December 8

3 Main Drivers for Supply Chain Savings Validation


I’m sure you would agree that it’s never been more important, due to the new economy we are living and working in, for a healthcare organization to save every dollar, squeeze every penny, and trim every expense that it can on its non-labor expenses. Just as important, it is mission critical that supply chain professionals validate these savings. Here are three main drivers for supply chain savings validation to help you build a case for doing so:

1. Curbing Losses from Non-Verified Savings: We have all assumed that the supply expense savings that were reported to our senior management were correct. Unfortunately, this was a false assumption because things change and people change over the course of a contract. For instance, a large university teaching hospital booked an $820,000 commodity savings opportunity in their savings tracking system for their current fiscal year, only to find out through a compliance audit that their projected savings never happened. After a midcourse correction by their supply chain manager, the savings did materialize in year two of their contract. Just think how embarrassed this supply chain leader would have been if he didn’t catch this anomaly before it was questioned by his CEO, who by the way, had projected these savings in his hospital’s budget assumptions.

2. Not Trusting Your Vendor or GPO’s Savings Claims: How many times have you been promised or guaranteed by your vendors or GPOs that you would save X amount of money with their product, service, or technology, and then never took the time or effort to verify that their projected savings happened? Our estimate is that this happens most of the time. However, there is a new trend in supply chain circles to trust but verify all GPO and vendor savings projections. This is because supply chain professionals are finding that too often their vendors and GPOs’ savings projections have fallen short of their promise, only to humiliate them when this fact is uncovered.

3. Uncovering All Understated Contract Savings: Based on our research, hospitals, systems, and IDNs are understating their GPO and vendor savings by as much as 37%. This means that for every $100,000 in savings that are reported by supply chain managers, $37,000 is not reported yet is actually achieved by these same supply chain professionals. The lesson here is to make sure you are getting credit for all of the savings you have achieved by auditing your savings before, during, and after your contract is implemented.

We all know that it is hard enough to uncover new non-labor savings at our healthcare organizations today. Therefore, it makes sense to validate your GPO and vendor savings to make sure your hard-earned efforts to produce savings really happen as planned, as well as to make sure you are getting credit for all of the hard-earned savings that you are generating with your GPOs’, local, and regional contracts. It’s what professionals do!

P.S. (Limited Time Offer) If you would like to learn more about this important topic, just e-mail me ( to obtain a copy of our new eBook, “The Ultimate ‘Closed-Loop’ Savings Validation Guidebook.” By the way, the eBook is FREE, but the information is priceless!

Below are some similar articles that you may find interesting.

What Everyone Should Know About Supply Savings Validation

5 Keys to Overcoming Barriers that Limit Supply Chain Expense Savings

3 Ways the Supply Savings Triangle Can Enhance Your Overall Savings Strategies

Request Demo of SVAH’s VA and Utilization Tools


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