Supply chain triangle

As we see it the supply chain savings continuum is evolving from a purely price and standardization state of mind to healthcare organizations starting to focus their savings efforts on utilization (in-use cost). This sequence of events can actually be seen in your mind’s eye as a "Supply Savings Triangle" with price on the left side, standardization on the right and utilization at the bottom of the triangle. This would mean closing the savings loop on all of the realizable supply-money-savings opportunities for any and all healthcare organizations in the future. There is no where else left to go as we see it, related to supply expense management once you have closed these three doors.

Change is constant

We all know that change is the only constant in our supply chain business. Consequently, our supply chain practices must continually modify, evolve and transform if we are to reach the next level of savings performance. The distasteful alternative is to follow the same tired and overused price and standardization strategies and tactics of yesteryear, thereby risking stagnancy or sluggishness in your supply expense savings growth.

As Jack Welch, former chairman of General Electric, once said, "Change before you have to," which he learned from being in the trenches for 40 years. Staying ahead of the change curve is not only a discerning way of saying we must always be looking for the next big thing in supply expense management, but it’s also a legitimate survival tactic that all great leaders have employed for centuries to move their organizations forward in changing times. So keeping our eye on the horizon should never be considered a waste of time. It’s an idea incubator!

Nibbling around the edges

Yet, instead of looking over the horizon where new supply expense management ideas reside, I see numerous healthcare organizations still nibbling around the edges of their savings by joining new regional group purchasing organizations, contracting for special one-time supply savings programs or making bulk buys on their implants. Not that there is anything wrong with these tactics, but these tactics are just holding to a trickle the already inevitable decline in price and standardization savings that all hospitals have been experiencing in the last few years.

The real answer is it’s now time for all supply chain professionals to start down another expense savings track – utilization. You should do this at the same time you are employing multi-savings tactics to hold the line on the increases on your prices. This is what we are seeing progressive hospitals, systems and integrated delivery networks doing throughout the country – changing before they have to at their own pace. It’s less painful, more productive and the easiest way I know of to transition to this new and better way of doing business, while still keeping all of your price balls balanced in the air.

Think of Noah’s Ark

Noah didn’t build his ark when it was raining. He built his ark when the sun was shining bright and high in the sky. His friends and neighbors thought he was crazy, but Noah knew that change was just over the horizon and he would be prepared when the winds of change arrived.