Freight, shipping costs can be embedded, hidden, needlessly high

July 24, 2023

When it comes to freight and shipping costs, healthcare organizations may suspect or even know they’re high, if not excessive, but some lack the urgency to fix until the C-suite pushes Supply Chain to cut labor costs and non-salary expenses to accommodate slashed budgets or determine on their own that freight and shipping charges have been needlessly excessive.

Others, however, maintain nonchalance until poked and prodded to action. So how might Supply Chain take the lead in managing and reducing healthcare organizational freight and shipping expenses more seriously? What positive and proactive incentives exist? Nine distribution, logistics and supply chain services executives provide possibilities. 

Emily Gallo, general manager and senior vice president, Cardinal Health OptiFreight Logistics

“It’s inspiring to see how freight management has become an increasingly important facet of global supply chain. There are a few best practices that come to mind for how healthcare organizations can be more effective and efficient when it comes to freight management. A third-party freight management provider can help health systems follow these best practices. The first is mode optimization and determining which service level is the most cost-effective and efficient way to ship a package and ensure it arrives on time. User compliance is also extremely important – are your employees considering mode optimization with each shipment? There’s often a lot of opportunity for training and education – a third-party freight management provider can act as an extension of your team, in this case acting to drive positive change from within. 

“Additionally, healthcare organizations can prioritize supplier connections and compliance – and a third-party freight management provider can help you effectively manage action and value with external stakeholders like suppliers. Working with suppliers involves many steps, including establishing an initial connection with all suppliers, educating them on your program, getting the suppliers to participate and then monitoring to ensure they’re adhering to the contract and charges correctly. A third-party freight management provider can manage suppliers on behalf of the healthcare provider, resulting in significant lift being taken off the supply chain team. We’ve found that when these best practices are demonstrated and value is derived, it’s a motivator for health systems to adopt.” 

Mike DeSimpelaere, vice president, Network Operations, Cardinal Health at-Home Solutions

“Focus is the easiest way to define this – treat freight and shipping management just as you would patient care. Prioritize creating strong teams and strategies around supply chain, particularly freight, and take more control and ownership of your freight. Historically, many organizations have allowed suppliers to own freight management, which has not allowed for the flexibility needed during disruptions. You can partner with 3PL or freight management solutions to help prioritize deliveries and get ahead of delays.” 

Derrek Seif, Chief Strategy and Product Officer, VPL

“Supply chains need data to understand what’s happening and where they can improve, but they don’t always have the budget for a significant investment in vendor solutions. What our customers have appreciated is that we’re able to guarantee them savings, but also give them access to that data without an additional charge. They’re able to find savings now, but also get on a path to become more resilient. 

“Healthcare organizations can enhance their operations by partnering with industry experts who can guide them through the complexities of the freight management process and provide guidance to reduce one-day shipments, reduce unnecessary fees, and ensure more suppliers comply with the program based on industry benchmarks. VPL, for instance, provides a comprehensive suite of products designed to optimize inbound freight management, outbound shipping and tracking, real-time inbound visibility, as well as analytics and data visualization. 

“VPL’s inbound freight management solution offers a carrier-agnostic, full-service approach to manage inbound parcels and less-than-truckload (LTL) shipments. This allows health systems to break free from being tied to a single carrier and instead choose the carrier that offers the best rates and delivery times. The solution provides real-time visibility into the status of shipments, allowing for proactive decision-making and reduced disruption risks. By leveraging freight data and analytics, hospitals and health systems can identify opportunities for cost savings, improve supplier compliance, and optimize freight expenses. The automation of allocation, seamless invoicing, and supplier relations support further streamline operations and save time. 

“In terms of outbound shipping and tracking, VPL provides a carrier-agnostic solution that grants them the flexibility to select from multiple carriers and couriers. Again, ensuring access to the best rates and delivery options available. The solution is designed with tailored workflows to address the specific needs of outpatient pharmacy operations to enhance efficiency and compliance. With VPL’s solution, healthcare organizations gain greater control, choice, and tracking capabilities for their outbound shipments, facilitating improved management of growing requirements in specialty pharmacy, pathology, and healthcare-at-home settings. 

“Real-time inbound visibility is another critical aspect of VPL’s offerings. The track-and-trace functionality provides visibility into inbound shipments, allowing health systems to monitor the status of orders and anticipate the volume of packages arriving at their receiving dock. This information helps optimize staffing and space planning, thus enhancing operational efficiency. Proactive notifications and search functionalities enable effective communication and coordination between buyers and clinicians, reducing procedure delays, and improving overall patient care. 

“Last but not least, VPL equips healthcare organizations with powerful analytics and data visualization capabilities, providing actionable insights for cost savings and performance improvement. Real-time access to comprehensive dashboards allows organizations to identify areas of improvement across various aspects of the supply chain. These insights encompass inbound freight management savings, outbound shipping and shipper performance, supplier compliance and fees, medication distribution compliance, and carrier surcharges and performance. By leveraging these insights, health systems can pinpoint areas for optimization, track their progress, and make informed decisions to drive ongoing cost efficiency and performance improvement. 

Tom Redding, senior managing director, Healthcare Services, St. Onge Co.

“Healthcare providers will need to think beyond the price of the product and understand the total of cost purchasing a product. Unfortunately, the freight/shipping costs are not always known to the healthcare provider since they are many times embedded in the cost of the product. Too often, healthcare providers do not proactively manage their operation and it leads to expedited freight costs, including shipping costs associated with product returns for product recalls, product damage, and product expiration. Healthcare providers will need to drive their suppliers to bring more visibility to the shipping costs when it comes to the frequency of delivery, shipping mode, and any specific packaging requirements to truly impact their freight/shipping costs.” 

Mark Speight, COO and partner, Caduceus Medical Logistics

“While direct cost savings are undoubtedly important, based on my 20+ years of experience, I firmly believe that same-day logistics can significantly impact both system operations and patient outcomes, for better or worse. Same-day logistics plays a critical role, acting as the circulatory system of a hospital. Just as blood is vital to an organ, timely cargo delivery is crucial, as any delays can have severe consequences, costing both tears and treasure. 

“Conversely, delivering excellent same-day service can empower the healthcare system with new opportunities and enhanced patient care options. In various systems, we have supported hospital-to-home operations by ensuring patients receive timely lab results from visiting nurses, home infusion supplies, and pharmaceuticals. This kind of capillary perfusion, so to speak, enables efficient and effective care beyond the hospital walls. 

“Additionally, speed is of the essence in our operations. We frequently handle urgent deliveries of life-saving pharmaceuticals, critical supplies, and medical devices. These deliveries may be of the utmost urgency, such as when a patient is on the operating table or when they have only 45 minutes’ worth of respiratory medicine remaining. By offering healthcare providers the capability to meet such time-sensitive demands, we provide them with valuable options that I believe have a substantial and positive impact on patient outcomes.” 

Norman Brouillette, senior vice president, Supply Chain Solutions, Retail, Tech & Health, Ryder System

“The pandemic isn’t the first major supply chain disruption for the healthcare industry, nor will it be the last. So with many healthcare organizations still vulnerable to disruption, I tell them, ‘The time to transform your supply chain for future resilience is now.’ We can help other healthcare networks gain control of their supply chains, while also lowering costs and improving patient care. It’s really about leveraging what Ryder already does best, like our proprietary visibility and collaboration technology, analytics and business intelligence, our data scientists, logistics engineers, and our expertise and scale. 

“For healthcare organizations looking for advice on where to start, I’d say start by breaking down the issues contributing to the vulnerability of your supply chain to uncover the root causes. Ensure you have the support of top leaders of the organization. And, then partner with a reliable third-party logistics provider like Ryder that can provide you with a fully integrated solution that includes expertise, technology, engineering and design, warehousing management, transportation solutions, labor, and continuous improvement.” 

Ron Devitt, founding partner, DeSpir

“Incentives for following the protocols and contingency plans with known carriers include better and more consistent patient outcomes, reduced loss and risk, and faster (real-time) responses for products that have been compromised in transit.” 

Cory Turner, CMRP, senior director, Healthcare Strategy & Product Marketing, Tecsys

“To encourage healthcare organizations to prioritize freight/shipping management and improve efficiency, a Consolidated Services Center (CSC) theme can be implemented. Key strategies include centralizing freight management, fostering collaborative partnerships, integrating technology, providing performance-based incentives, offering education and training programs, promoting sustainability, and utilizing data analytics for continuous improvement. These approaches aim to streamline processes, optimize routes, reduce costs, enhance visibility, and align with environmental goals. By adopting this theme, healthcare organizations can make effective and efficient use of freight/shipping services and improve their overall supply chain.” 

Jake Crampton, CEO, MedSpeed

“Health systems make investments every day in technology and tools to make their teams more effective and to elevate patient outcomes. Viewing logistics as a cost center inhibits innovation. Conversely, an organization that views same-day logistics as an investment that (done well) can yield tangible returns in the form of quality improvements, patient experience enhancements, and clinical enablement, will be poised for the future. This visionary perspective positions healthcare entities at the vanguard of progress, enabling them to seize opportunities, overcome challenges, and establish a sustainable foundation for long-term success.”