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?
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