Is Standardization Now Holding Us Back?
Savings Beyond Price -Weekly eNewsletter – February 18, 2009
Robert T. Yokl
President & Chief Value Strategist
Challenging Conventional Wisdom in Supply Chain Management
We all get trapped into believing what we have been taught over the years about what works in supply chain management, or what we call the CONVENTIONAL WISDOM (ideas or concepts that are accepted without question as being true). I call this “getting stuck” in the old ways of doing things. This can be dangerous to your healthcare organizations financial fitness.
In fact, most ideas and concepts that are considered CONVENTIONAL WISDOM today do change over time, and therefore need to be challenged and reevaluated if you are to stay relevant, progressive and forward thinking in our supply chain practices.
One such CONVENTIONAL WISDOM that has outlived its useful life is that standardization is the one key to supply chain success. This fact is standardization is actually holding back new and better savings for your healthcare organization.
Here’s why. No one size, shape, color, formulation or mix of products, will not universally meet ALL of your customer’s exact requirements. You will either over-shoot or under-shoot your mark if you believe every customer has the same functional requirements thereby one size fits all situations. That’s why you have found it impossible to standardize on pacemakers, ICDs, orthopedics, spinal implants, etc. It just won’t work because every patient has different medical requirements that can’t be standardized. Your goal should be customization (built to the exact specification of each customer group), not standardization which is now becoming the new CONVENTIONAL WISDOM in this new healthcare economy.
I would also ask you to challenge and reevaluate the CONVENTIONAL WISDOM that everything you buy must be disposable. The healthcare organizations that we have worked with who have the lowest total cost are the ones who recycle, launder or reprocess more reusable kits, trays, gowns, towels and custom packs than their peers.
Summing up, everything that you have learned over the years that was thought to be true, isn’t always based on fact. You must constantly be challenging and reevaluating what you are doing so that you don’t fall into the trap of believing that what you are doing is the most cost effective or efficient way to do business. There could be a better way
Never…ever stop questioning the CONVENTIONAL WISDOM that once was thought to be infallible because very few things last forever!
Your Partner In Savings Beyond Price™,
Robert T Yokl
Chief Value Strategist
Strategic Value Analysis® In Healthcare
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.
The Best Advice I Ever Got
As a young material manager I was counseled by my mentor at the time that “there is always a better price, a better deal or a better offering if you want to wait long enough to cash in on it. However, while you are waiting you are missing big savings opportunities along the way”.
That’s why from this point forward I didn’t accept any bid after my bid deadline, didn’t listen to so-called sweet heart deals until my current contracts were coming to an end, and never cancelled a contract because a better deal came my way. I have found, as years pass, that not only was my mentor’s advice prudent, practical and wise, but from a time management standpoint, it was the only way to do business without going absolutely crazy.
If you or I routinely jump from vendor to vendor because they have a better price, deal or offering,, we are actually losing money along the way since the time, money and resources required to introduce, value justify and implement a new contract is eating into your savings.
A much better way to achieve price parity at all times I have found is to have long term contracts (3 to 5 years) with fixed prices along with favorite nation and cancellation clauses to protect your investment. This way you are virtually ensured of the best pricing over-the-long- term and, as a bonus, the lowest cost-to-change imaginable where real tangible savings can be attained.
It’s All About Utilization!
Savings Beyond Price -Weekly eNewsletter – October 15, 2008
President & Chief Value Strategist
Greetings!
Is All About Utilization!
My son and I met for an introductory meeting last week with a new material manager at one of our client hospitals who we have been servicing with software and services for the last five years.
The agenda for the meeting was for us to demonstrate our Utilizer™ Dashboard, Supply Chain Pilot software and to talk about the value analysis coaching and training we had been providing his hospital over the years, but this discussion soon spun off in another direction when this MM stated to us without any prompting that supply chain management today is “all about utilization”, not about price. Naturally, this was music to our ears, so we asked him why he believes this to be true.
He then said that he had found after decades as a material manager that it was a waste of time for him haggle with his vendors to save a few pennies off his expense budget, when his GPO contracts achieve 98% of the savings available to his hospital. On the other hand, if he invested the same amount of time to uncover, investigate and implement his utilization savings, he could save hundreds of thousands of dollars a year.
Here’s the rest of the story! This MM didn’t know us, our products or our services before this meeting, but we found ourselves on the same page with him before our meeting was over. It’s no surprise to us that more and more MMs are thinking and acting the same way as this supply chain professional when it comes to reducing their supply chain expenses. They are letting their GPOs do what they do best – reduce their acquisition costs – thereby freeing up their time so they can focus their energies on their utilization misalignments, where their greatest savings can be achieved.
To survive in these turbulent economic times we ALL need to employ, as this MM affirms, all of the weapons in our supply chain arsenal, not just the ones that are the easiest, ego boosting or handy to use.
Your Partner In Savings Beyond Price™,
Robert T Yokl
Chief Value Strategist
Strategic Value Analysis® In Healthcare
800-220-4274
P..S. If you are ready to deep-dive into your supply chain why not take a “test drive” of our Utilizer™ Dashboard and we will show you how we do it.
P.P.S. Don’t forget to check out my new blog article “What’s Ahead for Supply Chain Management? This blog will show your the emerging best practices that will be coming in the near future.
Price Is No Longer King
Savings Beyond Price -Weekly eNewsletter – October 9, 2008
President & Chief Value Strategist
Greetings!
Price Is No Longer King!
It’s no secret that rampant raw-materials inflation (9.8%) is driving product prices up for your healthcare organization. One client of ours told me that his trash can liner prices just went up 40%. Ouch!
That’s why you need to take a deep breath and then dig and drill down even deeper into your supply chain to uncover the waste and inefficiencies, misuse, misapplication and value mismatches in your products, services and technologies. It is there you will find as much as 26% in new savings just waiting to be harvested.
What are you waiting for? Too many supply chain professionals are holding back from attacking these huge savings opportunities because they think that somehow their GPO will find a way to hold back these price increases. Don’t let the facts confuse you with this fiction. Price is no longer king, and let’s face it we’re in turbulent economic times that call for new strategies, tactics and techniques to right our boat.
It’s now time for you to take a deep-dive into your supply chain to find your utilization misalignments in order to minimize your healthcare organizations exposure to this broadening predicament that is universal to all businesses. How you beat the market is by finding better ways to do things other than just hope that your GPO will pull a rabbit out of a hat and make your price increases go away.
Your Partner In Savings Beyond Price™,
Robert T Yokl
Chief Value Strategist
Strategic Value Analysis® In Healthcare
800-220-4274
P..S. If you are ready to deep-dive into your supply chain why not take a “test drive” of our Utilizer™ Dashboard and we will show you how we do it.
P.P.S. Don’t forget to check out my new blog article “What’s Ahead for Supply Chain Management? This blog will show your the emerging best practices that will be coming in the near future.
Thinking Lean
Savings Beyond Price -Weekly eNewsletter – September 19, 2008
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
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.
New Podcast Published- “Offsetting Price Increases in Tough Times”
Squeezing the Most Out of Your Supply Chain
I recently corresponded by e-mail, with a MM who said he was working on a PPI initiative, instituted a new inventory reduction program, installed a new MMIS system and had started reviewing his purchasing service contracts to generate even more savings for his healthcare organization.
I then asked this MM if he was also targeting his utilization misalignments. In response, he said to me “when is ENOUGH – ENOUGH?” My answer to him by return e-mail was, if you want to squeeze the most out of your supply chain you need to do everything, everyday and in everyway possible to wring the towel dry on your supply expenses.
Why? Because healthcare organizations today need, more than ever before, every dollar that they can get their hands on in order to stem the tide of hyper-inflation on your operating budget which is being caused by our energy crisis, weak dollar and the credit crunch. You could call it a perfect storm!
Tipping point: Your hospital’s heating oil bill alone will cost your hospital 70% more this winter. If you are heating your hospital with gas it’s going up 65% and electric 5.2% over 2007 prices. Your GPO is sending you more price increases, than price decreases. Rather than give you even more examples, let’s just say that your prices are changing faster than you can keep up with them with no end in sight.
Now is the time for you to become a HERO in your management’s eyes. They desperately need all the help you can give them to hold back this whirlwind of inflationary price increases. You can do it by squeezing even more out of your supply chain, especially in your utilization misalignments where you can save up to 12% of your total supply spend (supplies and purchase services) within 12 to 18 months.
Don’t miss this big opportunity to show your management how supply chain management can come to the rescue when the chips are down.
Your Partner In Savings Beyond Price™,
Robert T Yokl
Chief Value Strategist
Strategic Value Analysis® In Healthcare
800-220-4274
P.S. If you want to hold back the inflationary spiral we are now experiencing, why don’t you “Test Drive” our Utilizer™ Dashboard that will show you where all of your utilization misalignments reside.
P.P.S. Don’t forget to check out my new blog article “How Many Value Analysis Courses Have You Had?” This blog is all about what you need to do to become a professional value analysis leader and/or practitioner.
A Time for Action…Not Rumination!
Your management will be asking you to ratchet down your supply expenses even further this year due to the high cost of energy which affects almost everything your hospital buys. And still another reason is the slowing economy that could have an effect on your hospital’s revenues.
These challenging times call for action…not rumination. As leadership guru John C. Maxell tells us “The pessimist complains about the wind. The optimist expects it to change. The leader adjusts the sails” to catch a favorable wind. This is the attitude you need to keep your supply chain ship righted in these turbulent times.
Here are some questions I would like you to ponder to keep your boat afloat in this perfect storm. Are you adjusting the way you do business to weather this squall? Are you looking beyond price to uncover new savings for your healthcare organization? Are you re-specifying everything you buy to trim your sails?
The reason I’m asking you these three questions is that price savings alone won’t keep you from running aground. Only by attacking your utilization misalignments and value mismatches can you right your ship, and get wind in your sails. If you continue to pursue price savings alone you won’t have enough fuel to ignite your savings fire.
I see more and more supply chain professionals becoming believers in this new way of doing business, since they now realize that price isn’t king any longer. Isn’t it time you take massive action to alter your course and right your supply chain ship before the winds become too strong to change course?
Just How Good Is Your Supply Chain Radar?
Just How Good Is Your Supply Chain Radar?
A recent client I was working with on a Supply Chain Scorecard Program and then subsequently a Strategic Value Analysis® Program vehemently disagreed with many of the metrics and benchmarks that SVAH utilized to identify savings opportunities for their organization in all of their products and commodity areas. Now keep in mind, I was dealing with the VP of Operating Room Services who up to this point had run their product standardization and evaluation committee (for 7-years prior) before we were engaged by their system to perform our supply chain savings services. No matter what product and/or commodity group I showed on their savings opportunity scorecard he would disagree that I did not have my facts correct or that the benchmark metrics were outright wrong.
Is it conceivable to think that you can know where all of your savings opportunities are before they inflict damage to your bottom line?
Do you want be proactive instead of reactive?
For example, we were being challenged on their IV Set usage per case mix adjusted patient day, whereby the metrics showed a savings opportunity of $155,000 on an $850,000 annual spend, an 18% savings opportunity!Interestingly enough, this hospital just completed their own analysis by their product evaluation committee on their IV Sets and concluded that everything was in-line and that they were optimized on their costs and quality (I did not see any supporting data other than discussions from committee meeting minutes that could support their findings). I held firm, I knew my numbers were good and I had over 301 hospitals in my database to back me up that I was in the “Savings Zone,” whether my client wanted to believe me or not.
As it occurred we continued to work together and set up their supply value analysis program which of course IV sets was at the top of the list. Now the unique thing about our company is that we have seen IV Set studies at 50 different hospitals and health systems, so we get to bring all the best practices, questions and strategies to the table for our clients. Here is what we found out with this particular IV Set Study/Analysis.
- The Good News! They had the best price – they were part of a large IDN and had a direct manufacturer agreement, no price savings could be achieved. We compared them to our best price database and they ranked in the top 95th percentile.
- Not labeling was costing them thousands – All the departments were not date/time labeling their IV Sets correctly or at all to let other nurses know when an IV Set was set up on the patient, therefore they would automatically change the set (often too soon) on the patient to insure quality. The best practice is to change the set between 72-hours and 96-hours. Because they were not labeling correctly a good Nurse would change the set so not to endanger the patient by leaving the IV Set on too long. $25,000 to $35,000 in utilization savings!
- They had been sold a wrong bill of goods – 11-months prior to SVAH’s engagement, the hospital’s product evaluation committee had approved the implementation of an IV Set locking device that cost $5.00 (in addition to the IV Set cost) to be utilized solely on central intravenous lines for an annual added expenditure of $5,000. This made sense to all and would add to the quality of care for patients with the central lines. What happened was, the product was then misused on every IV Set throughout the entire hospital which added $120,000 in added cost as opposed to $5,000. $115,000 overrun! (They did not know this overrun situation was happening because they had no system to monitor their commodity costs) The hospital then re-evaluated and found that the product was not required at all, they returned to using sterile tape! $120,000 in savings.
- There is more! – the client opted not to pursue this product category until a later date because of the major changes that the two opportunities above would make to their nursing staff, but they will then revisit this product line to look at the value/function of the products being utilized. There could be thousands more here!
Up to this point, my client did not have the tools or knowledge base that SVAH brought to the table that would uncover these hidden/invisible savings opportunities in their hospital’s supply chain. My client did not believe that there was that much savings on this particular commodity grouping but was only working with what they knew from their product evaluation committee and existing supply intelligence told them. It was not on his radar screen!
Your Partner In Innovative Savings,
Bob Yokl
Robert T Yokl
Chief Value Strategist
Strategic Value Analysis® In Healthcare
P.S. If you are looking to establish, enhance, re-energize and dramatically improve your value analysis program (or you have hit the wall on savings) then our Certified Value Analysis Leader Program to be held on June 24-26 is the ticket for you. And, as a bonus, you will receive a one-year subscription to our new Value Analysis Resource Web at “no cost” to you. Note: Only 17 days left to save on our early bird rate of $1,192.00! click here to learn more
New Podcast: 80/20 Rule for Healthcare Supply Chain Savings
This podcast is geared towards helping you align your efforts and focus towards the supply chain savings opportunities that will give you the best bang for your buck as far as effort to return on investment. We will highlight the major functions of supply chain savings and detail out all the major supply chain savings areas and why and where you need to focus your efforts for the highest supply chain savings return possible.
How to Plan, Reduce, Improve and Succeed Even With Limited Resources!
by Robert T. Yokl, President
We all know we need to do more with less since our healthcare organizations’ revenues are flat, reimbursement is meager and staffing is at a premium. Rather then wince over these realities let’s talk about how we can plan, reduce, improve and succeed even with limited resources.
It’s been my experience that there is always a better way to do things that can dramatically improve your situation, even with limited resources. I remember when I was hired for my first materials manager’s job at a children’s hospital in Philadelphia, I quickly found that my new employer was so cash-strapped that on some weeks we were told we would not be getting a paycheck. But that didn’t stop me from planning and implementing a new par level system, reducing my utilization cost with my new value analysis team, improving my supply chain operations with a new computerized inventory system and succeeding with very limited resources. I was even promoted after only a year on the job!
Success in anything, when its comes right down to it, is having the right ATTITUDE, not money, time or even resources to get the job done. Since my first job as a materials manager at that children’s hospital I just talked about, I have worked for some of the largest, and most affluent healthcare organizations in the country, but you know what, I really didn’t really get anything more done with more money, more time and more resources than I did when I didn’t have any of these things many years ago.
If you are looking to succeed as a supply chain professional, don’t let any constraints, of any kind, hold you back from your planning, cost reductions, and improvements even if you have limited resources, since they really don’t matter if your have the right ATTITUDE to succeed!
P.S. If you would like more powerful savings 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.
Is Standardization Working Against You?
I have preached for years that “standardization is a self-defeating paradigm” for healthcare organizations that want to achieve the lowest total cost for the products, services and technologies they are buying. Now, we are documenting even more proof that the overused standardization model is producing even more unintended consequences than I first thought.
The truth is no one size fits all products, services and technology purchases. If you try to standardize on everything you buy you will limit your customers’ choices, and thereby, compel them to use over-specified or under-specified supplies and equipment which don’t meet their exact specifications. Believe it or not some of the blame for this observable fact can be laid at the feet of your GPO because you are rewarded for over-standardization by the terms of their offerings.
As an illustration, we just completed a 360 Degree Supply Savings Analysis for a client where we found that they had standardized on a $7.10 I.V. set for ALL of their patients. This practice was costing this hospital $54,334 annually in unnecessary and unwanted IV set cost since this was the only IV set that was available for their clinicians to use.
A much better way to decide on what I.V. sets this client should have been buying was for them to develop customized specifications for each of their value groups (segmentation of the customers by their critical to quality requirements) that use this product. With the result, that this client would have ended up with five or six IV sets vs. one only and this would have met each of their value groups’ exact CTQ requirements thus saving $54,334 annually on their IV set purchases.
The lesson of this story is that this client did have the best price on the IV set they were buying, however their standardization policy was working against them when it came to having the lowest total cost in this commodity group. Is you standardization policy working against you as well?
er In Savings Beyond Price™
Your Partner In Savings Beyond Price™
Robert T. Yokl
Robert T Yokl
Chief Value Strategist
Strategic Value Analysis® In Healthcare
P.S. One of the new power tools that are available to you and your c-suite to give them and you a window into your supply chain operations is our Utilizer™ Dashboard. This new tool will show you and your c-suite members all their supply chain costs in one database along with actionable targets for savings. Why not make it easier on yourself by having this tool at your disposable to effortlessly cost justify your initiatives vs. fighting your c-suite for every dollar you request to improve your supply chain operations. Check out our “test drive” to see how we do it!
It’s Only Money Right?
Click to enlarge view of comic
