Squeezing costs out of supply chain management

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Squeezing costs out of supply chain management

October 02, 2015
From the October 2015 issue of HealthCare Business News magazine
Roundtable participants acknowledged that providers frequently place duplicate orders for the same items, resulting in higher freight expenses. Furthermore, products are sometimes shipped in more expensive ways (overnighted, via air) when a less expensive method (two to three day) may be acceptable. Someone pays for these high freight charges — either the supplier foots the bill or passes along the costs to the providers.
Sometimes, the freight charges are more expensive than the products themselves. Participants also cited the practice of hoarding inventory, noting how many clinicians order and store excess inventory in fear they will run out. In these cases, trading partners lose money when excess products expire and must be discarded.
• The complexities of health care contracting:

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Roundtable participants voiced the complexity of health care contracting as a major pain point and cost driver. Both providers and suppliers agree that discrepant data, disconnected systems, frequent price changes and the overall complexity of the health care contracting process creates unnecessary work and increases costs on both sides of the supply chain.
• The shadow supply chain:
Various participants pointed to clinician involvement in the supply chain as a driver of inefficiency, cost and waste. Clinicians spend time on supply chain tasks that take them away from patient care, while often over ordering products because they have little visibility into overall organizational inventory levels. For example, a nurse might reorder products for a facility not knowing that another facility within the health care system has a surplus of the same items available for use.
• Physician preferences:
Cost-to-Serve around physician preference items, specifically implantable devices, was identified as a significant cost driver. Traditionally, supplier and provider organizations have been at odds in this area, competing for physician loyalty and compliance as opposed to collaborating with physicians to determine the best product at the optimum cost for patient care. Complicating matters are the highly manual, disjointed and duplicative processes surrounding the use of implantable devices in the OR, which ultimately drives an additional $5 billion per year in health care industry costs due to lost, wasted or expired products.

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