June 16

Don’t Only Focus on Fixed Cost When Even Bigger Savings are Achievable in Your Variable Cost

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There is no supply chain professional that isn’t focused on controlling their supply chain costs through price, standardization, and rebates. But, did you know that there are even bigger savings to be found in your variable supply chain cost by attacking the waste and inefficiency in your supply streams? This is why shifting your focus from price to supply utilization management is mission critical for you to continue your double-digit supply chain savings now and in the future.

What Would You Do if You Ran Out of Price Savings Tomorrow?

This is a question you should ask yourself every day because it is becoming a reality for most healthcare organizations. Yes, you can squeeze a few more price dollars out of your fixed supply chain expenses with your national and regional GPO’s committed volume contracts. But, trust us that these savings aren’t going to make a dent in your healthcare organization’s bottom line. That’s why you must look to your supply chain expense’s variable cost to keep your savings machine humming.

Need Diagnostic Tests to Uncover Your Variable Cost Savings?

If my doctor were only interested in the diseases she could see and hear with her stethoscope, otoscope, and BP cuff, I might be dead in a week. That’s why she employs extensive diagnostic tests to determine my overall health. You need to do the same if you are to root out all waste and inefficiency in your supply streams.

For instance, you can’t see with the naked eye if your Oxisensors are being utilized optimally by your clinicians. You would need an Oxisensor diagnostic test to determine this fact. Likewise, you can’t determine if your cardiac catheter tray is cost effective without internal and external diagnostic tests.

Our point here is that you can’t determine if your products, services, and technologies are in utilization alignment without testing them with many different modalities.

Price and Utilization Savings are Now Friends

At a recent AHRMM’s Executive Thought Leaders Forum, participants emphatically stated, “Even with the lowest possible price, if utilization is inappropriate the cost will remain too high.” Supply chain leaders also noted that with commodities, there is a point at which the price is as low as it can possibly be, and they must look at reducing utilization to capitalize on further savings.

There is a new mandate for supply chain leaders: Price savings alone won’t lower your healthcare organization’s supply chain expenses. Only by attacking your price and utilization simultaneously can you truly reduce your supply chain costs to acceptable levels. This is the new reality for supply chain leaders!


Below are some similar articles that you may find interesting.

4 Approaches to Contain Your Supply Chain Expenses

3 Supply Chain Expense Optimization Secrets You Need to Improve Your Margins

3 Reasons Why Data-Based Decision Making is the Future of Supply Chain Expense Management


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Tags

cost, fixed cost, GPO, healthcare organization, hospital, IDN, savings, supply chain, supply chain costs, supply chain savings, utilization, utilization savings, variable cost


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