I can never say this too many times: If you are depending on price and standardization to keep your supply chain savings alive over the next few years, think again. These savings aren’t going to be available to you in abundance. However, I have listed below the next wave of hospital supply chain savings opportunities that you should be aware of:
Hospital Supply Chain Savings Opportunities
Self-Distribution Organizations
I have been watching this trend for some time (borrowed from Walmart, McDonalds, Target, etc.). Cut out the middleman and buy direct from manufacturers and distribute your own supplies to your owners, divisions, or affiliates. It’s all based on economy of scale; if you can generate enough volume, you can chip away at your logistics cost. If you aren’t already an owner, division, or affiliate of one of these organizations, I would suggest that you either join one or develop a regional one with your peers since they do save dollars and make good sense.
Regional Group Purchasing Organizations
While the lifecycle savings of these organizations is questionable, in the short-term they can save you 3% to 5% on selected commodities. Again, if you aren’t a member of a regional GPO, it makes sense to join one – now!
Shared Services Organizations
This isn’t a new idea, but can be very effective in lowering your healthcare organization’s operating costs. Some of the services that can be provided by these organizations are: laundry/linen, custom pack manufacturing, records management, pharmacological repackaging, surgical instrument repair, cook/chill food preparation, bio-medical engineering, etc. You can either start your own shared service organization with your peers or join one in your region that is already successful.
Supply Utilization Management
I can’t fail to mention that even these three organizations, mentioned above, are adding supply utilization management to their portfolio of services. This is because they know that their work isn’t done for their owners, divisions, affiliates, and members until they have driven every last dollar out of all their supply chain expenses. Is this a cost driver you are targeting, too?
In the final analysis, healthcare organizations need to generate even more savings than ever before to reduce their supply chain expenses. To try to do so as a standalone hospital, or even a small system, and not take advantage of the economy of scale brought about by self-distribution, regional GPOs, and shared services organizations is a mistake that should be avoided.
Tip for Healthcare Supply Chain Professionals
There are a few hospital supply chain service organizations that are organized to provide all of the above services I just talked about in tandem. If you have one of these super shared services organizations in your region, we would suggest that you investigate the opportunity to join them. It is our opinion that this is the only way for supply chain professionals to truly bend the curve in their healthcare supply chain expenses. Half measures won’t get the job done!
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