September 10

Building Your Hospital’s Supply Chain Infrastructure to Save Big


As you know, it takes a solid foundation to build a strong and lasting building or structure like the Taj Mahal in India, Eiffel Tower in Paris, or the Chrysler building in New York. What you might not be aware of is that it takes the same unique architecture, perseverance, and creativity when you are building your hospital’s supply chain infrastructure to save big if you want it to be built to last.

The secret to long-lasting success in hospital supply chain expense management is that you have a structural design that incorporates these four elements:

1. Price Congruency: As I’m sure you realize, price is just one component of supply expense management, but is the basic foundation of all other savings techniques. Therefore, you must continuously test the marketplace to ensure that you are receiving the best price, but you also need to create a competitive environment where price is king. No supplier or GPO should be awarded a new contract for any reason other than they are giving you the best value (i.e., quality, service, and price). Once your vendors realize that relationships are tangential to this formula for success, your pricing will be dramatically reduced due to their fear of loss of business. This isn’t a theory, but a fact!

2. Value Analysis Efficiency: We have observed hundreds of hospital value analysis teams in action over the last 34 years and have concluded that most are lacking in efficiency (i.e., wasting time, energy, and effort) in their teamwork. Conversely, we have encouraged, promoted, and witnessed that value analysis teams that follow the Team-Based Project Management Model™ are immediately more effective, productive, and timely in their teamwork than unstructured value analysis teams. We would suggest that you consider this new team model for maximum efficiency and results! 

3. Utilization Fundamentals: If your hospital, system, or IDN isn’t focused on savings beyond price or utilization misalignments (wasteful and inefficient consumption, misuse, misapplication, and value mismatches) in your supply streams, then your job as a supply chain professional is only half-done! This is a critical piece of your supply chain expense infrastructure; driving out the last dollars in your supply chain expenses by as much as 7% to 15%. Don’t miss this important building block in your supply expense substructure! 

4. Compliance Integrity: We see compliance as the underpinnings of any hospital, system, or IDN’s supply expense infrastructure because without conformance to requirements, all of your expense management work is wasted. We see this occurring all the time, where a hospital thought they made a change in price, standardization, or utilization, but it never happened due to miscommunication, misunderstanding, or ineptitude. Don’t ignore this critical rung in your supply expense infrastructure or your hard work will go unheralded! 

To some, healthcare supply chain expense management can seem easy and intuitive. However, don’t let this attitude permeate your supply chain organization, since expense management is truly an art and a science that begins and ends with a supply chain infrastructure that is built to last. Remember: There are no shortcuts in the supply chain business if you want to win in the supply chain game! 

Articles you may like:

The Three Building Blocks of World-Class Healthcare Supply Chain Expense Management to Save More in Less Time

Circle of Confluence Strategy Reduces Clinicians’ Fear of Change

Does Your Hospital’s Culture Matter in Cost Management?

Request Demo of SVAH’s Value Analysis and Utilization Tools


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