April 30

Three Things to Do Immediately to Significantly Improve Your Purchased Service Contract Management


Purchased service management (PSM) is a hot topic today in supply chain/value analysis circles. Yet, are you doing everything you can to increase your purchased service controls, manage your outliers, and increase your savings yield with your multi-million-dollar purchased service (PS) portfolio? If not, here are three things to do immediately to significantly improve your purchased service contract management:

1. Automation of Your PS Contracts: If you are still utilizing static spreadsheets to manage your PS contracts, you are missing the opportunity to organize, speed up, and reinvent your PSM process by 10-fold. For instance, you can tag your contracts by category, demographics, location, and dates of renewal so you can bid common contracts together. This is very difficult to accomplish with a spreadsheet.

2. Benchmarking Your PS Contracts: How do you know if you have obtained the best PS contract price? The answer it that you need to have a comparison or benchmark from a peer hospital, system, or IDN. Benchmarking is how you obtain the best price that ensures that the quotations you receive are at the lowest price possible.

3. Identifying Utilization Misalignments In Your PS Contract’s Portfolio: Believe it or not, price is just one small element of your total cost on your PS contract equation. If your utilization (or in-use cost) on your PS contracts are higher than your peers based on your own historical standards or peer benchmarks, you could be spending hundreds of thousands or even millions annually unnecessarily even if you have the lower contract prices in your region.

Purchased service management is really a new supply chain management discipline that needs to be mastered like any other commodity purchase. Still, PS are different from the run-of-the mill commodity purchases and need to be treated as such. These three things (listed above) should go a long way towards significantly improving your PSM if you are looking to master this new discipline.

If you are interested in mastering purchased service management, you might be interested in our automated benchmarking and utilization Purchased Service Advantage System that can speed up your PSM process.


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