We are getting calls from supply chain executives and chief financial officers looking for a solution to their supply budget shortfalls in fiscal year 2021-2022. They tell us that they have tapped out of their GPO contract savings and now want to know where else to go to balance their supply budgets. We tell them that there are three ways supply utilization management can pave the road to recovery and balance their supply budget as follows:
1. Immediate New Supply Savings Opportunities: Most supply chain executives haven’t attacked the utilization misalignments (or wasteful and inefficient consumption, misuse, misapplication, and value mismatches) in their supply streams that can generate 7% to 15% in new supply chain savings for healthcare organizations almost immediately. In our opinion, there is nowhere else to go for supply chain savings!
2. Control Supply Costs Going Forward: Not only do you need to attack your new utilization costs, but you need to continue to manage and control your utilization misalignments going forward so your healthcare organization’s staff doesn’t fall back to old bad habits. Just because your value analysis or supply chain team found and implemented a big savings opportunity, you still need to track these categories and products to ensure that the savings continue to fall in line. The lesson here is that utilization management is a never-ending task and responsibility of supply chain management!
3. Broaden the Scope of Supply Savings Opportunities: Most supply chain/value analysis professionals focus their utilization management savings efforts only on their clinical products. However, there are hundreds of other commodities, contracts, and technologies you buy where your utilization can be askew. A few years back, we helped a community hospital save $430,000 annually on the utilization of their outside reference lab testing services that wasn’t even on their radar screen. This is just one example of where hundreds of thousands of dollars of supply utilization savings are hidden in your supply streams.
We see a bumpy road ahead over the next 12 to 18 months for healthcare organizations on their road to recovery from the pandemic, especially since their GPO contracts are running out of steam. We are also seeing progressive healthcare organizations focusing on their supply utilization management to make up for this shortfall in their GPO savings. Isn’t it time, you too, tap into this new savings source?
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