can attain your next level of savings beyond price.
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