The Institute for Supply Management Research has recently reported that supply chain managers are finding that their existing technologies may not be meeting their sophisticated analytics needs. Is this your situation, too?
What Is Supply Chain Expense Analytics?
Supply chain expense analytics is the art and science of measuring trends, patterns, anomalies, and variations in your supply chain expenses to quickly identify savings opportunities. Thomas H. Davenport, author of Competing on Analytics, describes analytics as “the extensive use of data, statistical and quantitative analysis, explanatory and predictive models, and fact-based management to drive decisions and actions.”
What Davenport is saying, in layman’s terms, is that if you organize your supply chain expenses by their unique supply categories and then measure these same expenses by their activity-based performance against your own historical standards and that of your peers, your savings opportunities will quickly appear before your eyes.
For example, we identified with our Utilizer® Dashboard (which does all the analytics work for our clients) that one of our client’s transcription service utilization was $1.64 higher than their peers’, or a $211,888 annualized savings opportunity. When our client investigated this anomaly in their transcription purchase service spending, they discovered that they were spending too much on their fragmented and decentralized outsourced transcription services. They also decided, after a thorough analysis of their hospital-wide transcription service, to outsource all of their transcription service functions (internal and external). This resulted in an additional $66,999 in savings for a total savings of $278,887. Our point here is that these huge savings would never have been identified if they did not use our leading-edge analytics tool to uncover them.
Why Don’t We Have These Leading-Edge Tools?
We have observed three reasons why we as a profession do not have these sophisticated tools.
The first is that we think that our current tools (e.g., databases, databanks, and spreadsheets) are providing us with the comprehensive analytics that we need to be successful in the new healthcare economy we live and work in. Unfortunately, most analytics tools are not combining numerous discovery techniques to seek out the correct decisions and actions to identify and implement our next savings opportunities – beyond price and standardization.
The second is that we don’t want to ask our management for the investment to procure the right analytical tools. A new CAPS Research report states that your supply chain returns on average $6.77 to your healthcare organization for every dollar invested. This is an important metric to cite to your boss when you are asking for an increase (especially for new technology) in your healthcare supply chain operating expenses.
The third reason is that we are simply unaware that our analytics aren’t where they need to be. Here’s a test that might help you raise your consciousness on this topic. If you cannot identify ALL…YES ALL, of your utilization, purchase services, and value mismatches in your supply streams with your current analytics tools, then you are falling behind the curve on this modality.
What Do We Need to Remedy This Situation?
As we have suggested, if your analytics tools aren’t sophisticated enough to search out your hidden supply expense savings opportunities then you need to upgrade them so that they can advance your supply chain expense management to the next level of performance.