There is no Finish Line with Savings
I love the philosophy of Costco (super warehouse club), which can be reduced to “there is no finish line with savings” for our club members. Costco meets this mission by not providing bags for their customers, only carrying one brand of each product in each category, reducing their lighting costs on sunny days since every store has huge skylights, and delivering their products on pallets and then placing them right into Costco’s warehouse stores without double handling. They only accept one credit card (American Express) which gives them ultimate leverage with their credit card company. As you can see, Costco’s savings efforts are a never-ending cycle…
As you might have observed, Costco doesn’t meet this “no finish line to savings” goal by just focusing on the price at the pump. They incessantly are searching for better ways to lower their total cost of acquisition to disposition. Another way they do this is with their private label brand called Kirkland Signature, which is highly acclaimed in a number of categories (batteries, laundry detergent, cookware, etc.), as #1 rated in the marketplace. My wife and I have found this to be accurate with most of the Kirkland Signature brand of clothing which is indeed superior to even some of the nationally advertised brands we had been buying for years.
My goal with this blog article was to give you some big and little ideas on how your hospital, system or IDN can emulate one of our nation’s leaders in providing your customers with a never ending cycle of savings. It’s not about price, but it’s all about finding innovative ways to reduce your total supply chain cost.
Here are a few questions you should ponder as you investigate your own never-ending cycle of savings for your healthcare organization:
- What percentage of private label brands are you buying?
- Are you utilizing a purchasing card for small purchases?
- Do you have too many hand offs of your products?
- Are your buyers looking beyond price for big savings?
- Are you employing the latest technologies to reduce your cost?
This is just a sampling of the type of questions you must ask yourself to create an environment for a never-ending cycle of savings, since there is no finish line with savings for today’s supply chain professionals if you are to meet the changes of the new healthcare economy.
Bridging the Gap Between Price and Utilization Savings
I just had a conversation with a material manager who told me that he was trying to change his orientation from price to utilization savings, because he now realizes that his price savings are slowly disappearing.
In response to his comment, I told him that price savings, cost avoidance and inflation fighting should still be a priority with him, but he also needed to bridge the gap between price and utilization savings if he wanted to continue his double-digit savings every year. I believe the goal of every supply chain professional in 2010 should be to avoid being blindsided by diminishing, thinning and meager price savings that are a reality today.
Here’s how to do it! First of all, price savings is exclusively a purchasing activity so let’s keep our buyers pecking away at even more price concessions, better terms and conditions and negotiating special deals to hold our cost of acquisitions to an absolute minimum.
On the flip side, let’s get our value analysis teams in high gear to attack our utilization misalignments, since this is their area of expertise and can best be accomplished by teamwork — not individual activity.
This success formula is the simplest and easiest way I know of to bridge the gap between price and utilization savings without missing a beat. You don’t need to hire new staff, reinvent the wheel or even change the way you do business.
Just change your operational orientation from price ONLY to utilization too since there functions aren’t mutually exclusive. Then you will have the best of both worlds to attack your total cost of acquisition to disposition in just two complementary supply chain operational areas. The solution to this challenge can be just as straightforward as that!
New No Cost Webinar – Value Analytics The New Science of Savings
Value Analytics
The New Science of Savings
Learn the advanced methods and strategies to analyze your utilization trends, patterns and variations in your supply spend categories so you can move to the next level of savings performance beyond price.
Webinar Overview
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Are You Flying Blind?
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Why Value Analytics?
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What is Value Analytics?
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A Road Map for Success
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5 Key Elements for Precision
Thursday,
November 12th – 1:00pm Eastern
All
Registered Attendee’s Will Receive a Copy of the Webinar Slides and
Audio Replay at No Cost to You!
Strategic Supply Chain Webinar Series Leader – Robert T. Yokl,
President/Chief Value Strategist
and Robert W. Yokl, VP of Operations, Strategic Value Analysis in Healthcare
Webinar May Be FREE But The Information is Priceless
Creating the Future of Supply Chain Management
The biggest risk today, as I see it for supply chain professionals, is running out of savings. Yes, I know that some hospitals, systems and IDNs are still finding some low hanging fruit to keep their savings rolling, but those days are numbered. It’s not a growth strategy!
A good way to look at this emerging trend is check out what other industries are doing when they HIT the wall on savings. Over the last 5 years or so manufacturing, energy, financial, airline industries, etc., have been attacking the in-use cost of their products, services and technologies. Why? Because their price savings have disappear!
The tactic industry uses to drive out all of their waste and inefficiency in their value streams is called demand management or as we like to call it in healthcare — utilization management. This approach has saved billions of dollars without hurting their customer’s quality.
In brief, the demand management (i.e. utilization) methodology focuses its efforts not primary on suppliers or price, but on how products, services and technologies are deployed in an organization. Are there wasteful and inefficient practices, are they being misused or misapplied and are there lower cost alternatives to meet these stated functions at a lower cost? Its not uncommon for companies to cut 7 to 15 percent off their expense budgets and the savings can begin in as little as three months.
Extensive Industry research confirms the future of supply chain management isn’t about suppliers or price, it’s about your CONSUMPTION, where 79% of all of your new savings reside. Since most healthcare supply chain best practices (e.g. spend managers, just-in-time, ERP systems, etc.) are adopted from other industries, this is one trend that you don’t want to overlook, ignore or disregard because … it’s the future of supply chain management! This isn’t a prediction, but a fact!
So if you want to start creating the future of supply chain management at your own healthcare organization you need to start today by focusing on your own products, services and technology consumption. That’s where other industries are finding a GOLD MINE of savings, not just by bidding, negotiation or joining a new GPO to obtain a better price.
Benchmarking Still Drives Savings
Savings Beyond Price -Weekly eNewsletter – April 1, 2009
Robert T. Yokl
President & Chief Value Strategist
Benchmarking Still Drives Savings
Greetings,
Industry embraced a simple idea in the 1980s. The idea was that it was possible to search for the best practices that will lead to superior performance by comparing cost, time or quality of one organization to another. This process is called benchmarking and it has been immensely successful in all industries — including healthcare — for almost three decades!
Here’s the rest of the story! One BIG gap that we have found in healthcare benchmarking practices is that this technique is not universally applied to the identification of supply expense savings opportunities. Yet, healthcare organizations that are benchmarking their supply expenses systematically have found that benchmarking is “what drives savings” for their hospital, system or IDN.
No longer do these progressive healthcare organizations need to guess where their supply savings are hidden, they now know precisely what to target for their next savings opportunity since their benchmarking has illuminated the way.
For instance, one of our clients, who is a subscriber to our Utilizer™ Dashboard, quickly discovered that their hospital wasn’t recycling their Oxisensors at the level that they should have been reprocessing, thereby losing $32,692 in savings annually.
How would this hospital have known this important fact if they weren’t continuously benchmarking to improve their performance? The answer is they wouldn’t have known unless they had stumbled over this anomaly in their supply chain by happenstance. Then it would be too late to recoup their big losses!
If you want to be on top of your supply chain game, benchmarking your supply expenses shouldn’t be ignored or be a “one time event”. It should be a regular (we recommend quarterly), systematic measuring of your healthcare organizations’ supply chain expenses against those who are recognized as best-in-class practitioners in healthcare or even in other industries. In this way you can make certain that you are the best of the best in ALL of your categories of purchase.
at a time.
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 want to know more about benchmarking best practices I would recommend that you sign up for our Healthcare Supply Value Analysis webinar on April 16th.
Does Price Equate to Total Cost?
Savings Beyond Price -Weekly eNewsletter – January 15, 2009
President & Chief Value Strategist
Does Price Equate to Total Cost?
“Many CEOs(and supply chain professionals) have been conditioned to believe that supply chain management is all about price, and they have not taken a total cost approach and looked at other factors, such as utilization, in their (supply chain) model.”
This quote from one of HPN Magazine’s SURE AWARD recipients, Ministry Health Care CEO Nick Desien of Milwaukee, Wisconsin, is a WAKE-UP call to all supply chain professionals in this weak economy. Why? Because price is no longer king in our strategic supply savings arsenal!
If you want to continue to achieve robust savings every year, you must now refocus your savings efforts on your total cost from acquisition to disposition. The best way to do so is to attack your utilization misalignments, or your wasteful and inefficient consumption, misuse and value mismatches in your products, services and technologies.
Just the other day, one of our clients took this advice and saved $42,988 on their PICC trays by customizing their PICC trays to each of their value group’s (OR, ER, ICU, nursing floors, etc.) exact requirements. This client found that one size PICC tray doesn’t fit all of their customer prerequisites, so why should they be buying them all the same tray? For this reason, customization vs. standardization should be your goal too.
One final thought! Desien believes healthcare organizations that approach their supply chain as a strategic imperative, as other industries do, will be on the path to improve their hospital, system or IDNs overall performance. But this goal can’t be realized with price alone!
Your Partner In Savings Beyond Price™,
Robert T Yokl
Chief Value Strategist
Strategic Value Analysis® In Healthcare
800-220-4274
P.S. If you are looking for faster, smarter and better technology in this New Year to give you ultimate visibility in your supply chain, why not “test drive” our Utilizer™ Dashboard for even greater savings yield this year.
P.P.S. Don’t forget to check out my new blog “Why Do You Need a Team Mission Statement?” that will show you how to give your teams a common purpose and a firm foundation for their savings work.
Boost Your Value Teams Productivity by 87% or More!!
Are you ready to build high-performance teams that keep your project managers on track, on budget, and on target to achieve even better and faster results?
If your answer to this question is a NO, you can stop reading this column…now. However, if your answer is YES, keep reading since I’m going to share with you one little known secret of high performance value teams. A secret that will enable you to virtually guarantee successful savings implementation every time, minimize communication gaps, and optimize your team’s time, money and resources.
The secret is for you to invest in project management software that will: (i) expand your ability to manage and control all of your value analysis projects in real-time, (ii) give a tangible structure to your value analysis studies vs. winging it, (iii) expertly apply value analysis concepts to your projects, and (iv) document all projects and savings.
Just the other day I was talking to one of our IDN clients about what’s new in his supply chain world. He told me that he is now is employing project management software to manage all of his savings projects and this has boosted his project manager’s productivity by double digits.
More importantly, this supply chain professional now has piece of mind that his projects are on track, on budget and on target. Before buying the project management software he wasn’t really sure what the factual status of his projects were at any given time. All he had to base his decisions on were verbal project updates along the way.
That’s all changed now he says with just one click of his mouse he can see for himself all of his projects status reports without any filters, miscommunications or misunderstandings that have often crept into his status reports in bygone days. He now believes that only with project management software can healthcare organizations meet their strategic savings objectives each and every year. It just makes sense to do so!
Your Partner In Savings Beyond Price™,
Robert T Yokl
Chief Value Strategist
Strategic Value Analysis® In Healthcare
800-220-4274
P..S. Discover the power our Supply Chain Pilot™ can give you in the management and control of ALL of your supply chain and value analysis projects. It just makes sense to do so!
P.P.S. Don’t forget to check out my new blog article, “Stepping Up to the Supply Chain Leadership Challenge”. This blog is all about the supply chain heroes who are making a difference at their healthcare organizations every day.
Incentivize to Save
Savings Beyond Price -Weekly eNewsletter – October 1, 2008
President & Chief Value Strategist
Greetings!
Incentivize to Save
If there is one success factor that I have observed that is universally missing from all but a few supply value analysis programs is an rewards and recognition program to motivate your value team members to be hyper performers.
For some unknown reason supply chain professionals believe that their value teams should be motivated to do this hard, time consuming and artful work just because they ask their department heads and managers to do so.
Well, that’s not the way human nature works. Everyone listens to their own radio station called WIIFM (or what’s in it for me). And if you aren’t tuned into this radio station too, then you aren’t going to obtain the optimal performance you are looking for with your value teams.
Yes, you will have some successes without a rewards and recognition program for your value teams. However, over the long-term is what separates the weak from the built-to-last VA programs is value teams that have strong commitment, motivation and resilience which is absolutely necessary to generate double-digit savings each and every year.
So if you are looking to turbo-charge your Supply Value Analysis Program to the next level of performance you definitely need to have a rewards and recognition driven program that will put you over the top every year in savings.
The Supply Chain Energy Predicament!
I know that we are all feeling the pain at the gas pump. I just spent $74.41 today to fill up my own SUV. That’s more than I used to pay every two weeks — just a few months ago. But this isn’t the worst effect of the energy predicament we will be facing as supply chain professionals and as consumers over the next few decades. Yes, I said decades!
The reality is that a healthcare organization’s consumption of petroleum-based products, from needles and syringes to plastic bags, represents 86% of everything you buy. This figure doesn’t even factor in the higher energy cost your hospital will be paying to heat, light and cool your buildings and run your equipment. I can’t think of another industry that has this high an energy footprint. Can you?
What can we do about it? First, we must realize that your manufactures and suppliers won’t be able to hold their prices to you beyond their current GPO or local contract obligations. This could mean a 6%, 8%, 12% or more spikes in your prices, over the next 12 months. You then need to prepare your CFO for this eventuality by providing him or her with your estimated price increases in each commodity group you buy. This way he or she can plan ahead for this contingency.
Next, you will need to vigorously attack your utilization misalignments, because your CFO will desperately need these savings ($11,000 to $30,000 per occupied bed) to offset the price increases you will be experiencing over the next few years.
Lastly, you’ll need to re-specify all of your products, services and technologies you buy to find lower cost alternatives, since this is the ONLY way you will be able lower the cost of the commodities you are buying today.
What I’m suggesting herein will be like climbing a mountain for you, but I see no other choice for healthcare organizations if they want to survive in this energy predicament we find ourselves in now.
Don’t wait to put these recommendations in effect, given that what I have described to you is a “perfect storm” that could sweep your hospital away in these turbulent times. It also could be a very rewarding time for supply chain managers who want to sit elbow to elbow with their management team to solve this problem, and at the same time, gain tremendous recognition and gratitude by doing so!
Your Partner In Savings Beyond Price™,
Bob Yokl
Robert T Yokl
Chief Value Strategist
Strategic Value Analysis® In Healthcare
P.S. You heard my predictions about the future of supply chain management in this week’s column, but did you know that we could make your life easier in these turbulent times if you have our “Utilizer™ Dashboard” to pinpoint your savings opportunities. Learn more here!
Stop the Madness with Your GPO Contracts
I have been told by value analysis managers throughout the country that they spend 96% of their time evaluating new or renewal GPO contracts, which isn’t value analysis at all. When I tell them that there is only 1%, 2% or 3% savings to be achieved with their GPO contracts and, on average, 26% to be saved on any value analysis project they conduct, they soon understand that they are spending their time on the wrong side of the supply chain equation – price!
The next question I’m always asked by value analysis managers is, “How do I STOP THE MADNESS with my GPO contracts, so that I can spend the required time on my value analysis projects?” Here’s three strategies that I tell them to employ to get organized, prioritize and optimize their time to save even more:
- Start a campaign with your peers to insist that their GPOs write contracts with 3, 5 and 10 year lifecycles – not one year terms. Not only will this tactic reduce the number of GPO contract renewals, but will enable GPOs to lock in their prices over the long-term, since inflation is the real threat to price stability in the healthcare marketplace. For example, Southwest Airlines has not been affected by the current energy crisis since they locked in their fuel prices over the long-term. Your GPO can provide this same price protection for you!
- Don’t change your manufacturers just because there is a new GPO contract being offered by your GPO, because the cost of change will usually cost your more than the contract savings being offered. You can do this by searching out comparable contracts with other GPOs (yes, you might need to join more GPOs to do so), so that you can continue to purchase from your preferred manufacturer at competitive prices. Your justification: Contract churn isn’t and will never be a cost effective way to do business.
- If you are a large enough healthcare organization to do so, write long-term custom contracts with your GPOs assistance, so that you can lock in your prices for the foreseeable future.
I’m sure you can think of a few more and even better strategies to organize, prioritize and optimize the time you are now expending evaluating your GPO contracts now that I have opened Pandora’s Box. It’s my opinion, that if we don’t STOP THIS MADNESS it will have a stifling effect on your supply chain effectiveness in the sort and long-term.
If you agree or don’t agree with my take on this topic, I would love to hear your comments on this pressing problem.
Your Partner in Innovative savings,
Bob Yokl
President & Chief Value Strategist
Strategic Value Analysis® In Healthcare
800-220-4274
P.S. If you would like more powerful savings and quality ideas like this one I would recommend that you sign-up for our “no cost” weekly Savings Beyond Price™ e-Newsletter at www.Strategicva.com. You will also get a copy of my e-book “Your Target Blueprint for Supply Chain Management Success”, as a bonus.
Building Your Toolkit!
I spoke last week at the North Carolina Association of Materials Managers Annual conference on the topic “Value Analysis 2.0: New Rules, Systems and Models for Long-Lasting Savings Success”, which gave me an even more in-depth insight into the challenges that supply chain professionals are facing today.
I also had lunch with a few MMs and value analysis managers at the conference who wanted to know how they could uncover the big and robust utilization savings that I talked about in my presentation. This is when I realized that supply chain professionals aren’t building their toolkits with the precise tools to prepare them for the future of supply chain expense management, i.e. utilization management.
This is because the old tools that healthcare organizations have been employing (MMIS, ERP, and spend managers) for years won’t get this new work accomplished. That’s why we now need to embrace the new art and science of value analytics to search out our utilization misalignments and eliminate them. By doing so supply chain professionals can save 3%, 7% or even 12% in our supply expenses – beyond price.
If you would like to know more about this new and emerging discipline I would suggest that you download my new special report “Utilization Management: The Future of Supply Expense Management” that will show you what you need to do to build your toolkit to meet this challenges in the 21st century.
Your Partner In Innovative Savings,
Bob Yokl
Robert T Yokl
Chief Value Strategist
Strategic Value Analysis® In Healthcare
P.S. This is the last call (deadline May 31st) for applicants for our Certified Value Analysis Leadership Training program at our early bird rate of $1,192 ($211 discount). If you have been thinking about applying to this one of a kind program this is the time to do it. Otherwise, you will miss this discount period! Learn More
P.P.S. Don’t forget to check out my new blog article “Are You Really Practicing Value Analysis or Doing Something Else” (Revisited). This is where I talk about how I have found that value analysis coordinators, managers and directors aren’t practicing value analysis either. – to their disadvantage! Read Here
