Doing it with Data
Savings Beyond Price -Weekly eNewsletter – September 24, 2008
Robert T. Yokl
President & Chief Value Strategist
Greetings!
Doing it with Data
One of the top 10 mistakes that value analysis practitioners make when they are assigned a value analysis study is that they don’t data mine to hunt for predictive information that can lead them to those big and little pearls of discovery.
This is because it is much easier to stop at the first savings that is identified (usually a price savings) in a VA study and then call it quits. Remember, price is just the tip of the iceberg and that 79% of all NEW supply chain expense savings is to be found underneath the iceberg.
Case in point! A few years ago I performed a value study on diabetes tests where I quickly found that my client could save 11% (or $8,234) by jumping on a new GPO contract, but I didn’t stop there with my study. I then data mined my client’s test utilization and found that they were utilizing 7x more tests or $64,234 then their peers. Further investigation and observations uncovered that my client’s diabetes test strips were defective thereby their nurses had to use two test strips before obtaining an accurate reading. Once this defect was eliminated the total project savings for my client resulted in a $72,468 yield!
If I would have stopped my value study when I uncovered the $8,234 in price saving for my client I would have missed altogether 90% of the savings available on this project. The term “Doing it with data” isn’t just a nice phase to quote, it’s the central part of any value analysis study.
More importantly, data mining is the future of supply chain expense management! Don’t ever miss this step (doing it with data) in your value analysis process, or you will leave millions of dollars of savings on the table – untouched.
