Unintended Consequences
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
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.
