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Buy local, and help your IDN and the communities you serve
By Robert T. Yokl

Over the last 10 years, there has been a major shift by healthcare providers toward moving their supply chain purchases from local vendors to regional and then to national suppliers, in order to save money. While on the surface, this practice might seem prudent in this tight healthcare marketplace, in fact, it conflicts with a healthcare organization’s social responsibility to the communities it serves. It also eliminates the possibility of discovering new local sources for your supplies, services and equipment.

Missed opportunity
By sharing some of their business with their local suppliers, hospitals, systems and IDNs seize an opportunity to meet their social responsibility, improve their community image and stabilize their costs. If a healthcare organization buys all of its categories of purchases regionally and nationally, they not only lose the chance to save money, but they also neglect their local business community, which is the source of most of their fund-raising dollars. It just makes good business sense for hospitals, systems and IDNs to have a “blended sourcing strategy” (local, regional and national), so they can help themselves help their neighbors survive and thrive. That help will circle back to their healthcare organization in a myriad of beneficial ways.

Social responsibility
Healthcare organizations are usually the biggest employers in the geographic areas where they reside. It doesn’t make good business or social sense to turn a deaf ear to the local business community. Each of these small, medium and large businesses employs thousands of workers; they and their families are your current or potential clientele. Don’t ignore the impact your healthcare organization can have on your surrounding community, or the importance your contribution to the local economy can be to its well-being and to your reputation.

Blended sourcing strategy
When I was a materials manager in the ’70s and ’80s, every hospital, system and IDN where I worked had a standing order: “All things being equal, buy locally.” I am afraid that this business philosophy has eroded over time to, “Buy only from suppliers that have a GPO contract.” I believe that a “blended sourcing strategy” can meet both of these long-held buying tenets.

The blended sourcing strategy takes into account the healthcare organization’s social, fiscal and community’s shared values when making buying decisions. Organizations employing such a strategy search for local suppliers that can meet their business objectives on all of their purchases. This strategic objective has become much easier to realize over the last few years, since most local suppliers belong to their own group purchasing organizations, and that has leveled the playing field on price.

Among my clients, some hospitals, systems and IDNs (as well as at least one regional GPO) annually bid and contract with local suppliers for their office supplies, furniture, computers, food, paper products, etc., at a considerable savings for their healthcare organizations. Just as important, they have found that the customer satisfaction from these local suppliers is equal to or greater than their previous regional or national suppliers for the same commodities.
You might say just about now that this sounds like a good idea, but how does this affect GPO commitment levels? The fact is, very few GPOs mandate 100 percent commitment. (Eighty percent is the national average.) Contracting executives can share some of their purchasing dollars with the local business community and still meet virtually all of their GPO commitments.

Supply chain managers must follow an array of purchasing parameters – quality, service, and price – in order to make good business buying decisions for their healthcare organizations. I’m suggesting that you add one new parameter to this grouping – routinely adding local suppliers to your bidders’ list. By doing so, you demonstrate your healthcare organization’s sense of social responsibility, improve your community image, increase your fund-raising efforts, and add extra savings to your bottom line.

Robert Yokl is president and chief value strategist for Strategic Value Analysis® in Healthcare, Skippack, Pa.