Even successful supply chain organizations have to shake things up from time to time to maintain their competitiveness. I remember a pretty aggressive supply chain manager who told me that he was replacing all of his current buyers (he had six of them) since they didn’t have the skill sets he needed to ramp up his savings in all of his major commodity groups.  This was a bold “change for change’s sake” that I had to agree would make his department even more dynamic then it already was.

How do you know when to change?  There is a danger of staying the course, playing it safe and not rocking the boat that can become routine, since most change isn’t set in motion until a supply chain organization is deteriorating beyond the point of no return. A much better way to prevent this from happening is to look for the seven telltale signs that your supply chain organization is going off track and/or has become too comfortable with the status quo. They are:

1. Is there a breakdown in communications between your supply chain and your customers?
2. Are many of your employees uncomfortable with change?
3. Do your employees operate according to well-established routines?
4. Has the percentage of savings generated from new savings streams decreased over the past five years? 
5. Do influential groups or individuals impede your savings initiatives?
6. Do you have the ability to obtain the resources you need to get your job done?
7. Has collaboration between customers groups decreased over the past five years?

If your answer to two or more of these questions is yes than you need to invest the time to make some big, small and lasting incremental changes in what you are doing to bring your supply chain department back to the center line of peak performance.

The core of this “Periodic Change Philosophy” is that if you change before you need to then you won’t need to undergo painful major life threatening surgery, but only minor surgery to set your supply chain organization on the right path again.  Just as important, your supply chain organization will continue to remain strong, nimble, and adaptable in this new healthcare economy.

This is a real world dilemma that supply chain professionals face everyday:  When to push, when to pull, or when to find the middle ground to get half-a-loaf vs. nothing from our customers! No one likes change, many times, even when it is good for them.

I have three tactics to share with you that you might find useful in your own quest for mastering the art of change management:

• Trade, if you have leverage – Trading is a skill used for thousands of years by people who took full advantage of their leverage. You can do the same if you have something to trade that the other person wants. For example, we know of one supply chain professional that trades requests for new purchases from his customers (moves them up the queue for approval) for changes he wants to see in their buying practices, such as, testing a lower cost alternative product vs. what they are now buying. It’s a simple idea that works very effectively, if you have leverage of any kind.
• Nibble around the edges – Get as much as you can now, and then come back for more bites of the apple at a later date. I used this same tactic in my supply chain career thousand of times.  I would obtain agreement from my customers to make a very small change in what they were doing (e.g. removing one or two items from their custom pack or kit that they weren’t using), then I would come back year after year taking more bites of the apple until it was all gone.  It worked 98% of the time!
• Wait until the timing is right – When I hear a supply chain manager tell me that one of their physicians or clinicians won’t change his or her practices, even though he or she is costing their hospital thousands of dollars a year, I tell the manager to wait until the timing is right (the physician or clinician moves up, moves on or retires) to make their next move.  As you know, timing is everything in the world we live in – even when you want to change something!

There is no easy formula to change people’s minds and hearts, but there are tactics to move the ball forward that aren’t fast, perfect or ideal, yet are much better solutions than doing nothing about the situation at hand.  Your goal should be to never let a savings, quality or process improvement opportunity go by without making some positive change happen.

A good example of this truism is that Warren Buffett a few months ago bought the Burlington Northern Santa Fe Railroad for $26 billion dollars because he said that his decision was “ in tune with the future” of America”.  But on a recent interview with Charlie Rose on a PBS station he told Charlie that he always had a LOVE AFFAIR with railroads.  He even said that “He has a toy railroad set in his attic” at his home, since railroads have always has been a passion with him.

So do you really think that Buffett bought this railroad, which he admits was “not a bargain” just because he thinks “it was an opportunity to buy a business that will be around for 100 or 200 years”?  Or, do you think he bought it because it really was an “emotional” decision because he just loves railroads and then justified it based on the facts?

It’s the same logic with any decision that you want your customers to make.  If you want them to make a decision in your favor, you will need to “emotionalize” the decision making process, then justify it with facts.  Your clinical staff does this to you every time they bring up their emotional arguments of how any decision that is being proposed will affect the quality of their “patient care”.  They then justify their “emotional” decisions with facts.  It has been a winning formula for clinicians for decades.

So if you want to win more decisions on your product, service and technology proposals, you will need to find an emotional link to your proposals, and then justify it with facts.  For instance, more and more hospital CEOs are preaching to their clinical staff that if they can’t reduce their hospital’s their supply chain expenses, then he/she will have no alternative but to look to cutting their labor cost. 

This reality check has sparked an emotional “hot button’ with most clinicians when they hear this unassailable fact from their CEOs and makes them more pliable in their dealings with supply chain management.  You might call this tough love, but I call it “emotionalizing” your decisions, and then justifying them with facts.

It is not a theory, but an indisputable fact that all change comes from emotions, not facts. Don’t underestimate this powerful change management strategy to make positive, previously unattainable and once thought impossible transformations happen at your healthcare organization.

I have followed this same advice in my own career where I have proposed big business changing savings ideas at every healthcare organization I have worked in my supply chain management employment. For instance, I have proposed (in writing) a new supply value analysis program at every healthcare organization that I have worked and NEVER once have my proposals been turned down by senior management, customers or stakeholders.

I once decentralized the centralized buying function that had been in place for 46 years at my multi-hospital system and then replaced it with a GPO model based on a written business case for change that saved my healthcare corporation millions of dollars — almost on day one.

I proposed in writing, and eventually received approval from my board of directors, to move forward with a group purchasing program for their 27 long-term care facilities where I was Vice President of Support Services. This reinvented the way they had done business for decades.

I’m sure you get the idea! Developing a written business case for change in order to introduce, test the waters and then to gain approval on your big and even little supply savings ideas is a powerful instrument for the changes you believe are mission critical to your healthcare organization.

Here’s how it works! This business changing and decision-making instrument begins with a written document that would give the background of the problem or opportunity and description of what you want to accomplish. It would describe how it benefits your organization, how it fits into your organization strategic plan, the risk and rewards, the resources required, the responsibilities and the timing and the operational and financial considerations.

Your business case for change doesn’t need to be elaborate, but it does need to be thorough, concise and well thought out. Most importantly, it needs to be your tool of choice that you employ when you want to “change the way we do things around here”.

The short answer is that you need to become more skilled at dealing with difficult people, irrational situations and the politics of your workplace. There is an art and science in doing so. Here are five basics that work every time:

1. Have Patience – Thomas Paine, in his pamphlet “Common Sense” tells us that all things and truths become clearer with time. That’s why you need to have patience when confronted with a tough situation.  I personally wait at least 24 hours before making any tough decisions because the emotions of the moment have now passed and I have a clear head to make the right decision. Don’t make rushed decisions if you can avoid it!
2. Listen Artfully -We all know the techniques of “Listen Artfully”, but how many times have you really used them?  I have found that if you can keep people talking and keep yourself listening attentively you can find out everything or anything you want to know about any situation. It always pays dividends to listen!
3. Be Respectful - Even when you totally disagree with an individual’s point of view, be respectful, civil and polite. In doing so, you might just learn their reason(s) for why they have a different perspective on the subject at hand.  Then you have all the facts you need to make your own decision!
4. Ask Why – The most important question you can ask anyone, when confronted with an opposing opinion, is why they feel that way. They will then need to defend their position. Often they will talk themselves out of this opinion, when they hear their own answer.   That’s why the “why question” opens up a whole new way of thinking for even the toughest opponent.
5.  Don’t Cave In -The easy route to take when confronted with tough people, decisions or situations is to “cave in”, but this won’t solve your problems.  It will just complicate them.  Once your colleagues, employees or management realize that you change your mind easily they will never ease up on the pressure to change your mind on any subject. But if they know that you are hard as a rock and are an unmovable object, they will soon tire of trying to change your mind. This doesn’t mean that you should be inflexible or stubborn, but always be mindful that your opinions count too! Be firm and consistent!

The Reverent Robert H. Schuller has said that “Tough times never last, but tough people do”. That’s why you must master these five skills that are needed to deal with tough people, tough decisions and tough situations.  If you do, I can ensure you that it will make your job and your life a whole lot easier, more productive and fun again.

The best case scenario for healthcare reform is that the Feds will attack the cost of readmissions within 30 days of discharge by disallowing reimbursement, bundle inpatient and outpatient charges at a lower rate, and expand their pilot gain sharing program to all qualified providers who can meet seven stringent participation criteria. The worse case scenario is that the Feds will dramatically reduce your hospital’s already meager Medicare payments, which has been already proposed.  

With this said, I don’t think this is a time when you should take a “wait and see attitude” since vacillation isn’t an option. It’s safe to say that some form of healthcare reform is on the way and to pay for it the Feds will need to take more dollars from your healthcare organization’s budget to make it work. That’s why even more rigorous cost management should be the order of the day for all healthcare organizations. To do less is to risk getting caught asleep at the wheel while your competitors sail through this impending historic financial disruption without missing a beat.

For years value analysis was something we told our bosses and colleagues we were doing to make them think we were on the cutting edge of supply chain management. We knew however in our heart of hearts that our team(s) or committee(s) weren’t generating the savings and quality improvements that they could or should be. We knew our team or committee members weren’t attending meetings, that we weren’t getting management support that we needed to be successful and that our department heads and managers too often placed barriers in our path that prevented us from making savings happen.

That was then, this is now!  We are now seeing hospitals, systems and IDNs providing formal advanced training for their senior management and value analysis teams in the classic tenets of value analysis, organizing their teams to save and seeking out new power tools to manage, monitor and control their supply value analysis program. They are hiring professional trained value analysis coordinators, managers or directors to manage their supply value analysis program.

Why Now, not then? No hospital, system or IDN, with their dip in revenues due to the recession, can leave a significant 7% to 15% in utilization supply expense savings on the table untouched. In the past this 7% to 15% seemed nice to have, but now is critical to their survival.  That’s where value analysis comes to the rescue!

Value analysis, if practiced patiently, fervently, artfully and scientifically is the vital savings engine that all healthcare organizations (large and small) need to make Savings Beyond Price™ quickly happen. But this budding success story won’t materialize unless your senior management, team(s) or committee(s) has the requisite tools, training and executive management support required to create, manage and maintain high performance value analysis teams.  

So if your hospital, system or IDN is getting serious about value analysis just remember this important salient fact: value analysis isn’t about establishing a value analysis team or teams and then telling them to GO SAVE MONEY!  It’s all about having highly trained, motivated and incentivized VA team leaders and team members that understand, internalize and vigorously apply the six-step value analysis methodology to uncover and then implement any and all savings opportunities for your healthcare organization. 

Supply chain professionals have stepped up their savings game due to the effects of the recession of 2009, but are they really creatively driving the last dollar out of your supply chain or just nibbling around the edges?  Here are five big ideas that will give you an even bigger dose of creativity to ramp up your savings in these unsettling times:

1.                You don’t have all of the good ideas

I can’t tell you how many times I’ve seen the door closed on good ideas because they weren’t invented by the supply chain department. It’s now time to encourage new and better ideas to bubble up from your vendors, staff, co-workers and department heads to bring new inspiration to the job at hand.

2.                You need to collaborate more with your peers

Too many supply chain professionals act as if they are            lone rangers as opposed to collaborating with their peers in teams to make savings happen. As an individual you can only accomplish a minuscule amount of work on a daily basis, but you can supercharge your savings efforts by teaming up with your peers to get this hard work done.

3.                You need to have more diversity in your teams

Teams that act, look and think alike won’t generate new, different and better solutions to your challenges. One little known secret to boosting your creativity is to get people with different backgrounds and expertise to work together as creative contributors. 

4.                Accept some failures and dry holes as inevitable

Don’t be frustrated by some failures and dry holes that your team(s) will experience in searching out savings, but instead consider them a learning experience. It’s your job to make your team members feel safe, confident and risk averse so that they can filter the best ideas for implementation and kill projects that are leading to a dead end. 

5.                Give your team members as much responsibility as possible.

Your team members should be given as much responsibility for their projects as possible. They shouldn’t be second guessed by your team leaders or senior management on their findings and recommendations. Most importantly, they need to be given sufficient time and resources for exploration and implementation of their projects.

Getting a bigger dose of creativity for your supply chain initiatives is more about the process you follow to get results — than luck.  It involves tapping into the ideas of right people with the right diversity, accepting some failures and dry holes, and giving your team members as much responsibility as possible. Simply stated, it’s not about being a lone ranger!

Just the other day a supply chain manager clearly stated this paranoia when he said “I know this doesn’t make sense not to spend a little money with your Utilizer™ Dashboard when we could save millions by doing so, but that’s the reality at my hospital today.”

This frugality doesn’t make any sense to me, since when you are in a hole you need to dig yourself out, not wait for someone to rescue you. Simply refusing to spend money to save money or to generate new revenues isn’t a viable solution in these tough times. It will only make your situation worse!

So when you hear that there is a freeze on ALL new spending at your hospital, system or IDN, I would question the validity, sanity and wisdom of this management fiat. Inspired leadership doesn’t retrench, hunker-down or hide from reality.  They take prudent steps to dig out of the hole that they find themselves in until they can see the daylight. Then they dust themselves off and move one step at a time to higher ground where they can clearly see the light at the end of the tunnel.

In fact, inspired leaders are spending money to make and save money, even in these perilous times. These leaders understand the importance of moving forward, not backward in this sea of change. And they have the courage to make the hard decisions that are necessary to keep their healthcare organization on course in these turbulent times. To their credit they aren’t waiting for someone to rescue them from the challenges they face because they know help isn’t on the way.

Savings Beyond Price -Weekly eNewsletter – February 4, 2009

Robert T. Yokl

President & Chief Value Strategist

 

Leading Change

Every crisis has seeds of opportunities for those who are prepared, persistent, persuasive and fearless! If ever there was a time when supply chain professionals need to LEAD CHANGE at their healthcare organizations…it’s now!

With few exceptions hospitals, systems and IDNs are bleeding red ink or at best are having one of the worst financial years in decades because of reduced census, growing receivables, shrinking investment income and higher capital cost. I liken this to a tsunami!

To lighten the load on your healthcare organization’s finances, supply chain professionals need to LEAD CHANGE in their healthcare organizations by:

 

1.                Developing a new vision and strategy for change

The old vision and strategy of just saving on the price isn’t going to work in this new healthcare economy since prices are going up – not down.  Your new vision and strategy should be focused on your utilization or in-use cost where on average 26% can be saved almost overnight. That’s were your new and better savings reside! 

 

2.                Communicating your change vision to all levels of management

Making change happen is a team effort, not an individual endeavor.  Therefore, you must get your senior management and department heads and managers to buy into your vision.

This can best be accomplished with white papers, presentations, and newsletters circulated throughout your organization that would get everyone talking, working and supporting your vision. Yes, this does take some time and effort, but this is what leadership is all about. Talking and walking the walk!

 

3.                Creating high-performance value analysis teams

To implement your new vision and strategy you will need to create high-performance value analysis teams, and not accept your current so-so value analysis team’s performance. I haven’t seen a value analysis team(s) that can’t raise their performance by as much as 10-fold if they are reorganize, reinvent and reinvigorate to save money in new ways.  

 

4.                Generating sustainable, measurable and new utilization  savings

As I have already mentioned, price savings alone won’t lead your healthcare organization out of this crisis.  Only by attacking your utilization misalignments will you make a BIG dent in your supply expense budget. And these sustainable, measureable and new savings will go right to your bottom line where your healthcare organization needs the impact most.

 

I have just outlined an action plan for you to LEAD CHANGE in your healthcare organization in these uncertain times. This will position you to be a hero instead of a victim in the tsunami that hit us in October 2008. 

As I see it, supply chain professionals have an extraordinary opportunity to LEAD CHANGE in their healthcare organization because there are still millions of dollars of untapped savings beyond price to be liberated in your supply chain that you never thought was possible.

Now go and LEAD CHANGE before it’s too late to do so!

 

Your Partner In Savings Beyond Price™,

Robert T Yokl

Chief Value Strategist

Strategic Value Analysis® In Healthcare

Bobpres@strategicva.com

1-800-220-4274

P.S. If you would like more information on how to reorganize, reinvent and reinvigorate your value analysis teams to be better than good you might want to download my White Paper” Strategic Value Analysis®: Savings Beyond Price™” that will give you an insiders’ view on how to do it.

Material management (or supply chain management) as it is now called) has been red hot for 27 years in healthcare, yet very few healthcare organizations have taken the time to develop a Strategic Supply Chain Operations Plan (SSCOP) to fine tune their multi-million dollar business operations.  Few healthcare organizations ever take the time to refresh their SSCOP plan if they have one to compensate for the winds of change that take place yearly and will affect their healthcare organization.

Winds of Change: Big changes will dramatically affect your healthcare organization is the economic melt down we are all experiencing. Your elective admissions are slowing, your investments have shrunk by double digits, your prices have escalated, your sources of credit lines are shrinking and your capital budgets are on life-support.  

Master Change: We in supply chain management always seem to be herky–jerky when it comes to strategic operational planning, when the fact is planning is the little known secret you desperately need to stay on top of your game.  By looking at where you have been, where you are now and where you want (or need) to be in 1, 2, 3 or 5 years with your supply chain management program, you can manage these unpredictable winds of change more effectively.

Anticipate Change: This is the situation with one of our clients whose management is telling him he needs to do more with less. He has responded to this challenge by developing a Supply Chain Operations Plan, with our assistance that includes reinventing and re-tooling his purchasing operations and supply value analysis program to be leaner, meaner and more productive.  As a result our client has proactively increasing his supply saving yield by 11.4 over the next few years. 

If you want to be left standing when the winds of change hit your healthcare organization, you need to master change by anticipating change with your own Strategic Supply Chain Operations Plan that will keep you afloat in good times and bad.

Your Partner In Savings Beyond Price™,

Robert T Yokl

Chief Value Strategist

Strategic Value Analysis® In Healthcare

Bobpres@strategicva.com

800-220-4274

P..S. Don’t wait until a crisis arises at your healthcare organization to create your Strategic Supply Chain Operations Plan. Be proactive, responsive and visionary by making planning a continual process of improving your supply chain each and every year so that you can master the winds of change.  

P.P.S. Don’t forget to check out my new blog article, “The Case for “Know-Nothing” Value Teams.  This blog will show you how to achieve better, unbiased decisions from your value analysis project managers every time.

Savings Beyond Price -Weekly eNewsletter – September 19, 2008

Robert T. Yokl

President & Chief Value Strategist

 

Greetings!

Thinking Lean

Believe it our not, studies have shown that in excess of 60% of the supply chain activities you perform every day add no value to either your internal or external customers. Simply put, they wouldn’t pay for them if they knew what the cost was to serve them.  Does this surprise you?        

Well it shouldn’t! I know of supply chain professionals that have been doing the same things every day, the same way, for 20 years who haven’t questioned why they are doing it. Nor, have they analyzed if their activities and processes can be leaned even further to reduce their cost-to-serve to their customers.

A good example of this un-lean thinking is that some hospitals are still stocking office supplies, x-ray film, paper towels and lab supplies in their warehouses when it adds no value to their customers to do so. These commodities should be delivered directly to their home departments by your suppliers to dramatically reduce your handling cost.

Value analysis is another area where lean thinking is absent in my judgment. I have seen as many as 35 members attend a value analysis committee meeting, which I would consider a mob, where little or no real work was accomplished.  Does having 35 members add value to your value analysis process?  By the way, we have found that 10 people is the ideal number of team members that you should have on your value teams.  

The lesson to be learned here is that we should all be THINKING LEAN (what would the customer pay for if they knew its cost) in everything we do, and then always be searching out new ways to reduce the cost-to-serve our customers.

THINKING LEAN is really a simple concept to learn and apply. If you want to save big by introducing practical ideas, methods and techniques the thinking lean concept will cut your costs to serve your customers one activity or process at a time.
 

Your Partner In Savings Beyond Price™,

Robert T Yokl

Chief Value Strategist

Strategic Value Analysis® In Healthcare

Bobpres@strategicva.com

800-220-4274

 

P..S. I’m happy to announce the release of our new Utilizer™ Dashboard Contract Driver module that will make your contract management job a whole lot easier. I consider it a way for you to have ultimate control over all of your contracts.

 

P.P.S. Don’t forget to check out my new blog article “4 Tactics to Combat Complacency with the Status Quo” This blog is all about progressing beyond just price savings, and moving on to the next generation of savings productivity. 

 

What this CFO was really saying to this MM was that he was satisfied with the status quo; why rock the boat, take any risk or try to make things better. Change is never easy, but absolutely necessary if you want to keep your supply train on track, on time and moving forward. It is therefore essential for supply chain professionals to combat complacency by changing hearts and minds to get momentum moving again or you will run out of fuel to stoke your savings fire.  The best way to do so is to employ these 4 proven and time-tested tactics:

•1.                Never, Never, Ever Take “NO” for the Final Answer

The answer “no” is just a temporary setback for supply chain professionals who want to be wildly successful in their field. Your must always come back another day, week, month or year with a reconfigured proposal to get your way. Or, you will be left with the crumbs in your business life that are left over after all of the other big decisions are made by your management. 

•2.                Never, Never, Ever be Satisfied with the Status Quo

Never accept the way things are now, if you want to see things change for the better. Just because your hospital, system or IDN has done things the same way for many years doesn’t make this the best way to do things. Always be looking for new, different and better ways to improve what you are doing to make your healthcare organization a better place to work.

•3.                Find champions to fight Your Battles with You

There are always one, two or three high level executives in your organization that will agree with your proposals and that can be convinced to become champions for your initiatives.  Your job is to find them so that they can help fight your battles with you. Otherwise, you will be a voice crying in the wilderness that will never be heard over the chatter and noise that your management is hearing everyday from your peers.

•4.                Create a Sense of Urgency that Can’t be Ignored

There is always a good reason why your organization should do things NOW!  Prices will be going up NOW.  Resources are available NOW to make it happen, but won’t be next month. Jim is on vacation next month, but is available NOW to get this project started.  Get the picture? There is always a good reason that you can unearth to get your management to move NOW on your proposals as opposed to a later date. This is because any proposal has a way of becoming less attractive and less timely as time marches on.  Do it now needs to be your mantra, if you really want to get things done around here.

There are certainly more things you can do to combat complacency with the status quo at your healthcare organization. However, these four tactics have been successful at any organization that has employed them. Why? Because they tap into the rational and emotional side of our brains to get us moving in the right direction….NOW! 

This statement implies that in everything you are doing right now or thinking about doing for the future you must take a long-term view of how it aligns with your hospital, system or IDN’s long-term goals. Those goals are fueled by the uncertainty of the healthcare marketplace in the 21^st Century.

As an illustration, I’m seeing healthcare systems and even Alliances centralizing some or all of their financial services (payables, credit and collection, accounting, credit and collections, etc.) under their corporate umbrella to dramatically reduce their overhead cost. More than a few healthcare systems are replicating the WalMart model by vertically integrating all of their supply, processing and distribution operations as separate and free-standing new business entities.

These are long-term trends that have short-term implications for supply chain professionals who must start thinking and planning to move in this new and better strategic direction. For instance, if you are planning to upgrade and expand your current warehouse, as one of our clients is considering doing, you might want to think about building a shared services off-site warehouse with other hospitals in your region. This way you will be following the long-term trend of vertical integration today instead of locking yourself into a short-term strategy of building your own warehouse and absorbing all of these costs yourself.    

To summarize, what fuels the long-term supply chain management success is to always be looking over the horizon at the trends that are emerging in our marketplace, and then incorporate these lessons into your own strategic planning process so you are always thinking short-term with the long-term in mind.