Why You Need Supply Project Charters to Save Even More!
A Supply Project Charter is a statement of the scope, objectives and participants in a project. It provides a preliminary delineation of roles and responsibilities, outlines the project objectives, identifies the main stakeholders, and defines the authority of the project manager. Source: Wikipedia.com
It took me some time to fully realize that a good project charter is one of the key success factors for any and all savings and quality projects (Six Sigma, LEAN Management, Value Analysis, etc.). The reason I now feel this way is that you need a beginning, middle and end to all projects. Therefore, if you don’t have a good project charter you don’t have a rock-solid foundation for the beginning of your projects, thus, risking going off track even before your project gets started!
At minimum you will need the following 13 essential elements to be included in your project charter: Project Title, Project Type, Focus Area, Department, Facility, Project Start Date, Project Number, Champion, Project Leader, Product or Process Owner, Statement of Problem or Opportunity, Project Completion Date, and Financial and Quality Goals & Objectives (e.g., savings, improved revenues, reduced defects, etc.).
Now that you have these essential elements listed in your project charters you can refer back to them to insure that your projects stays on track, on budget and on time. We have found that the timely on going (monthly) review of this data to be critical to the success of any project. In fact, to manage and control all of their projects, we encourage our clients to establish Balanced Scorecards based on the information in their project charters.
A recent survey by ISixSigma Magazine found that 81% of the most successful Master Black Belts ALWAYS utilize a project charter to get a fast running start on their projects. The survey stated further that project charters were the second most commonly used tool by Black Belts, next to process mapping as part of their improvement work.
How can you dispute these statistics? If you want to save even more money and improve your quality the answer is to start to employ PROJECT CHARTERS on all of your supply chain initiatives. You will then have a beginning, middle and end to all of your projects.
LEAN and Value Analysis Work Better Together
I would estimate that 79% of our nation’s hospitals, systems and IDNs have value analysis teams in place to evaluate the appropriateness and cost effectiveness of the products, services and technologies that they buy. However, is our job done when we complete these studies?
Not Quite! We still haven’t attacked the waste and inefficiency of these same products, services and technologies in our value streams. This can represent 7% to 15% in new and better savings for your healthcare organization if you add LEAN Management techniques to your value analysis model.
The LEAN Management techniques were introduced by Toyota into their manufacturing process in 1934 to eliminate waste from their production process. LEAN’s core concept is to “eliminate anything that doesn’t add value to your products or services”. LEAN techniques have been so successful that they are now being applied in every industry (including healthcare) in every country around the world as a waste eliminator.
It’s no longer good enough to just obtain the best price for what you buy because price is just the tip of the iceberg. You must now “LEAN” the products, services, technologies and the processes that support them if you are going to wring the towel dry on your savings.
A good example of LEAN thinking is when one of our clients eliminated all of their operating room custom packs, since they couldn’t VALUE JUSTIFY how they added value (time, labor cost or savings) to their surgical suites operations. This might seem like a radical change to you but I’m sure you will agree that it illustrates that “leaning” your operations means not accepting the “conventional wisdom” about anything that you are presently doing. It means thinking and doing differently!
We have proven over the last twenty-two years with our LEAN Value Analysis System that LEAN and value analysis work better together, since we have found that value analysis searches out lower cost alternatives to what you are doing now. While LEAN eliminates the wasteful and inefficient consumption, misuse, misapplication and value mismatches in your value streams. It is the perfect marriage of complementary tools!
So if you are looking for even deeper and broader savings with your value analysis program than ever before, may I suggest that you add LEAN Management techniques to your value analysis model to get the job done end-to-end.
What Happens When You Run Out of Price Savings?
Price savings are harder to find, contain, negotiate or even identify now that everyone (including your vendors) understands and has become highly skilled at how to play the price game. Wouldn’t you agree?
What happens when you run out of price savings, or as I like to say, “What happens when the fish stop jumping into your boat?” At a recent seminar that I conducted a MM’s answer to this question was “Look for a new job”. I don’t think that’s the right answer to this question — do you?
Reality check: Your vendors’ cost for transportation, energy, plastics, etc. (or 80% of the things your hospital buys) will continue to escalate. So who do you think your vendors are going to pass this cost along to?
Yes you got it right – YOU!
I was just talking to one of my major teaching hospital clients the other day who is scrambling to find more savings in their orthopedic and spine implants, but even after benchmarking his cost with us and bidding his implants using our benchmarks as a guide, he only shaved a few percent off his implant prices. By the way, this client belongs to two GPOs and still can’t get better prices even with his own custom contracts on implants
The next day I talked to another client of ours who is the Vice President of Purchasing for a six hospital system who is racking his brain on how to get better prices for his hospitals, when he never had this challenge before. Until recently, he always could find a new and better price savings on any commodity he was purchasing.
What does this all mean to you! If you are betting your career on finding new and better prices for the commodities you buy in the future you are going to be in for a rude awaking – it isn’t going to happen.
On the other hand, if you look beyond price you can make a quantum leap forward in utilization savings that are never ending and are right in front of your eyes just waiting to be harvested.
Stop Wasting Your Valuable Resources
People are the most valuable resources in any and all healthcare organizations, yet they are being stretched beyond human capacity to get their jobs done, while at the same time save money and improve quality.
All of these activities are extremely important. However, we have observed that healthcare organizations’ timing, targeting and discovery of new savings and quality opportunities actually are wasting their value resources, not conserving them.
We have seen LEAN Management inventory reduction initiatives in operating rooms that have expended hundreds of hours of their clinicians’ time with only meager savings and quality improvement to show for it. Also, value analysis teams meeting monthly for years without producing real substantial savings.
If you are to stop wasting your valuable resources we must get rid of this “shoot from the hip” mentality when deciding on our savings and quality projects, and then replace it with a scientific approach to conserve our limited resources.
By “scientific” I mean that you actually measure where your best savings and quality improvement opportunities reside by employing value analytics. Then and only then, do you assign a value team to ferret out the opportunities for improvement – not before.
In light of the fact that we in healthcare have a shortage of 100,000 registered nurses, we need to be cognizant of the reality that our clinical resources aren’t limitless. Yet, it is mission critical for us to have our clinicians deeply involved in our savings and quality projects. This won’t happen unless we conserve these finite resources by being more prudent, cautious, and practical on how we assign them to our cost and quality management programs.
What Really Works!
Savings Beyond Price -Weekly eNewsletter – November 13, 2008
Robert T. Yokl
President & Chief Value Strategist
Greetings!
What Really Works!
If you separate the facts from the fads in healthcare supply chain management you will quickly discover the “must-have” supply chain practices that truly produce superior results. What does really work, you might be surprised to hear, is that you need to go back to basics before you can go forward to big savings results in the future.
From my experience, here are the four primary supply chain best practices that really work and have past the test of time:
1. Committed Volume Purchasing
I can’t think of a healthcare organization that doesn’t belong to one, two or even three GPOs, but very few hospitals that I have observed have jumped on their GPOs committed volume contracts. That’s where the deep deep savings can be achieved for your healthcare organization, because all vendors sharpen their pencils when they know that they will get all of your business, not just some of it. That’s why regional GPOs are becoming a big factor in saving money for their members; they are all steadfastly focused on committed volume purchasing.
2. Classic Value Analysis Techniques
Value analysis in all its flavors, as a MM characterized it to me the other day, can save you money. However, if you were to employ the classic (back-to-basics) tenets of value analysis as espoused by Larry Miles, the Father of value analysis, you will save a lot more money and have better and faster results.
3. LEAN Management Practices
LEAN management has a 28-year history of leaning supply chains of waste and inefficiencies in all industries, including healthcare, by making use of Toyota’s 14 principles of management. LEAN is not only a best proven practice, but a “must-have” approach to supply chain management that will eliminate the huge costs of your hidden waste. The healthcare organizations that we have worked with over the years that religiously applied Toyota’s 14 principles have saved seven to 15% on supply chain expenses – almost overnight.
4. Supply Utilization Management
In the 80s Bill McFaul, the co-founder of McFaul and Lyons consulting firm, coined the phase “consumption management” to focus his clients on savings beyond price™ where the greatest savings can be achieved. We now call this discipline Supply Utilization Management because this art and science encompasses more than just consumption analysis of the products, services and technology you buy, but also targets the value mismatches in supply chains that are bloating hospital’s budgets. This is an old concept whose time has arrived again to be put into practice, since your price savings are slowly on the decline and your low hanging fruit have been picked.
You might want to consider these four best practices as “what’s old is new again” since the right strategies, tactics and techniques never really grow old, but somehow just get lost in the passage of time as we move on to new but not necessarily better best practices. I hope you will revisit these four primary supply chain best practices to produce even more superior results in the future for your healthcare organization.
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 read more about “what’s old is new again” ideas you might want to check my special report “Building a Savings Factory” that will give you even more best practices that have passed the test of time.
P.P.S. Don’t forget to check out my new blog article “Supply Chain Hall of Fame Awards Now a Reality”. This blog will talk about nine men that changed the face of supply chain management in our time.
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!
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.
