We in the hospital supply chain business need to aggressively defend our supply expense cost structure, since cost is our enemy and we must always be on the attack. The primary reason for embracing this attitude is that there is always leakage and upward swings in your supply expenses that must be ratcheted down with a good offense to preserve a positive balance in your supply cost. I have found that hoping that this will happen naturally or by chance isn’t a strategy for success!
When I was a corporate supply chain manager of a large IDN, I received calls from my division CEOs either to congratulate me on lowering their supply expenses or to ask me why a particular cost account had increased unexpectedly. I knew I had to always be on the offensive to make sure that I was keeping my CEO’s supply expense budgets in balance, or they would call me on it!
Supply Savings Triangle
Since my natural inclination was to keep lowering my IDN’s supply expenses, these calls didn’t make me confident or faze me, but instead motivated me to do an even better job in the future. As such, we were one of the first IDNs in the nation to have our own GPO, system-wide value analysis program, and we started to focus on utilization. I like to call this approach, attacking the “Supply Savings Triangle” (i.e., price, standardization, and utilization) all at one time!
Mind you, this was when nobody was thinking about utilization management. But we were, since we understood that it didn’t matter if we had the best prices or had 97% standardization if the products, services, and technologies we were buying were misused, misapplied, misappropriated, or were a value mismatch. We wanted to do everything we possibly could to keep our supply costs in balance.
Fast forward to the 21st century, and this concept of focusing all of your efforts on the “Supply Savings Triangle” has become even more important than ever before. In fact, it is mission critical for healthcare organizations to have a full-court press on all their supply chain expenses, not just price and standardization.
New and Improved Hospital Supply Chain Expense Initiatives
That’s why I believe that the best defense is a good offense! This way you will never become complacent, comfortable, or satisfied with yesterday’s successes. Instead, you will forge ahead with new and even better supply chain expense initiatives, and I hope, with a renewed emphasis on utilization management where your big double-digit savings are just waiting to be harvested. Then you will have a real upper hand on all of your supply chain expenses, not just price and standardization.
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