A survey by Sage Growth Partners reveals that nearly all hospital leaders believe that supply chain optimization can improve their healthcare organization’s margins by as much as 1% to 3%, which is consistent with my own firm’s research. By optimization we mean the act of maintaining your supply chain costs at the lowest levels possible without compromising your healthcare organization’s quality. The secret to driving down your supply chain cost to the lowest level possible, and keeping it there, is that you need to master these three supply chain domains:
1. Measurement: A measurement is a result, usually expressed in numbers, of a calculation to ascertain the financial health of your supply chain operations. These measurements (i.e., analytics, historical and peer benchmarks) will determine if you are obtaining the best prices for your size healthcare organization, if you are standardized to the enth degree, and how well you are eliminating utilization misalignments. Please note that without measurement you don’t know what you don’t know. Trust me when I say, this never ends well!
2. Monitoring: Monitoring of supply chain expenses is the systematic process of tracking favorable and unfavorable data and analytical trends, patterns, and anomalies in your healthcare organization’s supply streams. This can’t be accomplished with spreadsheets since this data is too huge, cumbersome, and dynamic to be monitored effectively. It’s been our clients’ experience that only technology can help you monitor your supply chain expenses successfully.
3. Controlling: This is a management process, delegated to an individual or value analysis team, that compares actual supply chain expense management performance against key performance indicators to ensure that your annual savings goals and objectives are on target, on plan, and on budget for any given period. If not, you will need an intervention to get them back on track.
Once you have completed these three domains, the circle will be closed on the optimization of your supply chain expenses. As documented in Sage Growth Partners’ survey, by sticking to this methodology you will organically increase your healthcare organization’s margin by 1% to 3%.