January 30

Consumption Management: Supply Chain Doesn’t Own this Problem but Can Help Uncover Big Savings

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“With a simple Consumption Management Program in place, you will have an ongoing program that will manage all of these cost and quality issues that have been slipping through the cracks for years.”

Supply Chain’s job is to get the right product, to the right place, at the right time and at the right price. Then their job is done, right? But what about consumption management? Who manages that? Well, it is not really managed per se, it is just consumed on the individual department level throughout the organization. Any given hospital could purchase 5,000 to 15,000 line items and health systems can be purchasing 20,000 to 50,000 line items, in which there could be a lot of waste that we are not looking after.

Plain and simple, consumption is the quantity of products that are used within the organization by the end customers. You must have great pricing but even if you have the best price your costs can still be high if you are using two or three of a product when you should only be using one. It just makes sense that we manage both sides of the cost equation with the price and consumption of the products we purchase every day.

Here are just a few examples of consumption issues:

  • Nurses choose the three port PICC line 90% of the time when only about 10% to 20% of this product should be used in ICU. Potential 70% waste factor due to feature-rich selections.
  • RF ablation instrument used in OR case; physician is using two when they should only be using one.
  • Nurses opening suture trays on the floor to get a pair of scissors when the tray should not have been consumed in the first place. This one has been happening forever.
  • Cylinder gas costs increase by 38% due to poor management of cylinders throughout the health system. Vendor chargebacks for missing and unreturned cylinders.

There are Big Savings Here to Take Credit for with No Ownership of the Problem

Without a doubt, Consumption Management needs to be led by Supply Chain. Why? Because there is no other department in the hospital/health system that is capable of tracking, alerting, and assisting clinical and non-clinical customers to eliminate the consumption management issues in their departments.

The big win for Supply Chain will be in the form of big savings which have been in decline since the maturity of group purchasing and contracting. I am sure most of you reading this have stumbled across major consumption issues while dealing with contracts and came out with a big win. One example is finding out that you are spending way too much on pulse oximeters and that the nurses are changing these out too often and costing you major money. This is not a Supply Chain problem, but it just makes sense that Supply Chain lets the end users know of the issue and use the vendors, value analysis teams, and Supply Chain staff to help them to fix the issues.

There is No Blame Game, Just Big Improvements

I cannot tell you how many times I see department heads and managers fight tooth and nail in order to disprove a major increase in their consumption of a product or service. Why do they do this? Because they are worried that they and their department will look bad in some way, shape, or form. They really don’t want to get into the use patterns of individual staff members and departments and would much rather Supply Chain just find a lower price instead. But in most cases, Supply Chain already has the best price in place and it is now up to the end users to self-correct their usage and waste patterns.

Don’t Underestimate the Power of Clinicians Self-Correcting

If you are new to Consumption Management, I would highly recommend that you consider using a patient volume centric reporting system that incorporates all of the various measures such as surgical cases, patient days, lab tests, etc., into the reporting. This will take out the biggest excuse for overconsumption and that is, “We were busier that month/quarter/year.” This then will leave the door open to either making contracting adjustments or working with the respective departments to self-correct their issues. Self-correcting is the best and easiest way to make savings happen but the end users first must know with certainty that they in fact need to self-correct within their department and/or procedural modality.

Baby Steps Towards Consumption Management Will Pay You Back with Big Savings

With a simple Consumption Management Program in place, you will have an ongoing program that will manage all of these cost and quality issues that have been slipping through the cracks for years. This may be hundreds of thousands or even millions of dollars for your hospital and/or health system which will be much needed at this time.


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Tags

consumption management, healthcare supply chain, Healthcare Value Analysis, hospital supply chain, Hospital Value Analysis, supply consumption, supply utilization


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