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.
Five Myths Vs Facts
Savings Beyond Price -Weekly eNewsletter – June 10, 2009
Robert T. Yokl
President & Chief Value Strategist
Five Myths vs. Facts!
Greetings,
Over time we all develop a belief system that is based on our life experiences, biases, and traditions but are these viewpoints myths or are they facts? These collective perspectives or assumptions that we gather over time can relate to our supply chain world as well as our life!
From a supply chain perspective if these beliefs and assumptions aren’t tested, inspected and examined vigorously we could be overlooking big breakthroughs in our supply chain management. Here are five myths versus facts that you should be reexamining in order for you to remove any performance gaps in your supply chain operations:
1. Benchmarking Doesn’t Work
I can’t count the times a MM has told me that they believe that benchmarking doesn’t work because it is inexact science or we are different. By holding this belief, these MMs are missing the opportunity to save millions of dollars annually.
To the contrary, benchmarking is an art and science that has been proven in every industry, including healthcare, to be the best methodology to identify gaps in an organization’s performance. This leads us to search out best practices to fill those gaps that are costing us thousands, maybe even millions of dollars annually.
2. Price Savings are Forever
I hope everyone understands that “nothing is forever”, but too many MMs believe that this truism doesn’t apply to price savings when the facts inform us differently. With few exceptions, hospitals, systems and IDNs are just holding the line on inflation (3.9% for 2008) with their price savings, not beating it. This fact would lead me to believe that MMs should be searching out other sources of savings if they want to beat the inflation rate each and every year.
3. Utilization Management isn’t a Priority
Considering that price savings are slowly disappearing, what better source of new savings (7% to 15%) could there be than utilization (in-use cost)? How then can MMs IGNORE these big savings opportunities by stating that it isn’t a priority? Shouldn’t the highest level of savings available at a healthcare organization, with the best ROIs, be an uppermost priority to every supply chain manager?
4. Value Analysis is all About GPO Contracts
Every time we visit with a value analysis team we find them evaluating their new GPO contracts, with very little emphasis on the waste and inefficiency in their supply chain.
Value analysis ISN’T about GPO contracts; it’s all about functional analysis, which has nothing to do with GPO contracts. When will we get these two disparate supply chain activities designations right?
5. Purchases Services isn’t in our Scope
I was just told again last week by a value analysis manager that he doesn’t believe that purchase services should be in the scope of his supply value analysis program. Then I asked him who did he think should be functionally analyzing these contracts?
The way I see it your department heads won’t, your supply chain department is too busy, and your administration doesn’t even have these multi-year million dollar purchases on their radar screen. That’s why purchase service contracts MUST, in my opinion, be in the scope of your supply chain department and evaluated by your value analysis teams. To do less is to relinquish hundreds of thousands of dollars of savings annually.
These five myths vs. the facts should raise your consciousness to the possibility that all commonly held beliefs and assumptions aren’t always factually true. That’s why you need to challenge not only your own beliefs and assumptions, but those held by others in your healthcare organization that might not pass the test of time.
Your Partner In Savings Beyond Price™,
Robert T Yokl
Chief Value Strategist
Strategic Value Analysis® In Healthcare
1-800-220-4274
P.S. Don’t forget to sign up for this ONE-TIME-ONLY “How to Create, Manage and Maintain High Performance Value Analysis Teams” NO COST webinar on June 17th (Eastern) at 1:00pm (Eastern). This webinar is exclusively designed for those hospitals, systems and IDNs who are seriously looking for new and better strategies, tactics and techniques to take your supply value analysis program to the next level of savings performance.
Getting Unstuck
Savings Beyond Price -Weekly eNewsletter – February 24, 2009
President & Chief Value Strategist
Greeting,
Getting Unstuck
Failure to “get unstuck” can put your career as well as the health of your healthcare organization – at risk. By this I mean in times of peril, like we are experiencing now, the old ways of doing things (price, standardization and capitation) aren’t going to lead you to NEW paths of success.
You must develop a new vision and a new fervor for your supply chain operations in order to move past what you have been doing so that you can create a new roadmap to lasting success. A good way to start on this new path for “getting unstuck” is to imagine what savings strategies you would pursue if price, standardization and capitation savings opportunities completely disappeared from your radar screen.
This scenario actually happened to my firm 10 years ago when GPOs took away all or most of the price saving opportunities that we were identifying for our clients. We then had to “get unstuck” and move on to new and better savings strategies, tactics and techniques (utilization, value analysis, and contract management) so that we could continue to bring value to our clients. In doing so, we found new paths to longer-lasting savings for our clients – beyond price — then we ever thought possible.
The vivid picture that I just described to you isn’t fiction, but a fact! Price, standardization and capitation savings are rapidly fading from your radar screen. If you don’t decide to “get unstuck” and move on to new paths you will be at an impasse that will put you and your healthcare organization – at risk.
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 are really looking to “get unstuck” by traveling on new paths you will want to sign up for our latest webinar “Game Changer: 2009 Recession” where we will discuss this topic in detail.
P.P.S. I want to remind you to take a look at our latest version of our Utilizer Dashboard Software today. You have to see how this software tool will give you fast, efficient and easy to use low cost tool to help you drive out all of your savings beyond price then you need to take a look at the Utilizer today! You have to see the Utilizer to Believe it!
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Free Special Report
Supply Chain Utilization
Targeting your next big savings opportunities
“Could a misalignment that comes with a simple (and less costly) fix be eating away at your savings?”
“Beware of Standardization”
“Managing utilization costs can save six to 10 percent on total supply expenditures”
