Supply chain professionals should know by now that managing and controlling their purchase service cost is a best practice. But did you know that your purchase service (PS) acquisition cost is only the tip of the iceberg? Yes, that’s right. 80% of your purchase service costs is beneath the water line beyond price. Here’s four reasons why this is happening:
- We rarely benchmark our purchase service in-use cost: We know that most supply chain professionals benchmark their prices for their PS contracts, yet, don’t measure their PS total life cycle cost.This can render them an additional 11% to 18% in savings.
- We are looking for quick fixes to our PS contract’s cost: Once we discover a lower price fora PS contract, our search for lower cost alternatives ends. For instance, maybe the service, like reprocessing of BP cuffs, is less expensive to bring back in-house or you could reprocess even more for greater value.
- We aren’t validating our PS savings on a quarterly basis: You might think you saved eight percent on your new linen/laundry contract, but when you validate it you discover you are saving 12% annually. This happens because things change, policies change and people change over time and must be adjusted for in your savings calculations.
- We aren’t targeting waste and inefficiencies in our contracts: With our fixation on price, we ignore even bigger savings by eliminating waste and inefficiencies in our current PS contracts. For example, do we need after hour service in our outsourced biomedical contracts or can our biomedical department take the “first call”to resolve the issue to eliminate unnecessary after hour fees.
Purchase service contracts are different from your supply contracts. In that they are complex, multifaceted and prone to obfuscation. Yet, the rewards for diving deep into your PS contracts as we did above will yield savings much greater than your supply contracts. By the way,your GPO contracts are just the starting point for negotiations on your PS contracts, because no PS contract is or, should be, the same for all customers.
Are you looking to raise the bar with simple and straight forward tools and systems? Why not view a demonstration of SVAH Solutions VA and Utilization Management Tools today. The demonstration is no cost and no obligation but the information is priceless!