Most of us assume that our supply chain functions are doing okay until we hear from a customer, our CEO, COO, or CFO that something just isn’t right with our labor or non-labor expenses or our supply chain department’s operational performance. I remember this happening to a supply chain vice president who was touting to his CFO that he had the best IV set prices in the region, only to hear three months later from his CFO that his IDN’s IV set and solutions cost was higher than before they signed a new IV set and solutions contract. If only this VP had key performance indicators (KPIs) to give him a heads up that this was occurring, he could have avoided this embarrassing situation. This is just one of the following five ways that KPIs can make your healthcare supply chain operations better than just good:
5 Ways KPIs Can Improve Your Healthcare Supply Chain Operations
1. End Learning Gaps: Let’s say your warehouse inventory turns KPI identifies that you are carrying more stock than is required to have an efficient warehouse operation. Many times, this is a learning moment used to teach your storeroom staff how to manage your healthcare organization’s inventory effectively. Or, send them to formal training on this topic.
2. Measure Performance: You don’t know what you don’t know if you don’t have KPIs to alert you that one of your labor or non-labor expenses or supply chain functions isn’t performing at peak performance. For instance, if your vendor’s fill rate averages below 90% there could be a serious stockout situation on the horizon. You need to know this is happening!
3. Better Decision Making: If you knew, because of a KPI you had initiated, that your operating room packs were being utilized at a higher rate than normal, wouldn’t you decide to investigate why this is happening? And wouldn’t this KPI help you make a better decision on the correct order quantities when you are ready to reorder your OR packs?
4. Detect Unfavorable Patterns and Trends: By monitoring your KPIs, over time, you can spot favorable and unfavorable patterns and trends that need to be investigated, like your reference lab cost per test increasing by 33% in one year. Otherwise, you could be caught off guard when you get a call from your CFO to explain this budget variance.
5. Set Goals and Objectives: The best way to reach your operational goals and objectives is to set your KPIs to mirror the targets to be achieved. For example, if you decide to reduce your laundry/linen cost by adjusted patient day by 10%, then set your laundry/linen KPI at 10% less than last year’s budget. This way you will always be able to monitor your progress towards this goal and objective without an elaborate monitoring system.
One of the traits of a true leader is that they don’t want surprises. They want to be aware, prepared, and proactive when things change in their environment. KPIs are the secret to not being surprised by the changing circumstances in your supply chain operations. So, if you want your supply chain operations to be better than just good, KPIs are the magic bullet to make this a reality.
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