Fail Often to Quickly Succeed!
At our CVAL Training Course last week one of my students, a supply chain operation’s manager for a large system in the Mid-West, told me that he goes out of his way to let his value team members know that it is OK to stumble, falter or even fail on the projects that they are working on given that it will lead to even more successes more often and quicker than ever before.
I was very impressed with this operation manager’s attitude toward failure since it is one of the critical success factors in trying, evaluating, experimenting, and adopting or discarding products, services and technologies that you are investigating. More importantly, “rapid decision(s) and swift follow-through are essential to keeping an organization innovative” according to Dan Quinn, CEO of Rath & Strong Management Consulting.
Unfortunately, too many healthcare organizations espouse “finger pointing” as their predominant management style which only stifles innovation, instead of encouraging rapid decision making. It should be your goal therefore, to encourage your project managers to “fail often to quickly succeed”, even if your management is preoccupied with the blame game.
As Thomas Edison once said about inventing the light bulb, “I haven’t failed; I just found 10,000 ways how not to make a light bulb”. If Thomas Edison can fail 10,000 times before he succeeded in making a workable light bulb, then I think that your project managers should be able to fail often and quickly while on their way to million dollar savings success.
The Supply Chain Energy Predicament!
I know that we are all feeling the pain at the gas pump. I just spent $74.41 today to fill up my own SUV. That’s more than I used to pay every two weeks — just a few months ago. But this isn’t the worst effect of the energy predicament we will be facing as supply chain professionals and as consumers over the next few decades. Yes, I said decades!
The reality is that a healthcare organization’s consumption of petroleum-based products, from needles and syringes to plastic bags, represents 86% of everything you buy. This figure doesn’t even factor in the higher energy cost your hospital will be paying to heat, light and cool your buildings and run your equipment. I can’t think of another industry that has this high an energy footprint. Can you?
What can we do about it? First, we must realize that your manufactures and suppliers won’t be able to hold their prices to you beyond their current GPO or local contract obligations. This could mean a 6%, 8%, 12% or more spikes in your prices, over the next 12 months. You then need to prepare your CFO for this eventuality by providing him or her with your estimated price increases in each commodity group you buy. This way he or she can plan ahead for this contingency.
Next, you will need to vigorously attack your utilization misalignments, because your CFO will desperately need these savings ($11,000 to $30,000 per occupied bed) to offset the price increases you will be experiencing over the next few years.
Lastly, you’ll need to re-specify all of your products, services and technologies you buy to find lower cost alternatives, since this is the ONLY way you will be able lower the cost of the commodities you are buying today.
What I’m suggesting herein will be like climbing a mountain for you, but I see no other choice for healthcare organizations if they want to survive in this energy predicament we find ourselves in now.
Don’t wait to put these recommendations in effect, given that what I have described to you is a “perfect storm” that could sweep your hospital away in these turbulent times. It also could be a very rewarding time for supply chain managers who want to sit elbow to elbow with their management team to solve this problem, and at the same time, gain tremendous recognition and gratitude by doing so!
Your Partner In Savings Beyond Price™,
Bob Yokl
Robert T Yokl
Chief Value Strategist
Strategic Value Analysis® In Healthcare
P.S. You heard my predictions about the future of supply chain management in this week’s column, but did you know that we could make your life easier in these turbulent times if you have our “Utilizer™ Dashboard” to pinpoint your savings opportunities. Learn more here!
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LEAN Six Sigma: The Future is Now!
I had an electronic interview last week with Rick Dana Barlow Senior Editor of Hospital Purchasing News, for a future article on LEAN Six Sigma. This HPN interview got me thinking about how important it is for supply chain professionals to get on the LEAN Six Sigma train to meet their huge challenges over the next decade. Here are some of the ideas I spoke about in my HPN interview that I think you will find of interest.
First of all, Lean Management and Six Sigma are two different, but complementary methodologies, linked together into a unifying process called LEAN Six Sigma. LEAN Six Sigma has helped thousands of companies and hundreds of healthcare organizations dramatically improve their quality and increase their bottom line. What makes Lean management and Six Sigma different from TQM/CQI is their highly disciplined approach, their focus on waste and inefficiencies in the supply chain, speed and reducing the wide variances in products, services and processes employed and then controlling them – forevermore!
The healthcare supply chains are an ideal application for the Lean management or Six Sigma principles because they are transaction-based functions. For example, one big lesson we have learned from Toyota, the creators of Lean Management, is that purchasing departments can have as much as 50% non-value-added activities (i.e. activities customers wouldn’t pay for if they knew about them) that can be reduced by as much as a third by employing the Lean Management methodology. In this age of doing more with less we in supply chain management need to embrace these proven concepts so that we can optimize our resources just to keep pace with the changing healthcare marketplace.
Just as important, Lean Management and Six Sigma offers supply chain managers a disciplined, standardized, repeatable, and measurable system to reduce their cost and improve their quality. Its tenets can be applied to any initiative that a supply chain manager is asked to undertake (inventory management, PPIs, standardization, utilization, etc.) These concepts are really a magic bullet for supply chain managers to have even faster, better and more consistent supply chain operations.
I believe that the reason that more supply chain managers haven’t adopted these concepts is their belief that it will take too much of their time for them to learn, manage and sustain these new ways of doing things. In reality these concepts will actually save thousands of hours of year in reduced time, effort and expenses for supply chain managers. Education is the answer to moving material managers from a passive to an active role in adopting these new ways to managing their complex multi-million dollar supply chains.
That’s it for the short excerpt from my HPN interview, but it shouldn’t be the end of our dialog on this important topic. I would like to hear your ideas on this subject matter as well so we can get all supply chain professionals on the LEAN Six Sigma train.
How Are You Selecting Your Value Analysis Projects?
First of all, don’t confuse new or renewal GPO contracts as being value analysis projects, because they are not. This is contract management in its purest sense, which is a whole other discipline that has its own rules and models.
What I’m talking about here is the way in which you selecting your VA projects, which can unearth millions of dollars of savings in your value streams. For the best results, you should establish criteria for the selection of your VA projects. Here are five criteria I would suggest you start with:
1. Dollar Threshold: No VA project should be undertaken on a product, service or technology that has less than a $25,000 annual spend. The reason: Your ROI would be very small, if at all!
2. Projected Timeline: If your VA project will take more than 90-days to complete it might be better to break the project into smaller projects. Projects that have long timelines tend to go off track. Keep your projects in bit size pieces!
3. Probability of Success: If you only have a 50% probability of success in implementing a project (e.g. orthopedic implant study) then delay the project until you have an 80% success factor.
4. Project Alignment: If your VA project is not supported by your management then I would delay it for another day. Why fight city hall – you rarely win!
5. Solution Clarity: If you already know the solution to a problem (e.g. defective material) then don’t initiate a VA project — just fix the problem. It will save you a lot of time and effort by doing so.
These are just a few ideas to get you on the road to selecting the best VA Projects using criteria vs. gut feel with the greatest possible ROIs.
Your Partner In Innovative Savings,
Bob Yokl
Robert T Yokl
Chief Value Strategist
Strategic Value Analysis® In Healthcare
P.S. My staff thinks I’m crazy to offer our e-newsletter subscribers a 30-day “test drive” on our Utilizer™ Dashboard and you only pay if it works! But I’m so convinced that once you try it you won’t want to live without it that I have turned a deaf ear to my staff’s objections to bring you this outrageous “pay if it works” guarantee. Email me to learn more about this special offer - bobpres@strategicva.com
P.P.S. Don’t forget to check out my new blog article “A Lean Way of Thinking! This will give you a new way of thinking about your workload.
A Lean Way of Thinking!
Doing less with more is a mantra in healthcare organizations today. Everyone is scrambling to get their routine, but important work done, while trying to find time for those special projects that seem to be coming up more frequently than ever before.
Supply chain professionals are caught up in this whirlwind of activity too and are having a hard time coming up for air. Instead of worrying about it, which is a waste of your imagination, I would suggest supply chain professionals embrace “a lean way of thinking” so that you can find time for those things that are really important to get done.
When I was a material manager for four hospitals and one system, over my long career, I never ever had enough staff, sufficient money in my budget or the technology to get everything done that needed to be done. But I did have “a lean way of thinking” that I call how thinking vs. what if thinking that led me to design new ways of doing things that reduced my workload 10-fold.
For example, I designed a “Debit Memo” that attached to my vendor’s invoice that authorized my payable’s department to deduct or adjust a vendor’s invoice’ for price discrepancy, missed discounts, freight charges, etc. that didn’t agree with my purchasing order. This tactic saved me and my hospital’s payable’s department hundreds of hours a year of haggling with vendors or waiting for their credits. Yes, sometimes we had to credit the vendor back for some of these debits, but this was a rare occasion because my PO was law. Case Closed!
The point here is that this is just one of my scores of how thinking ideas that enabled me to dig out of the holes I always inherited when I took on a new job as a material manager. By the time I left a hospital or system I had their operations humming with my “lean way of thinking”.
You can do the same thing at your healthcare organization by thinking about how you can improve your supply chain operations without spending any money or adding any staff. It’s a fun game you can win!
Finally, once you get the knack of how thinking you will be stunned at how many new and better innovations you can bring about in your supply chain. I’ve done it hundreds of times and I know you can do it too.
How to Save More in Less Time!
I can’t think of anyone in supply chain management who doesn’t want to save more in less time. However, this isn’t going to happen with more GPO contracts, more standardization, more capitation or even more custom contracts, since this ripe fruit has almost been picked clean in your vineyard.
This is just churning the same old savings, over and over again, without having any real effect on your hospital’s bottom line, since inflation (3.4% annually) has been eating into all of your so-called savings for years. The future of supply chain expense management isn’t in the old ways of doing things, but instead is all about utilization management.
This is where you will achieve double-digit savings (26% on average) on just about any utilization project that you decide to attack. More importantly, it will require less time than any of the above strategies, tactics and techniques, I just mentioned, to reduce your supply expenses!
So if you aren’t on the utilization management train already, may I suggest that you start thinking beyond price by digging deeper and broader in your supply chain to identify and remove the wasteful and inefficient consumption, misuse, misapplication and mismatches in your value streams.
Then, and only then, will you save more in less time which will be sustainable over the long-term.
Your Partner In Innovative Savings,
Bob Yokl
Robert T Yokl
Chief Value Strategist
Strategic Value Analysis® In Healthcare
P.S. Would it be worth .82 cents to have ALL of the resources you required to be wildly successful with your hospital or system’s supply value analysis program? Well this isn’t a fantasy, but a reality with our innovative Value Analysis Resource Web. Check it out for yourself at www.strategicva.com/vaweb.htm. i PROMISE You — YOU won’t be disappointed!
P.P.S. Don’t forget to check out my new blog article “Stop the Madness with Your GPO Contracts”. This will give you some ideas on how to manage this important chore more effectively.
Stop the Madness with Your GPO Contracts
I have been told by value analysis managers throughout the country that they spend 96% of their time evaluating new or renewal GPO contracts, which isn’t value analysis at all. When I tell them that there is only 1%, 2% or 3% savings to be achieved with their GPO contracts and, on average, 26% to be saved on any value analysis project they conduct, they soon understand that they are spending their time on the wrong side of the supply chain equation – price!
The next question I’m always asked by value analysis managers is, “How do I STOP THE MADNESS with my GPO contracts, so that I can spend the required time on my value analysis projects?” Here’s three strategies that I tell them to employ to get organized, prioritize and optimize their time to save even more:
- Start a campaign with your peers to insist that their GPOs write contracts with 3, 5 and 10 year lifecycles – not one year terms. Not only will this tactic reduce the number of GPO contract renewals, but will enable GPOs to lock in their prices over the long-term, since inflation is the real threat to price stability in the healthcare marketplace. For example, Southwest Airlines has not been affected by the current energy crisis since they locked in their fuel prices over the long-term. Your GPO can provide this same price protection for you!
- Don’t change your manufacturers just because there is a new GPO contract being offered by your GPO, because the cost of change will usually cost your more than the contract savings being offered. You can do this by searching out comparable contracts with other GPOs (yes, you might need to join more GPOs to do so), so that you can continue to purchase from your preferred manufacturer at competitive prices. Your justification: Contract churn isn’t and will never be a cost effective way to do business.
- If you are a large enough healthcare organization to do so, write long-term custom contracts with your GPOs assistance, so that you can lock in your prices for the foreseeable future.
I’m sure you can think of a few more and even better strategies to organize, prioritize and optimize the time you are now expending evaluating your GPO contracts now that I have opened Pandora’s Box. It’s my opinion, that if we don’t STOP THIS MADNESS it will have a stifling effect on your supply chain effectiveness in the sort and long-term.
If you agree or don’t agree with my take on this topic, I would love to hear your comments on this pressing problem.
Your Partner in Innovative savings,
Bob Yokl
President & Chief Value Strategist
Strategic Value Analysis® In Healthcare
800-220-4274
P.S. If you would like more powerful savings and quality ideas like this one I would recommend that you sign-up for our “no cost” weekly Savings Beyond Price™ e-Newsletter at www.Strategicva.com. You will also get a copy of my e-book “Your Target Blueprint for Supply Chain Management Success”, as a bonus.
**New Comic** Persistence is Key!
Who Needs Project Management?
Of all of the tactics that I have employed, over the years, to save money one of the most powerful advances in our programs has been project management. It’s fundamental, time-tested and successful at all organizations who have employed it to manage their savings initiatives.
Yet, throughout my travels I rarely see it used at healthcare organizations for the planning, organizing and managing of their value analysis projects. This is a missed opportunity because this tactic will enable you to set time-lines on your projects, keep things moving on your projects, monitor and control your projects, get the most out of your limited resources and enable you to manage multiple projects with ease.
Save the easy way! At one time we too didn’t use project management techniques to manage our client’s value analysis projects only to find that our client’s team members were going every which way – but forward. That’s when we realized we had to do something different to control these unruly herds. We found that by providing a practical, easy-to-use project management system for planning, organization and managing our client’s projects we could tame the herd, speed up projects and perform 10x more value analysis studies than ever before. That’s what successful management can do for you.
So who needs project management? I would say everyone who wants a systematic approach to staying on top of all of your value analysis multiple projects at once and doesn’t want to leave anything to chance, happenstance or fate! Doesn’t that sound like you?
Your Partner In Innovative Savings,
Bob Yokl
Robert T Yokl
Chief Value Strategist
Strategic Value Analysis® In Healthcare
P.S. Almost Everyone who has seen a demo of our Utilizer™ Dashboard has told us that it is just what they have been looking for to manage and control their utilization misalignments! Isn’t it time you sign up for a demo too?
P.P.S. Don’t forget to check out my new blog article “Grow, Lead and Succeed with One Big Idea”, that will give you one big tactic that you can’t afford to miss to improve your communications with your bosses.
Grow, Lead and Succeed with One Big Idea!
By Robert T. Yokl
I had the pleasure last week of being a presenter at the Hospital Purchasing Service of Michigan’s semi-annual supply chain seminar. While there I talked about some new big ideas on how to grow, lead and succeed in supply chain management which was warmly received.
One of the big ideas that I presented to this group of MMs was that material managers must provide their management with a monthly report outlining their accomplishments (savings, operational improvements, market analysis, challenges and opportunities) for the month, quarter and year-to-date. I told the attendees that this monthly report is absolutely necessary because recent studies have shown that their bosses haven’t a clue of what they do, or, how their supply chain efforts has consistently contributed to their hospitals’ bottom line.
I see this communication strategy as being especially relevant today when I heard from these MMs that some of them can’t get their bosses attention for even 5 minutes a week. In fact, some of the attendees told me that they rarely, if ever, have regularly scheduled meetings with their bosses to discuss their challenges. Is this anyway to run a supply chain department? I don’t think so…
One prescription to solving this universal supply chain challenge is to start to communicate with your bosses through the vehicle of a monthly report. You would do this by beginning dialog with them about what you do, how you positively effect their P & Ls and that you do have information that would make their decisions easier. This would radically change the perception of your bosses that MMs are just buyers — not strategic thinkers.
Your Partner In Innovative Savings,
Bob Yokl
P.S. If you would like more powerful savings and quality ideas like this one I would recommend that you sign-up for our “no cost” weekly Savings Beyond Price™ e-Newsletter at www.Strategicva.com. You will also get a copy of my e-book “Your Target Blueprint for Supply Chain Management Success”, as a bonus.
