It is the nature of supply chain professionals to always to be reviewing, revising, and rethinking how they are doing things so their supply chain operations are always humming. But when do you know for sure it is time to rethink your supply chain expense management and control strategies, tactics, and techniques?
5 Signs It’s Time to Rethink Your Supply Chain Expense Management
Here are five signs it’s time to rethink your supply chain expense management and control strategies, tactics, and techniques before they become entirely outmoded, overused, or ineffective:
- Your GPO savings are like drips from a leaky faucet.
- You are just meeting, not exceeding, your annual savings goals.
- It’s getting harder and harder to find standardization opportunities.
- You changed your GPO, but you are still running out of savings.
- Your regional GPO savings are just not keeping your head above water.
Instead of losing sleep at night worrying because these five signs are what’s happening to you too, it’s now time to rethink your savings game. The best way to do so is to look at the numbers.
Look at Your Numbers; They Will Tell the Story
If your price related savings are only generating 1%, 2%, or 3% (total supply expense/total savings) in new savings annually, then you know you have hit the wall on savings, especially since inflation alone was 2.07% in 2016 and that diluted your savings. Therefore, you must rethink your savings strategies, tactics, and techniques to become more cost effective.
3 Areas to Focus on in 2017 to Rekindle Your Savings Machine
To rekindle your savings machine so that you are hitting double-digit yields again, we would recommend you focus on these three ready-to-be-harvested areas:
- Standardization Compliance: We recently performed a standardization analysis for one of our clients and uncovered that fact that 12% of the commodities they were purchasing were not standardized. Chances are this is your situation, too.
- Utilization Misalignments (UM): We know that unless your healthcare organization is employing Clinical Supply Utilization Management software to identify all your utilization misalignments, you will lose the opportunity to save 7% to 15% on your total supply budget this year. Envision continuously feeding your savings machine versus just stumbling upon savings from time to time.
- Purchase Service Contracts: If you aren’t deeply involved in vetting all your hospital, system, or IDN’s purchase service contracts, you are missing 11% to 18% in new savings right off the top.
Although the management and control of the prices paid for the commodities that you are purchasing will always be front and center in a supply chain operation, these three additional recurring savings opportunities must be at the top of the mind of all supply chain professionals just to keep pace with inflation, which is predicted to be 2.5% in 2017. That’s why doing nothing about your supply chain expenses isn’t an option in 2017!