KPIs or key performance indicators are being widely accepted by our clients to help them reduce their supply chain expenses by millions of dollars for their healthcare organizations. However, there are still skeptics in our industry who are asking, do we really need them, or don’t we already have valid KPI’s? Here are three reasons observed by Pearl Ahu, CIO Performance Master, to help you decide.
3 Reasons Why You Need KPIs for Your Supply Chain Operations
1. KPIs influence management behavior as well as business culture. We are seeing that when a KPI is established for a category of purchase, (e.g., bone cement) and its utilization is reported monthly, it is reduced without any intervention. This is because this reporting puts it at the top of the mind of the manager responsible for its utilization in the operation room as well as changing its culture to proactively manage their costs.
2. KPIs are meant to improve or transform organizational performance. We all need to know where we stand with our supply chain operations to get better or keep from hitting a wall. With KPIs or an exact performance measurement to guide your decisions you will naturally improve your organizational performance. For instance, we just established KPIs for one of our client’s supply chain operations to determine if they have any major improvement and savings opportunities from supply and purchased services, pharmacy, and even staffing. We are just waiting for the feedback on this exercise to help their supply chain make improvements post pandemic. Otherwise, they would be flying blind!
3. KPIs are something you can act on to improve your performance. We have seen hundreds of supply chain reports showing variances at the 30,000-foot level (e.g., supply cost per net revenues) but they don’t isolate, quantify, and qualify the cost or outcome issue so that it is actionable. That’s not the case with historic, comparative, or year-over-year KPIs; they lead you directly to the solution of your quality, cost, or outcome problem you are experiencing. Like a universal problem of IV sets being replaced prematurely at a rate that isn’t medical indicted costing healthcare organizations millions of dollars a year.
Employ KPIs to Lead the Way
We are told that this is the most challenging year financially for most healthcare organizations. Can you think of a better time to improve your healthcare organization’s performance, finances, and outcomes by employing KPIs to lead the way? That’s why you need KPIs to help you make better decisions, change behaviors, and disrupt your organization’s “that’s the way we’ve always done it” thinking pattern.
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