Healthcare News & Insights

Best practices your facility’s supply chain should be following


121149975What is the second most costly — and fastest growing — expense for most hospitals? 

It’s the supply chain. The only thing to beat it is labor costs.

Supply chain management is more than just ordering ordering stuff electronically. To do it right, you have to match the contract price with the order price, keep the data item master clean and up to date, and validate the product and trading partner information.

With declining reimbursement never has it been so important to look for opportunities to form partnerships or actual ownership structures that’ll allow facilities to focus on services they can provide most cost-efficiently. It’s also vital to identify your services that aren’t as profitable and consider outsourcing those to other facilities that have more expertise in that area.

Here are best practices for streamlining your supply chain management, according to Supply Chain Quarterly and  HIT Consultant:

1. Create a supply chain council

In order to align the supply chain strategy with the company’s overall strategy, it’s important to create a supply chain council. The council should be comprised of executives, administrators, key managers and other other key players in the facility. The council also provides cross communication allowing the hospital leadership to relay information regarding future strategies and projects to supply chain management.

The council also helps remove barriers. By having executive leadership in the group, they can see the supply chain has the same objectives and strategies as the rest of the facility, thus bypassing any red tape from trying to get upper management buy in.

2. Managing contract and non-contract purchases

Facilities need to look at what they buy most frequently and at what cost. Then, of those purchases, what is being bought through a contract and what isn’t. For those that aren’t, look into similar products and see if you can add them to a current contract. Using supplier partnerships and strategic alliances are important for getting prices that are consistent and under control.

3. Ensure visibility

Supply chains need to know what their providers need. Therefore, it’s vital to build visibility into the supply chain so facilities know what their providers need and want, and where the millions of dollars are being spent and on what. It also gives the chain insight into what will be needed in the future to map where future dollars will be spent.

4. Align with key suppliers

 Have the council work closely with the facility’s suppliers. By building a relationship with your suppliers it allow the facility to create a platform for problem resolution, develop continuous improvement goals for both parties and ensure performance measurement objectives are achieved. A friendly alliance will do all that and more. 

5. Offer accurate product data

As facilities embrace new business processes, such as Meaning Use, which focuses on data capture and sharing, the supply chain can act as the backbone that captures accurate data that can be shared.

An example of this provided by HIT Consultant detailed that “an organization that is capturing data about all of the medical devices and products used during a patient procedure can then use this data to populate the same information in other locations, such as the electronic health record. In the future, a one-time data capture for a multitude of uses can drive much greater efficiency and compliance.”

6. Scrutinize contracts

After a contract is negotiated and signed, don’t just file it away and forget about it. And if you don’t have a copy of the contracts, get one. Don’t just leave it in the hands of purchasing, legal, finance or operations. The supply chain group should have a copy of all the contracts, too. This way they will be located in one central area, and having all the contracts allow the supply chain manager to more effectively leverage what the company is spending, and possibly even reduce costs.

7. Keep inventory at optimal levels

Poor planning and forecasting are the root of all evil when it comes to keeping inventory at optimal levels. Top-quality facilities pay attention to their inventory at the highest level. Research has revealed that true inventory holding costs could represent up to 60% of the costs of an item that is held in inventory for 12 months, as opposed to the generally assumed 20% to 25%, according to Supply Chain Quarterly. Included in those costs are insurance, taxes, obsolescence and warehousing.

That’s why so many hospitals are placing a greater emphasis on demand planning and forecasting, so you don’t have a stockpile of inventory that is costing your facility.

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