Supply Chain Management – Centralized purchasing saves millions of dollars

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Supply Chain Management – Centralized purchasing saves millions of dollars

por Linda Comisar, Division Vice President | May 24, 2016
Linda Comisar
From the May 2016 issue of HealthCare Business News magazine

When my new employer tasked me to consolidate its existing purchasing process, it was a daunting task. The concept was just that, a concept. I had to develop process, protocol and a software module to work with our existing system to accomplish this feat.

Technicians reported spending 30 to 35 percent of their time daily sourcing parts, versus spending time doing only what trained technicians can do, which is diagnose and repair broken devices and equipment. When a part fails, the technician may not have had to source that part for months, or in some cases, years. The marketplace is dynamic and changes rapidly. A third-party vendor who was a great source a year ago may not be today. This is problematic in that every minute a piece of equipment or room is down, it is not generating revenue, or more importantly, has a negative impact on patient care. While revenue is certainly important, patient care will always be No. 1.

If you take care of patients, the revenue takes care of itself. I have spoken to many technicians who have told me they have spent days trying to locate a part to no avail. However, I am able to locate the item in minutes. This is because with a centralized purchasing group, one is able to utilize every aspect of economies of scale. A group of educated buyers is purchasing the item on a weekly or monthly basis, whereas the tech may only encounter the same need every 1 to 3 years.

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A centralized purchasing group has its finger on the pulse of the market and knows what items can only (in some cases should only) be procured from the OEM and, conversely, when it makes more sense to obtain an item from the aftermarket or a third-party vendor. Another challenge that exists is consistency in pricing. In many cases within a given hospital group, even with an OEM, Hospital A is not paying the same price (obtaining the same discount) as Hospital B. This happens for several reasons.

Technicians are spread thin and most concerned with obtaining the correct part to get the system up and running, and while quoted one price may often be invoiced at a different amount and never know. A technician often does not have the visibility to know what his counterpart paid in another facility. Resolving these issues is also very time-consuming. Preventing the issue is the answer. This is where centralized purchasing is worth its weight in gold. Front-end due diligence takes only a few extra minutes and greatly reduces these and most issues.

In addition to inherent knowledge of what vendor is best suited to meet the immediate need, there is the negotiation factor. Buyers are comfortable having these conversations daily. There are some technicians who are more than willing to negotiate. However, there are also a number of technicians who for a host of reasons — urgent need, lack of experience, lack of time, etc. — will never ask for a better price, or will just ask Vendor A to match Vendor B pricing. In this practice literally millions of dollars are left on the table daily.

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