June 25

Strategies to a Sustainable Healthcare Supply Chain Savings Pipeline


It is “Go Time” when it comes to taking your healthcare supply chain savings program to the next level of savings. Yes, we all have a few savings opportunities to fill our agendas with now. However, we also need savings opportunities next month, next quarter, and next year for our hospital, system, or IDN!

To this end, healthcare supply chain professionals need to have a sustainable pipeline of savings opportunities flowing at all times that will provide relief to our healthcare organization’s bottom line. Most hospitals’ bottom lines, as you know, have taken a major hit in these challenging economic times.

Create a Sustainable Healthcare Supply Chain Savings Pipeline

With this in mind, we thought you would be interested in knowing the following three big strategies to create a sustainable savings pipeline for your healthcare organization:

1. Buy or Build Systems that Deliver Savings Opportunities Without Fail: Let’s face it, you need to have a full pipeline, now and in the future, to deliver savings opportunities to your value analysis teams in order for them to achieve continuous savings.

For instance, if your value analysis team is studying a product with a $1,500 annual spend when they should be searching for $150,000 in savings opportunities, then I would say they are on the wrong track. That’s why you need a system to uncover your next level of savings. The best system we know of to do so is an activity-based costing system that can be visualized with a dashboard system.

Further, you need your system to deliver savings opportunities on-demand. As a CFO client said to me recently, as we reviewed his supply utilization dashboard, “I like having this system in place because it always tells me things that I was not even thinking about.” He says that he often gets busy and is pulled in many different directions, but he likes that his system is there 100% of the time and ready to deliver valuable supply chain expense savings opportunities on-demand.

2. Avoid One-Dimensional Thinking: What happens in the healthcare supply chain world is that we, as supply chain managers, tend to focus too much of our time on one or two areas of supply chain management and not enough on others. This is because we are proficient and comfortable in one or two of these hospital supply chain areas (e.g., price, standardization, contracts, utilization, or inventory management) and we tend to ignore savings opportunities in other major supply expense areas.

This reminds me of a large IDN that we were giving a presentation to who had a special relationship with their medical/surgical distributor. The distributor was providing this IDN with an inventory management system that they just loved. In our presentation on utilization management, the prospect related everything we were showing them back to this inventory management system and missed the point of our demonstration.

We could clearly see that this IDN was proficient in inventory management, but they still were not addressing all of their pricing, standardization, and utilization management strategies effectively. Their overconfidence in one area of their operations was causing them to leave big dollars on the table since they couldn’t see past their inventory proficiencies. The lesson here is that we need to broaden our scope when it comes to hospital supply chain savings and include all of the areas that would provide savings opportunities.

3. Enlist Your Staff in Frontline Savings Ideas: Just the other day, I stopped by my local hospital’s cafeteria while visiting a family member when I spied a special bulletin board that showed the results of a year-long “Supply Savings Employee Suggestion Program.” It listed all the savings opportunities achieved by the employees, who recommended the savings, and also the incentive bonus they received for their ideas.

To my surprise, there were over 50 savings ideas on the bulletin board. This was a big win for this healthcare organization! The bulletin board showed the top three recommendations which saved this hospital $135K, $78K, and $54K in annual savings and these employees received $1,000 bonuses for their suggestions.

My point here is, don’t ignore the value of an employee suggestion program, but make sure you plan and deploy it properly with your senior management team’s support. As you can see, it can deliver savings that you may never have thought were there in the first place. It’s like found money in your sofa or old pants pockets!

Time to Focus Our Healthcare Supply Chain Efforts

Simply put, it’s time that we focus our healthcare supply chain efforts on the development, enhancement, or refinement of our supply chain expense management systems to ensure that we are capturing all the supply expense savings opportunities that are available to our hospital, system, or IDN. You should be aware that without a rock-solid system in place to provide you with a sustainable savings pipeline, your saving machine will come to a screeching halt! Could you afford for this to happen?

Articles you may like:

Create a Value Analysis Program That Impacts Your Healthcare Organization’s Reimbursement, Delivers Even Greater Value, and Enhances Patient Care

Healthcare Supply Chain Leaders Aren’t Lone Rangers

Request Demo of SVAH’s Value Analysis and Utilization Tools


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