Albert Einstein once said that “Not everything that can be counted counts,” which is another way of saying to be careful what you count since it could be a waste of time. We see this in our value analysis analytics practice where we are asked to devise systems to count, classify, track and then measure items that have very little value, in our opinion, to a healthcare organization’s supply chain success, but are easy to count, like the number of new product requests approved or denied by a healthcare organization’s value analysis teams. A much better tactic is to only count and measure things that will identify problems, opportunities or produce profitable actions for your supply chain department. To get you started, here are four supply chain measurements that almost always lead to profitable action:
- Productivity of your staff per activity or function: No one can eyeball your staffing and tell you if you have too much or too little staff. That is why activity-based measurements of your staff’s activities or functions is the only way to know if you are staffed appropriately. Your healthcare organization may be measuring these activities or functions already. If not, you should consider measuring these activities or functions yourself.
- Utilization of your products, services and technologies: We continue to preach that this is where your biggest (7% to 15%) supply expense savings reside. If you aren’t continuously measuring this supply chain savings opportunity, you are missing millions in savings over the next few years.
- Inventory turns of all official and non-official inventories: You need to measure more than the inventories you are responsible for that I call official inventories. That’s because your healthcare organization’s non-official inventories (lab, interventional cardiology, emergency room, etc.) can amount to more than your official inventories.
- Net savings on your annual supply chain expense budget: Almost all supply chain departments report their supply chain expense savings monthly. However, a true measurement of your supply chain success is a term called “net savings” (annualized savings – annualized increases in your supply chain budget from approved new purchases = net savings). This should be the new standard at you healthcare supply chain organization.
As these measurements suggest, determining what to count and measure should be based on the profitable action it produces, not how easy it is to count. This is an important tenet, since it is very easy to count and measure things that don’t count.
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