January 21

5 Ways to Save Big on Your Supply Chain Expenses in 2020

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If you are still searching for more big supply chain expense savings ideas for 2020, you have come to the right place. Here are five savings ideas that should be on the top of your list for big savings this calendar year:

1. Attack Your Utilization Misalignments (or wasteful and inefficient consumption, misuse, misapplication, and value mismatches in your supply streams): These hidden supply chain costs, in the range of 5% to 17%, are becoming even bigger every year now that most healthcare organizations have joined systems, IDNs, or Alliances. This is because wasteful and inefficient supply chain practices are obscured from your view due to the huge volume of purchases being made every day, week, month, and year by your healthcare organization. Thereby, cancelling out many big savings gains you’ve achieved in any given year. Don’t let this happen to you.

2. Manage, Monitor, and Control Your Purchased Service Contracts: Purchased service contracts are the #1 least controlled supply chain expense at most healthcare organizations. This is because too many supply chain professionals don’t think it’s their job (or it has not been designated to them) to manage, monitor, and control them. Thus, delegating these important tasks, by default, to their department heads and managers. Why not take on this responsibility in 2020 to generate 11% to 18% in additional savings?

3. Optimize Your Standardization Opportunities: Standardization is more than standardizing by brand name or manufacturer. To optimize your standardization by five, eight, or even 12% more, you need to standardize based on your “best value” products, services, and technologies utilizing Activity-Based Costing methodologies to identify them. This way you can truly have the lowest supply chain expenses without compromising quality.

4. Redirect Your Value Analysis Savings Initiatives: We estimate that 86% of most hospital, system, and IDN’s value analysis reported savings are generated from their new or renewal group purchasing contracts. Our estimates show the net effect of these GPO savings to be a 1% to 3% reduction in your supply chain budget. A better best practice would be to have your value analysis teams also focus on the “Functional Analysis” of the products, services, and technologies your healthcare organization is buying through your GPOs. This one change in your value analysis protocols can save you an additional 3% to 5% annually.

5. Validate Your VA & Contract Savings Projections: It is our belief that a savings hasn’t happened until it is validated. This validation process is important since 23% to 46% of the time, changes (i.e., people, polices, census, etc.) over the term of a contract cause you to understate your actual realized savings. There again, you need to validate your contract savings, at least quarterly, to ensure you are reporting the accurate savings totals to your senior management. Thus, creating an immediate bump to your actual savings projections.

I’m sure you are finding each year that it is getting harder and harder to uncover new supply chain expense savings. Even your GPOs are scratching to find new contract savings for you! To reverse this downward trend in savings, we council that you search for savings beyond price like the five ideas that we recommend described herein. Remember, supply chain savings isn’t about price at the pump any longer, but reducing your product, service, or technology’s lifecycle cost.

Below are some similar articles that you may find interesting.

A Back to Basics Approach to Big Supply Chain Double-Digit Savings Results

Supply Utilization Cycle Management Essentials

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contract savings, healthcare, healthcare organization, hosptial, IDN, purchased service contracts, purchased services, save, savings ideas, standardization, standardization opportunities, supply chain, supply chain costs, supply chain expense savings, supply chain expenses, supply chain savings, utilization, value analysis


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