September 1

Targeting Supply Chain Expense Waste and Inefficiency in a Turbulent Economy


Given the current economic challenges that most healthcare organizations are facing, there is a renewed interest in targeting supply chain expense waste and inefficiency as hospitals, systems, and IDNs look for ways to balance their budgets. The reason for this uptick in exploring supply chain expense waste and inefficiency is that overall price savings have dropped to the lowest level (0.5% to 1% of total annualized supply budgets) ever recorded.  Addressing this new opportunity to save 7% to 15% on your total supply budget means focusing on four critical success factors as follows:

1. Utilization Analytics: The extensive use of data, statistical and quantitative analysis, explanatory and predictive models, and fact-based management is the driver1 for all supply utilization management decisions. This explanation is of upmost importance since you can’t see your clinical supply utilization misalignments (CSUM) with the naked eye. Without a CSUM analytics system to identify your CSUM, you will just nibble around the edges of your savings.

2. Utilization Benchmarks: Cohort benchmarks are necessary to search for CSUM best practices that will lead to superior performance for your healthcare organization. For instance, a few years back I benchmarked a hospital system’s forms utilization only to find, to my surprise, that they had the lowest benchmarks in their cohort that I had ever seen. Upon researching why this was occurring, I discovered that the hospital system was, by design, almost paperless, thereby, helping me to understand why their cost per patient day was so low. This information gave my client a goal to shoot for with their own forms’ utilization efforts.

3. Data Visualization: This is important because of how the human brain processes information. That’s why using visual representations, such as charts or graphs, allows the understanding of complex data to be explained with ease or simplicity. We have found that when our clients think about their CSUM data visually it can be an “aha” moment for them, otherwise, they will doubt that they are different from their peers and resist any change whatsoever.

4. Monitor and Control: Once you have eliminated your CSUMs you then must monitor and control those gains so they stick. This occurs with our clients about 20% of the time. That’s why monitoring and controlling your CSUM is an ongoing journey of vigilance, persistence, and patience.

Targeting your supply chain expense waste and inefficiency is job #1 for supply chain professionals in this turbulent economy, since price and standardization savings are slowly but surely disappearing. You might say there is a new mandate for supply chain professionals. That is to maintain price parity with your GPO contracts, but double-down on your CSUM where your double-digit supply chain expense savings reside. Otherwise, you will soon find that you are lagging behind your peers’ savings initiatives.

P.S. (Limited Time Offer) If you want to know more about Clinical Supply Utilization Management, may I suggest that you download a FREE copy of the 2nd edition of our book, “Supply Utilization Management: The Future of Supply Chain Expense Management” at

1. Thomas Davenport, Competing on Analytics

Below are some similar articles that you may find interesting.

7 Types of Healthcare Clinical Supply Utilization Misalignments You Can No Longer Ignore

3 High-Impact Savings Areas to Increase Your Hospital, System, or IDN’s Bottom Line

Reduce, Reuse, and Recycle to Strengthen Your Healthcare Organization’s Financials

Request Demo of SVAH’s VA and Utilization Tools


healthcare, healthcare organizations, hospitals, IDNs, supply chain, supply chain expense, supply chain management, supply utilization, utilization management

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