All healthcare supply chain/value analysis managers would like to think that they have driven out all unnecessary and unwanted costs in their supply streams with their cost containment strategies. However, SVAH’s extensive studies have shown that 1%, 2%, or 3% savings (total supply expenses/total annual savings) most healthcare organizations are experiencing are just the tip of the iceberg. The left behind savings or waste and inefficiency savings, that are invisible to the naked eye, are in the range of 7% to 15% of your total supply spend.
Why Good Enough Isn’t Good Enough
With very few exceptions, we have observed that most hospitals, systems, and IDNs have driven down their prices paid to rock bottom, have standardized on most of the commodities they purchase, and have pushed their rebates and ShareBacks to historical levels. Unfortunately, these successes have given supply chain/value analysis professionals the false security that they have done enough in their control to rein in their total supply chain costs. However, there is more to be accomplished.
Think of Your Supply Chain as a Bucket
Supply chain/value analysis managers can work extraordinarily hard to reduce their price, increase their standardization, grown their rebates and ShareBack every year, but still be losing millions of dollars a year because of waste and inefficiency in their supply streams. Think of your supply chain as a bucket that you fill to the rim with savings, but because of holes in your bucket you lose all those savings and millions more because you haven’t plugged the holes.
Case in point: We have documented at a community trauma center hospital that they were running $380K (annualized) over in their Oxisensor utilization, even though they had one of the most competitive prices in their region. So, their Oxisensor bucket was filled to the rim with big savings, but they were still losing $380K every year because of the misuse and misapplication of their Oxisensors.
My question for you is, can we continue to ignore these real, tangible, and quantifiable savings that are reducing our true savings yields each year? Or, should we plan a full out attack on our waste and inefficiencies in our supply chain?