I just viewed a slide show from a national GPO on their concept of value analysis where they stated that “value is a relative thing”, which to me means, that value represents different things to different people. 

While there is some truth to this definition of value analysis this GPO never once mentioned that value analysis is the study of FUNCTION and the SEARCH for alternatives to meet those functions reliably. This is the “holy grail” of value analysis and the time-tested methodology taught by Larry Miles (the Father of Value Analysis) for defining value in our customers’ eyes. This thereby isolates the functions (primary, secondary and aesthetic) that are most important to our customers that are then ranked and weighted by their order of importance and cost.

Why did this GPO get it wrong? Because it didn’t fit into their world view of value analysis or they don’t really understand the classic tenets of value analysis — but think they do.

This convoluted or self serving thinking about value analysis is promoting half-truths that will only lead value analysis leaders and practitioners along a path of confusion, frustration, missteps and ultimate failure. 

Let’s get it right! As an industry that has embraced value analysis as a best practice to manage and control our supply expenses shouldn’t we start to actually understand and then apply the system of beliefs that Larry Miles taught us vs. listening to false prophets that are leading us down the wrong path? 

What I’m talking about here is the way in which you selecting your VA projects, which can unearth millions of dollars of savings in your value streams.  For the best results, you should establish criteria for the selection of your VA projects. Here are five criteria I would suggest you start with: 

1.                Dollar Threshold: No VA project should be undertaken on a product, service or technology that has less than a $25,000 annual spend.  The reason: Your ROI would be very small, if at all!

2.                Projected Timeline: If your VA project will take more than 90-days to complete it might be better to break the project into smaller projects. Projects that have long timelines tend to go off track.  Keep your projects in bit size pieces!

3.                Probability of Success: If you only have a 50% probability of success in implementing a project (e.g. orthopedic implant study) then delay the project until you have an 80% success factor.

4.                Project Alignment: If your VA project is not supported by your management then I would delay it for another day. Why fight city hall – you rarely win!

5.                Solution Clarity:  If you already know the solution to a problem (e.g. defective material) then don’t initiate a VA project — just fix the problem. It will save you a lot of time and effort by doing so.

These are just a few ideas to get you on the road to selecting the best VA Projects using criteria vs. gut feel with the greatest possible ROIs.

Your Partner In Innovative Savings, 

Bob Yokl

Robert T Yokl

Chief Value Strategist

Strategic Value Analysis® In Healthcare

P.S. My staff thinks I’m crazy to offer our e-newsletter subscribers a 30-day “test drive” on our Utilizer™ Dashboard and you only pay if it works! But I’m so convinced that once you try it you won’t want to live without it that I have turned a deaf ear to my staff’s objections to bring you this outrageous “pay if it works” guarantee.  Email me to learn more about this special offer – bobpres@strategicva.com

P.P.S. Don’t forget to check out my new blog article “A Lean Way of Thinking! This will give you a new way of thinking about your workload.

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:

1. 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!   
2. 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.
3. 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

www.strategiva.com

Bobpres@strategicva.com

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.

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Yet, throughout my travels I rarely see it used at healthcare organizations for the planning, organizing and managing of their value analysis projects. This is a missed opportunity because this tactic will enable you to set time-lines on your projects, keep things moving on your projects, monitor and control your projects, get the most out of your limited resources and enable you to manage multiple projects with ease.

Save the easy way!  At one time we too didn’t use project management techniques to manage our client’s value analysis projects only to find that our client’s team members were going every which way – but forward. That’s when we realized we had to do something different to control these unruly herds.  We found that by providing a practical, easy-to-use project management system for planning, organization and managing our client’s projects we could tame the herd, speed up projects and perform 10x more value analysis studies than ever before.  That’s what successful management can do for you.  

So who needs project management? I would say everyone who wants a systematic approach to staying on top of all of your value analysis multiple projects at once and doesn’t want to leave anything to chance, happenstance or fate!  Doesn’t that sound like you?

Your Partner In Innovative Savings,

Bob Yokl

Robert T Yokl

Chief Value Strategist

Strategic Value Analysis® In Healthcare

P.S. Almost Everyone who has seen a demo of our Utilizer™ Dashboard has told us that it  is just what they have been looking for to manage and control their utilization misalignments! Isn’t it time you sign up for a demo too?

P.P.S. Don’t forget to check out my new blog article “Grow, Lead and Succeed with One Big Idea”, that will give you one big tactic that you can’t afford to miss to improve your communications with your bosses.  

What I have found from my interaction with these coordinators, managers and directors, at our three-day CVAL program, is that these individuals spend most of their time evaluating new and renewal GPO contracts! That’s not value analysis at all, that’s contract management in its purest sense.

After these very intense three days of training I’m happy to report that most of the attendees at our CVAL program finally realize that they aren’t practicing value analysis and have decided that going beyond price is where they want to go in the future with their value analysis programs.

As I mentioned last week at the North Carolina Materials Management Association annual conference, hospitals should have an annual audit of their pricing, then fill in the gaps of their contract portfolio where needed. It doesn’t make sense for these individuals to spin their wheels and waste their time trying to eke out a few more percentages savings with their GPO contracts, when there is about 26% savings on just about any commodity these individuals would investigate using the techniques of value analysis.

I went on to tell the NCMMA members that they should petition their GPOs to have more 3, 5 and 10 year contracts, with annual renewals, so their members could stop the madness of trying to keep up with their new and renewal GPO contracts that are e-mailed to them daily.

Bottom Line!  Value analysis coordinators, managers and directors need to get back to basics by actually practicing the tenets of value analysis and then move away from being contract managers. Contract management isn’t your job (it’s your purchasing department’s job) and it’s not what you were hired for.

It’s your job to study the functions of the products, services and technologies your hospital is buying, and then search for lower cost alternatives to meet those functions. That’s what’s missing from your value analysis program and is holding back huge savings for your hospital.   

P.S. If you would like more powerful savings 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.

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 21^st 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 31^st) 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

I just read an article in HPN magazine recommending one singular approach to what I call Value Analysis 2.0 (beyond price and standardization) that the author suggested would fit all size hospitals. I beg to differ with the author on this point, but let me tell you first what I liked about the article.

I was happy to see the author agrees with me that big price and standardization savings are now dead, and that hospitals now need to focus on savings beyond price (i.e. utilization) to keep their savings machine humming. I also agree that a fresh approach to value analysis in now called for if healthcare organizations want to move to the next level of savings performance. And that any and all supplies and purchase services should be included in the scope of value analysis teams’ charters so that no supply related cost is exempt from value justification.

I couldn’t agree more with the author that without a total and unwavering commitment from the c-suite no real change can or will happen beyond what you are doing now. And that material management should be the data guru’s for your value analysis teams, thus pointing the way to new savings opportunities, so your value teams aren’t burdened with this complex, time consuming and arduous task.

Where I differ with the author are on two points.  First, that all hospitals should be establishing product-line value analysis teams and secondly that value team members shouldn’t need to do any of the teamwork because they are too busy.   

On the first point, it’s my strong opinion, that small hospitals, which represent 80% of all hospitals in the country, don’t need elaborate product-line value analysis teams because they don’t buy enough products, services and technologies to warrant the time investment to do so.  Second, no one should ever be too busy to save money or not ready to roll up their sleeves to find it. Just listening to presentations from material management, then making decisions as a committee isn’t value analysis at all. This is Value Analysis 1.0, which we are trying to move beyond.

In the final analysis, I thought the author did a great job of explaining what she saw as the future of value analysis in healthcare. Nevertheless, I think we all need to remember that “one size” of anything doesn’t fit all situations. We need to customize what we are trying to accomplished based on the size, culture and complexity of our healthcare organization. Then we will get the exact fit for our healthcare organization.

P.S. If you would like more powerful savings 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.

• Added Many More Value Analysis, Utilization and Supply Savings Case Studies
• More Focused Training on Utilization Management and Benchmarking for Value Analysis Professionals
• Focus the Training to Be More Hands on with Real Time Actionable Results
• Share with you the Latest Strategies, Tools and Methods to Save More in Less Time with Less Effort
• Further Enhanced our Value Analysis Leader Web Software (included in the workshop)
  • New Utilization Benchmarking Section
  • More Savings Ideas to the Savings Idea and Best Practice Database
  • More Members Only Webinars

The truth is no one size fits all products, services and technology purchases.  If you try to standardize on everything you buy you will limit your customers’ choices, and thereby, compel them to use over-specified or under-specified supplies and equipment which don’t meet their exact specifications.  Believe it or not some of the blame for this observable fact can be laid at the feet of your GPO because you are rewarded for over-standardization by the terms of their offerings.

As an illustration, we just completed a 360 Degree Supply Savings Analysis for a client where we found that they had standardized on a $7.10 I.V. set for ALL of their patients. This practice was costing this hospital $54,334 annually in unnecessary and unwanted IV set cost since this was the only IV set that was available for their clinicians to use.

A much better way to decide on what I.V. sets this client should have been buying was for them to develop customized specifications for each of their value groups (segmentation of the customers by their critical to quality requirements) that use this product. With the result, that this client would have ended up with five or six IV sets vs. one only and this would have met each of their value groups’ exact CTQ requirements thus saving $54,334 annually on their IV set purchases.   

The lesson of this story is that this client did have the best price on the IV set they were buying, however their standardization policy was working against them when it came to having the lowest total cost in this commodity group.  Is you standardization policy working against you as well?

er In Savings Beyond Price™

Your Partner In Savings Beyond Price™

Robert T. Yokl

Robert T Yokl

Chief Value Strategist

Strategic Value Analysis® In Healthcare  

P.S.  One of the new power tools that are available to you and your c-suite to give them and you a window into your supply chain operations is our Utilizer™ Dashboard. This new tool will show you and your c-suite members all their supply chain costs in one database along with actionable targets for savings.  Why not make it easier on yourself by having this tool at your disposable to effortlessly cost justify your initiatives vs. fighting your c-suite for every dollar you request to improve your supply chain operations. Check out our “test drive” to see how we do it!  

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