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.
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.
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.
