“There are many benefits to having an active and ongoing benchmarking/KPI program for your organization that will tell you much more about where you stand than any other tool or modality can.”
If you have been in the healthcare supply chain for a period of time you develop a sixth sense or gut feel for your respective supply chain. This is a natural occurrence given the fact that you get a feel for the true ebb and flow of your contracting, pricing, and procurement of the products, services, and technologies that your health system purchases on an ongoing basis. You know from true experience with your organization, contracting strategies you are deploying with your GPO, and the holes you see in your procurement that you already have a plan in plugging. This is great, but then you must trust but verify that all is well and nothing major is slipping through the cracks that is going to make you or your supply chain organization look bad. How do you do this? Benchmarking and key performance indicators (KPIs) are the simple answer.
Benchmarking Can Affirm or Challenge Your Thinking
Sometimes you have to trust your gut but other times there are great measures that you could put into place that will tell you exactly what you want to know and what you need to do. That is where benchmarking and KPIs come into play. They can affirm or challenge your existing thinking without making you look bad as long as you are performing the benchmarking. Plus, there are other areas that you should be aware of which we outline below that will reinforce your gut feeling and tell you things beyond that that may be vitally important in the short or long term success of your supply chain organization.
1. It is Better to Know Where You Stand Than to Not Know – It is great if you feel good about where you are at with your contracting, pricing, and rebates but you may still be unknowingly leaving money on the table. Why do that when you can know exactly where you stand by running a few benchmarks and KPIs which will give you the answers you are looking for? Your costs may also have nothing to do with price or contracting and be consumption and/or utilization related, and someone has to let those end departments know that they are overconsuming.
2. You May Be at Best Practice Levels Already – Recently, we had a client that was converting over a major product category which was used organization-wide in order to garner an additional 8% savings. Here is the rub; they were already 23% below the next best practice hospital in their cohort which meant they were the best by far. The bottom line is that they did not need to convert their category over to the new vendor and could have still stayed in compliance with their existing vendor, but they never realized this nor asked to see their KPIs.
Did you know that this happens every day, but organizations just don’t know what they don’t know and follow the lead of their GPOs sometimes? You really need to know when you are at best practice levels in any and all categories in order to prioritize what and where you work on your next contract or value analysis initiative and most importantly when to leave enough alone.
3. How Do You Get to the Next Level if You Don’t Know Where That Is? – We are all striving to take our organization to the next level of supply chain savings and performance excellence, but where exactly is that next level? The best way to find out would be to have an active and ongoing benchmarking and key performance indicator program in place covering all aspects of supply utilization, consumption, and inventory management. Then and only then will you be able to know where the next level of supply chain savings and excellence is which you can then plan for and work towards. Without this, it would be like shooting an arrow but not knowing what you are aiming for.
An Active Benchmarking/KPI Program is Worth Its Weight In Gold
There are many benefits to having an active and ongoing benchmarking/KPI program for your organization that will tell you much more about where you stand than any other tool or modality can. This is worth its weight in gold to you as you can not only find out where you are but also know where you need to be. Plus, it will save you so much time, resources, and money because it will give you a strategic laser focus that you never had previously. My best recommendation for you and your supply chain today? Start benchmarking now!
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