Let’s face it…most so-called "value analysis programs" don’t work! They are just window dressing. If they did they would be producing double-digit results, not just talking about them. In actuality, most value analysis programs, if measured by savings results, are generating less than 1 percent savings annually (non-salary expenses annually/annual savings).

What a pitiful picture this represents when you consider that superior performers are saving, on average, 26 percent annually on their supply chain expenses. Here are seven reasons why these so-called "value analysis programs" fail to generate double digit savings:

1. Lack of vision
We all know about that vision thing and how the lack of it will lead us in every direction – but forward! To be successful in value analysis you must know before you start what your value analysis program will look like when you meet your stated mission. How will it look to others? What will people say about it? What results do you expect to achieve? And how will it change your culture?

2. Lack of cultural commitment
Healthcare organizations that are culturally committed to being a "low cost provider" consider their cost as their enemy and are always on the attack to reduce it. If your organization doesn’t have a "lean thinking" attitude you will never achieve double digit savings.

3. Lack of organizational architecture
It not enough to know the classic philosophy, principles and practices of value analysis; you also must be organized to save. By organized to save I mean you must develop a team approach to value analysis that holds people mutually and individually accountable for results and not just talk a good game.

5. Focused on price and aesthetics
With few exceptions, 99.9 percent of all value analysis programs are focused on price and the aesthetics of the products, services or technologies being purchased and not on their reason for being …function. Here’s a case in point: A recent study I conducted for a client showed that 44 percent of their annual supply chain savings were generated by recurring manufacturer rebates, 25 percent from new group purchasing organization contracts and 31 percent from value analysis studies. Since I consider rebates and new GPO contracts actually price-related savings, this client’s actual "price-oriented" savings was 69%.

6. Lack of precise measurements
Global measurements, such as, supply cost per adjusted patient day is a weak measurement if you are looking to hone in on the "gaps" in your supply chain expenses, which are now hidden from your view. For a more precise measurement you must drill and dig down into your supply chain to benchmark all of your commodity groups (i.e., pacemakers, orthopedic implants, electrodes, dressings, drugs, food, utilities, etc.), so you know exactly where your savings opportunities are hidden.

7. Just good enough thinking
Most value analysis programs accept "just good enough" as their performance standard for their programs, whereas, their goal should be to raise their standard of excellence to the highest level possible for this endeavor. This can only be accomplished when supply chain professionals accept their new roles as coach, sounding board, facilitator, counselor and awareness raiser for their value teams. And most importantly, by coaching by example the behaviors, skills and attitudes you want your value team to exhibit.

Here is one "big" idea if you want to move to the next level of savings performance in value analysis and avoid being an underachiever. I would suggest for starters that you adopt a savings goal of 26 percent annually. By just establishing this savings goal you will position your value analysis program to reach a new level of savings performance that you hadn’t believed possible, probable or doable before. HPN