Saving money is as much an art and science as logistics, inventory, or risk management. In fact, it requires a set of core beliefs, system thinking, and a smidgen of behavioral science if you are to be truly successful in reducing your supply chain expenses. Most supply chain professionals believe saving on their expenses is all about price and standardization, when nothing could be further from the truth. Here are five keys to overcoming the barriers that limit supply chain expense savings at your healthcare organization:
1. Have your customers, stakeholders, and experts participate in change: To quote the late, great Professor George S. Odiorne, “Most people like the changes they cause to happen, for they are adapting as they create the changes.” When people participate in making decisions, they make their expert contribution. Thus, they are often able to prevent the kinds of errors which grow out of ignorance. They also acquire more enthusiasm for the decision, or at least have some of their serious reservations removed, and accordingly work more diligently to make the decision work in practice. Therefore, always engage your customers, stakeholders, and experts in any price, standardization, or utilization change you are contemplating. It will make your savings job much, much easier if you do so.
2. Help your customers visualize their savings opportunities: It is one thing to identify a savings opportunity, it is quite another to convince your customers that it is time to change their behavior. We have found that the best way to do so is through visualization (i.e., charts, graphs, storyboards, diagrams, trendlines, etc.) to demonstrate to your customers that their practices are costing their department money. With few exceptions, we have found this has been a foolproof way to make change happen without being dictatorial.
3. Don’t think savings should happen just because you wish them to: I remember talking to a supply chain professional a few years ago who was discouraged because his cardiac surgeons wouldn’t change their pacemaker manufacturers for an unbelievable 25% savings. What I told this individual was that they didn’t change because they didn’t see what was in it for them. So, when you are selling a savings proposal, make sure you add value beyond price, standardization, and utilization to your savings offers for your customer’s benefit.
4. Wait until the time is right to make change happen: I have been turned down hundreds of times in my career on my savings proposals, but I learned to wait until the time is right (retirements, resignations, change in circumstances, etc.) to make a change eventually happen. Otherwise, you will find yourself frustrated because you can’t even bat 500 in the supply chain savings game without the right timing.
5. Let your data lead the way to supply expense savings: Every time we assess a healthcare organization’s supply chain expense opportunities, we identify millions of dollars in savings, beyond price and standardization, because we let the data lead the way instead of focusing solely on GPO or local contract offerings. This is the way to save even more money while maintaining your price maturity with your GPO contracts.
Our supply chain community tells us that it is getting harder and harder to find new supply chain expense savings. Therefore, supply chain professionals need to do things differently if they want their savings to keep pace with inflation, budget shortfalls, and competition. Following the above five keys to overcoming barriers that limit supply chain expense savings at your healthcare organization will go a long way towards bridging this gap.
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