Price is Dead. We Now Need to Move to Savings Beyond Price™
We had an “aha” moment last week when one of our team members analyzed a large regional GPO’s savings for their members over a 12-month period. To his and my amazement, this mega regional GPO only saved 1.2% for their members. If you think about it, these savings don’t even cover the cost of inflation for their members, or in some situations don’t even cover their membership fee! That is why we are saying that price is dead and you need to adopt new value analysis rules, systems, and models for long-lasting supply chain double-digit savings performance. Otherwise, your price savings will continue to be a trickle for many years to come – and then stop altogether!
Raise Your Hand If Your Price Savings Was Greater Than 1.2% in 2016
If you experienced supply chain price savings greater than 1.2% (i.e., dividing all your price savings by your total supply chain spend) in 2016, we would like to hear from you ([email protected] ) because you are an endangered species.
You might not realize it but most of your colleagues aren’t even saving that much in any given year. It’s the new normal.
However, your senior management is expecting you to continue to save at a double-digit level for many years to come to enable them to pay for the operational expenses that increase every year. This goal is obtainable, but not if you are depending on your national and regional GPOs to fill the gap on these savings.
Value Analysis 2.0: New Rules, Systems, and Models for Long-Lasting Savings Performance
You might not realize It, but value analysis isn’t about GPO contracts, new product evaluations, and conversions, nor is it about standardization. To the contrary, it is all about performing a functional analysis on all your healthcare organization’s high-value new, proposed, and existing products, services, and technologies. These new value analysis rules, systems, and models are mission critical to generate new and better savings beyond price, which encompasses these four phases to root out all the waste and inefficiencies in your supply streams:
- Organize, classify, and normalize your data and then data mine for your best value analysis savings opportunities. Above all, base all your value analysis decision on facts, not opinions.
- Develop a multi-step value analysis system like our Value Analysis Funneling ™ Model to provide your value analysis team members with a repeatable and auditable training system to uncover the hidden savings in your supply streams.
- Deploy a Team-Based Project Management™ Model to increase your value analysis productivity as much as 10-fold. It will enable your value analysis team to work together for maximum results with a minimum time commitment.
- Measure, monitor, and control your supply chain expenses going forward. It’s not enough to maximize your savings, you must now certify that they are sticking going forward.
Value analysis is all about function and the search for lower cost alternatives that has nothing to do with price, negotiations, or standardization. That’s how it generates double-digit savings for you now and in the future. It’s a methodology that keeps on giving.