Are You Playing On The Edges Of Supply Savings Success
At Your Hospital, System or IDN?
Until
You Have A Proven, Repeatable System To Measure, Manage
and Implement All of Your Supply Chain Savings, You Are
Just Playing On The Edges Of Supply Savings Success
Playing on the edges of supply
savings success is the game most healthcare
organizations are playing today. Hospitals tell me that
they are happy if they save $250,000 or $500,000 in
supply savings on any given year, when we have
documented for them savings opportunities of
$1.4, $2.6 or even $4.7 million. If you too
are playing on the edges by limiting your savings
goals and objectives to a finite number (a number
you feel you can achieve without too much effort each
year), then you aren’t “wringing the towel dry”
for your healthcare organization. That’s what you are
getting paid for as a supply chain professional, having
no boundaries or limitations on what can
be saved each year.
The best way to “wring the towel dry”
in supply savings and to stop playing on the edges is to
beg, borrow, steal or buy a proven repeatable
money-saving system to plan, organize, measure,
document, implement and report supply savings –
evermore. As opposed to “winging it” every year
with a hope and prayer that you will save enough money
to keep your job! Having a system is what has made
McDonald’s, FedEx, Disney, Wal-Mart and Southwest
Airlines such big successes. Could you imagine
McDonald’s letting their franchisees make hamburgers
their way or FedEx permitting their drivers to pick any
route they felt like to deliver their packages?
So why then are so many hospitals,
systems and IDNs “winging it” with saving money?
The answer is: “Winging it”
feels good, takes very little time or effort, seems to
be a very inexpensive way to save money, and sometimes
might even make your management think you are doing a
good job. In reality you are really wasting
yours and others time and talents on an event by event
basis. I call this an “Activity Trap”! I
see this “Activity Trap” every time I read minutes of
product evaluation, or value analysis committee, or
value team meetings, a lot of activity, but very
little results to show for these committee or team
efforts. So, if you are serious about saving money
- beyond the edges - start thinking about having
a systems approach to saving money that can almost run
on automatic pilot once you get it up and running!
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MAILBOX
My
CFO has asked me to come up with a list of savings goals and
objectives for 2006. Where would you suggest I get started
with this challenge? S.T.
Since we are almost into 2006 and there isn’t
time for you to perform an analysis of where your best
savings targets are hidden, I will give you a few generic
goals and objections you could think about that come from my
experience:
1. You
can always shave 1%, 2% or even 3% off your supply
budget, especially if you haven’t been too aggressive
previously in this area of your operations.
2. You
can always reduce your inventory by 5% to 10% without
breaking into a sweat, since very few department heads keep
their eye on their inventory levels
3. You
can always reduce your capital budget by 10% by
really value justifying each purchase. The reason is that
10% of your capital purchases aren’t needed at all, and 20%
you can find lower cost functional alternatives. Another 10%
can be trimmed of their feature rich components without
changing the functionality of the product, service or
technology being requested.
If I were you, I would start thinking about
your 2007 goals and objectives as you move through 2006, so
you don’t need to rush putting them together next year.
Good
luck,
Bob
Yokl, Sr.
Chief Value Strategist
Strategic Value Analysis In
Healthcare
800-220-4274
bobpres@strategicvalueanalysis.com
P.S. If anyone
else has a burning question that you would like me to answer, please
call or e-mail me and I would be delighted to answer.
There Is Still “Gold In them Thar Hills”
Business Intelligence: The Missing Link In Achieving Higher Levels
Of Savings Performance With Value Analysis
“Improved
Value Analysis Performance Only Happens When Data Is Better Managed,
Understood, Data Mined And Analyzed For Actionable Results.”
Most healthcare organizations
have now purchased a new generation of Materials Management Information
Systems (MMIS) or will do so within the next three to five years, but
does this mean that these organizations are now making smarter business
decisions based on better business intelligence? The overwhelming
conclusion to this question based on our extensive research is NO!
Business intelligence or the
search for hidden patterns, trends and vital information about your
customers’ purchases, inventory practices and logistics is the missing
link in value analysis performance today. Business intelligence
involves digging and drilling down into data warehouses and then data
mining to understand what our customers are purchasing, how they are
purchasing and what they are doing with these purchases once they have
received them. This search to find, verify and identify patterns in
your data, then formulate action plans to improve your supply/value
chain performance with the techniques of value analysis is the core
concept behind achieving higher levels of savings and quality
improvements through better data management.
Regrettably, the link between
better managing purchasing and utilization data and achieving higher
savings performance with value analysis is lacking at most hospitals and
systems in the U.S.
today.
Three Steps To Move You To The Next Level
Of Savings With Your Data
There are three critical steps
that are required to move you to the next level of savings and quality
improvements utilizing your data as business intelligence:
1.
Improve Your Data Quality
Over the last two decades, we have looked at millions of SKUs
(storekeeping units) and hundreds of data files that were generated by
hospitals and systems’ MMIS systems only to find 10% to 15% of these
files to be in a normalized format that is required for data mining.
This fact necessitated my staff to spend thousands of hours organizing,
categorizing, classifying, normalizing, stratifying and cleansing this
data in preparation for data mining over the years.
Based on this experience, the four major reasons we found for a hospital
or a system’s data quality being poor was: (i) weak, forgotten or
limited training on how to use the hospital or system’s MMIS system,
(ii) no standardized protocols established for categorization and
classification of line item data (iii) carelessness in entering data and
(iv) poor discipline in adhering to the protocols that were established
for data management.
2.
Expand Your Data Warehouses
A data warehouse, from a supply/chain management perspective, is a
centralized repository of ALL customer transactions in a format that is
understandable, easily retrievable and in a user friendly environment.
However, this information should be only your starting point in building
your world class data warehouse.
To be truly effective your data warehouse will also need to maintain: (i)
comparative pricing for all of your purchases, (ii) alternate products,
services, and technologies for what you are buying now (iii) utilization
benchmarks on all of your high usage commodities and (iv) global
benchmarks to target departmental savings opportunities that are hidden
from your view.
3.
Conduct Data Mining Exercises
Data mining is the process of finding, verifying and identifying unusual
or hidden purchasing, utilization or behavior patterns in your products,
services or technologies by systematically searching your data warehouse
for answers to the questions that arise from the data you uncover.
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