June 9

4 Approaches to Contain Your Supply Chain Expenses


I can only assume that your healthcare organization is revising its fiscal year 2020/2021 budget now due to the effects of the pandemic. This is because we are entering a new normal for our healthcare organizations where we will need to dig deeper and broader for supply chain savings just to keep running in place. Here are four approaches to containing your supply chain expenses next fiscal year that we hope will help you in your planning process:

1. Only approve new product requests if they are offset by new savings. Healthcare organizations have traditionally approved new product, service, and technology requests if they appeared to solve an existing problem. However, our studies show that this practice has increased hospital, system, and IDN’s expenses by 1% to 3% or more annually. In the new healthcare economy we are experiencing, we recommend that any new purchase be offset by new savings before the request is approved, unless it is a lifesaving measure!

2. Only approve new product requests if they are budgeted. One tactic to slow down spur-of-the-moment purchases is to have them budgeted (as line items) on your hospital’s budget. This way your department heads and managers will need to have their new purchases approved twice (at budget time and during your value analysis process) before they are finally purchased.

3. Only approve off-budget purchases by trading them for existing budgeted items. For example, if a new environmental service’s floor buffer is requested because an existing floor buffer is found to be beyond repair, but not budgeted, then your department head must trade an existing budgeted item of the same value to obtain a new buffer.

4. Only approve purchase requests that have been approved by the appropriate division vice president. Very rarely do senior management even see purchase requests from their department heads and managers. This is another filter you can use to slow down, impede, or even eliminate many purchase requisitions that aren’t mission critical.

All of these suggested tactics to slow down, impede, or eliminate many of your healthcare organization’s new purchase requisitions aren’t theoretical. We have seen them employed at hospitals, systems, and IDNs that we have worked with. You too can utilize them with the knowledge that they have been effective in halting the runaway practice of approving too many new purchase requisitions without thoroughly vetting them at multi-levels of your healthcare organization.

Below are some similar articles that you may find interesting.

Supply Utilization Management Isn’t a One-Time Event

3 Supply Chain Expense Optimization Secrets You Need to Improve Your Margins

3 Reasons Why Data-Based Decision Making is the Future of Supply Chain Expense Management

Interested in a Walk-Through of SVAH’s Value Analysis and Supply Utilization Management Solutions? Fill out the form below.


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