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

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.

Savings Beyond Price -Weekly eNewsletter – February 11, 2009

Robert T. Yokl

President & Chief Value Strategist

 

Unintended Consequences

I won’t argue with the conventional wisdom that standardization is one key to success in supply chain management. However, did you know that standardization can have unintended consequences that can greatly affect your healthcare organization’s financial fitness?

How could this happen? What we are seeing over the last few years is that healthcare organizations are over-standardizing on their product lines (I.V. sets, PICCS, electrodes, pacemakers, etc.) thus causing them to have higher total costs that are unnecessary, wasteful and unconscionable.

For example, we frequently see hospitals standardizing on one I.V. set throughout their healthcare organization at a cost of $7.86 or higher. These feature rich IV sets should only be employed in the operating room and emergency room, and not in every department in your hospital. By doing so, these hospitals are BLOATING their expense budgets by hundreds of thousands of dollars (maybe millions) each and every year.

The point I’m trying to bring across here is that standardization is a powerful cost management tactic when used artfully, but you need to have a set of rules to prevent over-standardization since this is uneconomical.

The first rule I would recommend you adopt is to not standardize on one product, service or technology without first understanding your customers’ (we call them “value groups”) exact functional requirements. In the case of IV sets you could have 7 to 9 value groups (OR, ER, Nursing Floors, Clinics, etc.) that you need to observe and interview to uncover their specific functional requirements, before you make a decision on what IV sets you will stock for them.

REMEMBER: One size of anything doesn’t fit ALL of your customer requirements. If they did we could hire monkeys to manage our storerooms because it wouldn’t matter what the monkeys gave out since it would be all the same to our customers. We all know that this would be an unrealistic and even laughable situation.

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 what rules you should be following to avoid over-standardization, I would suggest you listen to our “Value Analysis 2.0” podcast where you will learn new rules, systems and models to move you to the next level of savings performance.