Don’t Confuse Commodity Teams with Value Analysis Teams

We see there is a trend in healthcare supply chain management circles of forming commodity teams and then calling them value analysis teams which is a misnomer. Both teams have their purpose but shouldn’t be confused if you want to optimize your savings. Here’s how they are different.

Commodity Team Vs. Value Analysis Teams

By definition, a commodity team is a cross-functional team focused on improving the price, standardization, and sourcing of a specific commodity group or product line, such as, surgical services, cardiovascular, radiology, etc. These teams certainly can and do save money, but only superficially; not below the waterline where your healthcare organization’s biggest supply chain expense savings reside. Traditionally, these commodity teams prioritize, evaluate, and then approve group purchasing contracts for their healthcare organization on an ongoing basis.

On the contrary, value analysis teams are a heterogeneous group of directors, managers, and specialists whose job is to functionally analyze what you are buying now. Then, recommend lower cost alternative products, services, and technologies that will meet your customers’ requirements reliably. An example of a value analysis project would be searching for a lower cost alternative (exact features to requirements) on a $2.20 securement device with a function of “secure an I.V. catheter”. This VA project could bring about double-digit savings, which won’t be replicated with a group purchasing contract replacing equals to equals at a matching or lower price.

Look to a New Classification for a Value Analysis Team

A new value analysis team you might want to think about establishing to save even more money is a Utilization Management Value Analysis Team of directors, managers, and specialists whose role is to manage, monitor, and control the wasteful and inefficient consumption, misuse, misapplication, and value mismatches that regularly creep into your healthcare organization’s supply streams. An example of a utilization team’s project would be to investigate why your hospital, system, or IDN’s oxygen sensors’ utilization has increased by 113% in the last two quarters when your patient census has decreased by 4% in the same period. The answer to this puzzle could save your healthcare organization hundreds of thousands of dollars annually.

Why All Three Value Analysis Teams Are Important

Teams are important to your supply chain success to obtain buy-in, feedback, and insight into how things work at your healthcare organization. Yet, you must understand the role of each of the supply chain teams you are employing to get the most (time, energy, and commitment) out of them. Therefore, don’t confuse the strengths and weaknesses of each of these three different VA teams (i.e., commodity, value analysis, and utilization management teams), since they all have a role to play in the maturity of your supply chain operations. Further, you could train your value analysis teams to focus on price, standardization, and utilization savings all at one time. Misunderstanding their role in your supply chain teams can slow growth and maturity of your supply chain expense management.