Is Value Analysis Your Responsibility?
I was paging through AHRMM’s 2009 Material Management’s survey to look for trends that might be of interest to my readers. One trend that jumped out at me was that only 28.7% of the survey’s respondees reported that they were responsible for value analysis for their hospital. This is an astounding statistic when you think about it: 71.3% of MMs aren’t responsible for VA at their healthcare organization!
My first reaction to this eye-opener was that this must be a typo, but then I realized that this number was consistent with AHRMM’s 2007 (30.7%) and 2008 (36.5%) survey results, so it must be right. I also know that many hospitals, systems and IDNs don’t have active value analysis teams, so that’s one reason why this number is so low. Another reason it’s low is that not all supply value analysis programs report to material management. I have often seen this vital function reporting to nursing service, not materials management.
My thinking is that even if this number is a little off, it still shows a dangerous trend in healthcare: Material management isn’t 100% in charge of their healthcare organization’s supply value analysis programs or there is no VA program is place to do so!
As I see it, VA is a mission-critical function of materials management. Every hospital, system and IDN should have a supply value analysis program and it absolutely should report to materials management. This is because price is the smallest factor in the total cost equations (about 21%), while 79% of your product, service and technology cost is attributed to the in-use cost of the commodities you are buying. Based on our empirical experience, only VA teams can drive out these unnecessary and unwanted utilization costs…period!
In brief, if your hospital, system or IDN is to get ahead of the wave in the new healthcare economy that is upon us, you will need to embrace the value of value analysis in controlling your total supply expenses. This means, in practice that you will need to take charge of your VA program if it reports to another department or establish VA teams to get this hard work done.
The alternative is to either ignore this proven cost-cutting methodology or leave it to someone else in your hospital, system or IDN to get this important work done. This doesn’t seem like a plan to ensure your job security to me, so I would suggest that you take charge of your VA program today or get your VA program started to protect your turf and to keep your paychecks rolling in for the foreseeable future. It doesn’t take a whiz kid to see this as the road you should travel.
Doing More With Less the “Jugaad” Way!
New hard to pronounce words are always showing up in our business lexicon that at first has no meaning to us. Yet in time become part of our own healthcare organization’s everyday language because it now makes sense for us to do so.
One of those new words you will be hearing about is Jugaad (pronounced “joo-gaardh”), that has its roots in the Hindi language, meaning “innovative fix” or using whatever is at hand to get the job done quickly and cheaply. Think of “Jugaad” as business duck tape to fix all those nagging problems you encounter each and every workday.
It’s best described as producing quick results for very little money. That’s why I believe it has its place in the healthcare lexicon, since today, tomorrow and the future healthcare organizations will be challenged with doing less with more. In fact, I didn’t know I was employing Jugaad when I first started to preach to our clients last year that if they were looking for quick fixes to their utilization challenges all they needed to do was “measure then observe” to root out much of their utilization misalignments in their supply chain.
I have become a believer! Prior to this “aha” I thought this transformation would only happen if our clients used our patented 6-step LEAN Value Analysis Funneling™ Process. But now I know that you can take some shortcuts even with our LEAN Value Analysis process and still make significant savings happen without all the fuss and bother of following a defined, repeatable and auditable process.
Don’t get me wrong! Jugaad isn’t an end all or be all and isn’t for everybody. It can lead to unrepairable fixes, safety hazards, and shoddy service if applied haphazardly. From my own experience, it must be applied knowingly, carefully and artfully. It’s like my plumber; he will take short cuts when he is fixing my plumbing leaks because he is an expert and knows what he is doing. If I tried the same thing, I fear I would flood my house. It’s all about knowing what you are doing first, before ever tinkering with any product, service, technology or process in your healthcare organization.
Take the road most traveled! While shortcuts (or The Jugaad Way) are the answer to some immediate challenges that we all encounter, I have found that there is no substitute for taking the road most traveled if you have the time, money and resources to do so. To illustrate, even though I have promoted here and elsewhere that the technique of “measure and observe” or “The Jugaad Way” will quickly uncovering much of your utilization savings, I know from our experience, observations and analytical data that you will still be leaving too much money (hundreds of thousands of dollars to be exact) still on the table — untouched. This isn’t a good thing to do!
Summing up, Jugaad is a great new technique to add to your toolbox for solving your ever mounting cost and quality problems quickly and cheaply if you know what you are doing. However, don’t compromise your hospital, system or IDN’s savings, quality or safety by amateurishly tinkering with things you know nothing about.
No Better Calculation Than ROI to Determine Your Value Analysis Project’s Success
We can all fool ourselves into believing we are saving money on our value analysis projects, or we can actually prove it beyond a shadow of doubt by using a simple ROI calculation (ROI = savings – project cost/project cost x100) to determine your Value Analysis project’s success.
How to calculate ROI (Return on Investment)! As an example, if your savings is $190,222 on a VA project and your project cost (time, money and resources) to achieve this savings is $3,929, then for this project your ROI = 4,741%. It’s just that easy, although it isn’t as effortless as it looks to calculate all of these factors if you want to get your ROI to be accurate.
The big challenge, as I see it, in calculating your ROI is computing your project cost. This means that you need to estimate the number of people x hours x hourly rate of the involved parties (e. g. team meetings, ad hoc meetings, vendor meetings, ordering, stocking and storing new product, in service training, etc.) that is required to plan, organize, investigate, speculate and then implement the identified savings.
Is it worth the time? Yes, if you are truly interested in quantifying your actual project value, building stakeholder support, uncovering additional benefits and prioritizing future projects. No, if you would just like to continue to report to your executive management team incomplete, imperfect and subjective data that you think makes your value analysis program look good.
To this end, it has always been my policy to report the most accurate, complete and fiscally revealing information to my executive management teams and now my clients. This is because I have found that the most illuminating and actionable data available might require more time to actually bring together, but it always opens new doors and better ways to do things than shortcuts, easy answers and back of the envelope calculations. It’s your choice…
What a Great Model for Any Hospital Value Analysis Program
Last week I was on site at a client’s location conducting an advanced 1-day LEAN Value Analysis Training Program for their value analysis team leaders and team members. This was this client’s annual value analysis refresher course which I think is a perfect model for all value analysis programs to emulate. Why? Because too often hospitals start their value analysis program without any training whosoever (they just tell their teams to “Go Save Money”). Therein lies the problem! That’s why I like this client’s value analysis model: Annual refresher course to keep their VA teams on target, on budget and on the money each and every year!
Let’s face it value analysis is not as easy as it looks. If you were to tell me that you could establish a Six Sigma Teams without training black, yellow and green belts and then expect these teams to achieve Six Sigma outcomes you would be just kidding yourself. Your team members would need extensive training in Six Sigma to accomplish superior results. Value analysis is a discipline very much like Six Sigma or Lean Management. To be proficient at value analysis you need to have extensive, continuous and up-to-date training for peak performance!
That’s why this client not only began their VA program with extensive training for all their team leaders and team members, but they also realize that this education is never ending and that in order to continually improve their VA program they must refresh their VA training each and every year.
For example, this client told me that they contracted with a trainer last year who focused on evidenced based management. This year they hired our firm for advanced value analysis training as well. This is not a one-time event for this client, but an ongoing stratagem to continue to hire the best value analysis trainers and on an annual basis give their VA teams new and even better strategies, tactics and techniques that they can employ to boost their VA team’s performance.
It was also important to note that this client had their Chief Operating Officer attend this training session and then spoke to the group during a break. He reaffirmed how important all of their VA work is to their hospital, especially since their reimbursement is not going to go up any time soon even though higher technology expenses are still pushing their costs up each and every year. I can’t tell you how significant it is to have an executive management sponsor, like this COO, fully engaged and very active in hospital’s VA program! From my perspective, it will certainly make these team leaders’ and team members’ job easier and their teams much more successful.
One of the reasons this client’s VA program has been so successful over the last few years is that they keep the momentum going with VA training each and every year so that their VA teams never lose focus of how important they are to the financial success of their healthcare organization.
It’s easy for any hospital, system or IDN to put a VA team(s) together and say “Go Save Money”. It’s usually followed by capturing some low hanging ripe fruit that’s ready to be harvested. Nevertheless, we have found that the true test of a VA program’s sustainability, profitability and productivity is for them to achieve measurable and meaningful savings after their low hanging fruit has been picked clean!
An annual VA refresher course on the most up to date techniques in value analysis would be a good starting point for you too to keep your VA team(s) focused and motivate each and every year.
Last but not least, it doesn’t take a lot of time, effort or money to do so.
VA Isn’t Just About Product Evaluation/Selection
Just the other day, a Value Analysis Team Leader that we were coaching asked us if it would be OK with us if his VA team started looking at the processes surrounding the products, services and technology his team was charged with to uncover any and all waste and inefficiency in their value streams.
We were delighted to hear that this team leader was moving in this direction since VA isn’t just about product, service or technology evaluation/selection. It’s all about reducing your total cost from acquisition to disposition of your products, services and technologies. We therefore have encouraged all of our value analysis clients not to isolate their product, service and technology investigations to the commodities themselves, but to instead dig deeper and broader into their value streams to eliminate any and all waste and efficiency that might reside there hidden from their view.
Over the years we have conducted numerous value analysis process engineering studies by employing a FAST Diagram*. In my opinion, it is the best value stream mapping “made simple” tool available today. I can make this declarative statement since I have used numerous value stream mapping tools in my 27 year consulting career and hands-down the FAST Diagram is the easiest one I have found to learn, understand and then quickly generate results in the shortest time.
If you’re not familiar with FAST Diagramming let me explain. FAST Diagramming will enable a value analysis practitioner to identify each function, in a logical sequence, prioritize them and then test their dependency, efficacy and relative worth to your customers in any value stream process under investigation. In this way, you can more skillfully understand the complexity of your value stream processes as opposed to becoming preoccupied and paralyzed with methods and practices of flow-charting or traditional process mapping.
We have documented, by utilizing FAST Diagrams, up to 23% in process improvements (time, labor and resources) in any business process that we have studied over the years. More importantly, we have never found a dry hole in any study to date, which is proof positive that FAST Diagrams work.
So if you want to mine even more savings for your value analysis program, don’t have your VA team(s) stop your VA studies at your product, service or technology evaluation/selection phase. Have them move on to the next phase of your VA study — process improvement.
If you do, you will find that there are both big and small savings to be achieved in this process improvement phase of your VA study that will be well worth your time and effort in doing so. Up to 23% to be exact!
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*Learn more about how to perform a FAST Diagram in “The Ultimate Value Analysis Program” pages 177 to 186.
How to Keep your Value Analysis Projects on Target, on Budget and on the Money
From the earliest days of SVAH when installing our LEAN Value Analysis Program at client organizations, we emphasized one paper tool (before we developed our value analysis software to do so) to be utilized by our clients value analysis teams to keep them on target, on budget and on the money. Can you guess what the tool was?
Well, that tool was a simple “GANTT CHART”, which was invented by Henry Laurence Gantt, to plan their VA projects, lay out the tasks that needed to be carried out during the project’s life cycle and then estimate the time line that was necessary to complete their projects. Our clients found that there were three big benefits when they used this chart:
- It immediately allowed them to see what tasks should have been achieved at any given point in time.
- It showed what they needed to do to bring them back on course.
- It pointed to the “milestones” or deadlines they should have hit along the way to keep their project on target.
Best of all, if you computerized your “Gantt Chart” system as we have it is the quickest, easiest and most effective way I know of for your VA project leaders to look over the shoulder of your VA project managers to ensure that their projects are on target, on budget and on the money at any given time. So, if you are looking for a easy way for your VA project managers to get more done in less time – this is one of the best kept secrets for doing so.
Healthcare Expense Reduction: A Systematic Approach
The phrase “Healthcare Expense Reduction” can have many different interpretations. It could mean getting the best price, benchmarking to find the best practice, searching for the best value products, services or technologies or reducing your inventory levels to near zero. However, I would suggest that “Healthcare Expense Reduction” if done correctly needs to be all of these things and much more.
In point of fact, from our empirical experience it requires a systematic approach to reducing your healthcare organization’s supply chain expenses to get it right. This concept is analogous to what the insurance industry calls BLANKET COVERAGE, a single unifying policy that covers any and all of your risk or exposure to unforeseen calamities. This BLANKET COVERAGE idea holds true with “Healthcare Expense Reduction”; To get it right you need to cover all of your supply expense categories of purchase – all at one time.
To get you started on this journey, we have listed seven core elements of a successful “Healthcare Expense Reduction” unifying system. We advocate these core elements for you to obtain the highest return-on-your-investment of time, effort and resources in order to attack ALL of your supply expense savings simultaneously.
You will notice that these seven core elements described herein are actually interconnecting programs which you should have in place which cover the total spectrum of your “Healthcare Expense Reduction” efforts as follows:
1. Utilization Management Program
2. Value Analysis Program
3. Contracts Administration Program
4. PriceCheck™ Program
5. Inventory Management Program
6. Linen Management Program
7. Forms Management Program
As this list suggests for your “Healthcare Expense Reduction” to be effective you need to have complementary and synergistic expense reduction programs in each of your supply chain disciplines, not one-time events. This way you can be assured that you have “Plugged all of the leaks” in your supply expenses before they become mile-high gushers or raging rivers.
This isn’t just a theory, but the actual system that we have employed ourselves over the last 23 years to assist hundreds of healthcare organizations in reducing their supply expenses to absolute minimums, and then to keep their expenses under control — going foreword.
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.
Toyota Has Got Value Analysis Right…Do you?
I just read an article in the December 23rd edition of the Wall Street Journal titled TOYOTA ACCELERATES ITS COST-CUTTING EFFORTS. The article proclaims that Toyota’s goal is to reduce its parts expenses by 30% within three years by employing the strategies, tactics and techniques of value analysis.
Specifically, the article states that “Hit by financial crisis, (Toyota) last year launched a “Value Analysis” program to cut the cost of producing existing models. I believe this is the same financial crisis that healthcare organizations are facing today: reduced reimbursement, lower census and increased bad debts? There is no doubt in my mind that Toyota has “got it right” when they decided to utilize the time-tested value analysis methodology as their tactic of choice to push to return to profit after a very bad year.
Do you see the similarity with healthcare? Our industry faces the same challenges as Toyota: slow growth, reduced profits and an uncertain future. That’s why value analysis is more important than ever before.
Our industries’ price savings are slowly disappearing, but there are still billions of dollars in value analysis savings still available in the healthcare industry. This could be uncovered if we as an industry focus on the wasteful and inefficient consumption, misuse, misapplication and value mismatches in our supply streams.
Bottom Line: If you aren’t vigorously applying the techniques of value analysis to discover your next big savings opportunities, then you are losing out on this gold mine of new and better savings for your healthcare organization. As I see it, if healthcare organizations are to be profitable, viable and thriving in 2010, they need to take a lesson from the Toyota playbook and accelerate cost-cutting efforts with value analysis.
Why Does Value Analysis Fail at Some Hospitals, Systems or IDNs?
Value analysis is a best practice in 93% of hospitals, systems and IDNs in the country today, but why do so many VA programs fail to reach their full potential and reap the complete benefits of this supply chain discipline? To answer this question, I have prepared a FIVE point check list that you can use to measure your own VA program against to see if it is meets, exceeds or is missing the grade:
Steering Committee
If you don’t have a value analysis steering committee, chaired by the highest level of management you can recruit for this position, who will guide, monitor and arbitrate disputes in your VA program, then you are missing a key ingredient to your VA program’s success.
Balanced Scorecard
What is visualized and measured happens should be the mantra for your VA program. This is best achieved with a balanced scorecard that measures in real-time your savings vs. goals, milestones, meeting attendance, team and project status, etc.
Executive Champion
No real progress can be made with your VA Team(s) without an executive champion being assigned as an administrative representative to your VA team(s). This individual’s job is to represent senior management, guide VA process, arbitrate disputes, remove road blocks and smooth the road when political impasses arise.
Extensive Training
Team leaders and team members need extensive training in value analysis (it is a real discipline like LEAN Six Sigma that has a defined process, practices, tactics and techniques), or your VA team leaders and members will just WING IT, resulting in poor or unrealized savings and quality improvements.
Project Management
All team members need to be accountable for their results. This can only be accomplished by assigning VA studies to individual project managers who then are responsible for defining, planning, investigating and implementing VA savings opportunities.
As you can see by this checklist, value analysis isn’t a group of individuals meeting monthly to discuss new product introductions, GPO contracts, or product failures. It’s a formal and disciplined process that requires executive management leadership, continuous measurement, monitoring and control, extensive training and stringent project management to be successful.
If you are missing any of these ingredients, you are forfeiting the opportunity to be the “best” of the best in value analysis. Don’t leave these success elements to chance, but instead incorporate them into your current VA program so you can be assured of success – not failure!
5 Steps to Improve Your Hospital Value Analysis Studies with Focus Groups
There are a few key steps in every value analysis study that you conduct that should never be missed, ignored or be forgotten. One of the most important steps that is often overlooked in our rush to get our VA study done, is for us to listen to the VOICE OF YOUR CUSTOMERS so that you can clearly understand their wants, needs and desires prior to re-engineering any of their products, services or technologies.
This chore can best be accomplished with surveys, interviews and focus groups. However, I have found that the most efficient and least time consuming way to gather your customers’ critical-to-quality requirements is with FOCUS GROUPS. Louise Lee of SmallBiz Magazine tells us that there are 5 vital steps you need to know about when you are conducting focus groups. I have listed these steps below:
1. Do Your Homework
You need to develop a list of questions beforehand as conversation starters, but your questions should be broad enough to encourage discussion. A good way to start off is to ask your customers how they use the product, service or technology that you are studying. This will break the ice and get the dialog going!
2. Find the Right People
When you’re conducting a focus group not only invite customers, stakeholders and experts to participate in this exercise, but also ask a few non-customers to your session, this can help to give your focus group members some perspective and keep them grounded.
3. Choose a Location
If possible, have the location for your focus group as far away from their work centers as possible. In doing so, you will eliminate most distractions, interruptions which will shorten the length of your session.
4. Pick a Moderator
Most focus groups can last as long as two hours, and participants can be combative, blunt and critical of your efforts. Consequently, if you don’t feel comfortable in this environment have one of your hospital’s facilitator’s moderate your focus groups.
5. Discuss Results
Once you have completed your focus group, analyze your findings. Look for themes and ideas that stood out in the discussion, and see how you can use them to guide your value analysis study. And be prepared for negative feedback about your focus group, since most people in your hospital don’t like change.
As you can see, conducting a focus group takes time, planning, and analysis to truly comprehend the VOICE OF YOUR CUSTOMERS in any VA study that you conduct. From my experience, conducting focus groups as an integral step in your VA studies will improve the quality of your studies 10-fold. As an added benefit, it will clearly demonstrate to your customers that you really are interested in their opinions, comments and advice by your actions and subsequent results.
Why Not Incentivize to Save with Value Analysis?
I have been fighting this battle for 22 years now to get healthcare organizations to incentivize their value analysis teams to save EVEN more money. Nonetheless, I seem to be loosing this battle, but not the war!
It has been proven beyond any doubt with our own clients that if you incentivize your value analysis teams to save MORE by giving them rewards and recognition you will increase your savings yield by as much 300+ percent. However, in the 22 years we have been working with healthcare organizations in the value analysis arena only one in eight of our clients has opted to do so.
The question is why? After thinking about this question for some time now, it seems to me that there is a “cultural Bias” in healthcare organizations against incentivizing any of their teams (LEAN, Six Sigma, value analysis, quality improvement, etc.). They believe that team members are already getting paid a salary to do this work so why should we give these individuals any extra incentive to do what they are already being paid for?
What is missing from this decision “not to incentivize teams” for their new, harder, different and time sensitive work (that they are assigned to do beyond their normally assigned duties) is that this work is a HUGE distraction from what these hospital employees think they are getting paid for. The result: Most staff members only give 40% of their time, energy and effort when assigned to teamwork – not 100%!
Change the paradigm! If you want to change this pattern of behavior in teamwork, you will need to change the perception of this work as burdensome by emphasizing that it is important, mission critical and essential to the financial health of your hospital. This is accomplished by incentivizing all of your hospital’s teams, including your value analysis teams, with rewards and recognition when they reach predetermined goals and milestones.
Believe it or not, by doing so you will quickly discover that your staff members will line up to become members of your value analysis teams (and all other teams), not avoid them. Better yet, it won’t cost your hospital a whole lot of money (about 3% to 5% of the savings) or time to establish and manage a team rewards and recognition program.
You will be repaid for your efforts with new and better savings that will generate as much at a 35:1 ROI on your investment. Doesn’t this sound like something your hospital and thousands of healthcare organizations around the country should have been doing for years? If not, why not…
DATA GAPS: The Data You Have Vs. Actual Use
Most supply chain organizations have at least three trillion bytes of data in storage but they only have the analytical capability to analyze two trillion bytes due to their data gaps (e.g. missing data, inaccurate data, unclassified data, vague descriptors or inadequate classification of data). In fact, most supply chain organizations have only the capability to execute Value Analytics™ to their completion on only one trillion bytes of data.
What does this technical lingo mean to you? Most supply chain organizations are only capable of analyzing one-third of their data, at best, to uncover hidden utilization savings opportunities. Just imagine what you could do if you had ALL your data analytics steps in place to uncover these new and better savings.
Just the other day a supply chain manager told us that his spend manager didn’t give him the visibility into his supply spend vs. our Utilizer Dashboard, since our Value Analytics™ went deeper and broader into his supply chain than his spend manager did. The bottom line was $7.7 million in utilization savings that were hidden from his view since he was looking at only one-third of his data
So if you want to move to the next level of savings performance beyond price I would encourage you to implement these seven steps:
- CLEANS your data so that it is usable and defect free.
- HARNESS the latest technology to make your job easier. If you tried to perform these analytic studies without software your job would never be done.
- DEVELOP or use a third parties’ Value Analytics™ methodology to hone in on your utilization misalignments.
- ANALYZE the data that your analytics system spews out.
- ESTABLISH and/or utilize your current value analysis teams to ferret out the savings you have identified.
- FIND an executive sponsor or sponsors to champion your initiative and to remove the roadblocks you will encounter along the way.
- INCENTIVIZE your team members to keep them at peak performance.
I know that you are thinking to yourself that “this seven step roadmap is a tall order when you consider I’m already swamped with work.” However, these seven steps only look overwhelming to you if you try to do everything I’m suggesting — at once.
It took Strategic Value Analysis in Healthcare almost 10 years to be able to have them fire on all eight cylinders. What we would recommend you do to get started with your own Value Analytics™ Program is test the waters, since Value Analytics™ in my opinion is the future of supply chain expense management.
Effectively Maximizing Your Saving Yields
We all have a tendency to forget about yesterday’s savings because they are history, but by doing so we are losing a big opportunity to effectively maximize your savings yields. Worse yet, we are not realizing that your savings have evaporated because they weren’t put into practice properly.
We see this taking place all the time with clients of ours who believe that they have saved big dollars on a product, service or technology only to find, with the use of our Supply Dashboard that they either underestimated or overestimated their savings yields.
This reminds me of a client who thought they would save $52,345 on a disposable glove value analysis project, only to find they were spending $51,298 more than before the project because their food service department was now using the highest priced gloves available at their hospital. This blunder was due to poor communications in introducing our client’s new glove protocol and a lack of controls when the project was implemented.
On the other hand, we have had clients that have estimated their savings yield on a project to be $12,888 only to find with our Supply Dashboard that they actually saved $29,298 because they underestimated their savings by a mile. This is good news and bad news!
If you are to effectively maximize your saving yields you need to measure, manage and control your implementation outcomes. This can ONLY be accomplished by continuously tracking and trending each and every savings initiative that is reported on your saving reports.
This way of doing business will pick up on your radar screen any and all variances from your initial savings estimates and then, if necessary, you can take the appropriate action to get your savings projects back on track.
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.
