I don’t need to remind you that the cost of just about everything you buy is increasing due to supply chain shortages, higher labor cost, and surging energy prices, which all contribute to the high inflation rate we are now experiencing. In fact, many economists believe this situation can get worse in the coming months! Is there anything you can do about it? Our position is that there are three strategies for dealing with our healthcare organization’s rising supply chain costs that we would like to share with you herein:
Strategies for Dealing with Rising Healthcare Supply Chain Costs
1. Re-Specify Your Top 100 Categories of Purchase. It’s been our experience that your department heads and managers don’t need all of the functions and features they have specified in the products they are buying. In fact, in many situations, the person who originally specified the product could have left their employment, retired, or moved on to another department. That’s why if you asked this question to your customers, “What are the functions (primary, secondary, and aesthetic) that are absolutely needed to provide the necessary requirements?” you will find you can eliminate hundreds of thousands of dollars of unnecessary costs from your supply chain expenses – almost overnight. We call this value justification.
2. Reduce Your Products’ Consumption. The waste and inefficient consumption and misuse in healthcare organizations’ supply streams that we have identified over the last 20 years for our clients could be in excess of a billion dollars. That’s why we can state unequivocally that there is waste and inefficiencies in your hospital, system, or IDN’s supply streams.
3. Require ROI on New Purchases. We have observed that healthcare organizations generally add more new purchases (as much as 25% annually) than they eliminate in any given year. That’s why it is a good strategy to require a minimum return on investment (10% or the cost of change) on all new purchases before approving a new purchase. If there is a quality issue, then you must ask, “How much better is better?”. You will often find that the costs aren’t always equal to the benefits.
Options to Reduce Your Supply Chain Expenses
Every day we hear about more commodities that we are buying which costs have risen. Just the other day, I had sticker shock myself while trying to lease a new car. This is proof that inflation isn’t going away, just getting worse. However, you do have options to reduce your supply chain expenses as we outlined above that aren’t traditional but are effective in reducing your expenses. Isn’t it time you take the road less traveled to ensure that your healthcare organization continues to have a healthy bottom line?
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