Strategic Sourcing: How to get it Right

For years we in the healthcare supply chain have been throwing around the term “strategic sourcing” to mean just about anything involved in the procurement process. In actuality this term is really all about looking at the big picture and then assessing all of your sourcing options to continuously improve and re-evaluate your spend management and service quality. 

More to the point, “Strategic sourcing” isn’t just identifying more suitable and cost effective suppliers.  This thinking only gets you part of the way to “strategic sourcing” excellence. To receive the full benefits of “strategic sourcing” you must consider more procure-to-pay alternatives than you have in the past.   

If you look at the healthcare supply chain landscape today, hospitals, systems and IDNs are establishing their own warehousing, distribution networks, record retention centers, manufacturing facilities (e.g., custom packs, drug packaging and sterilization) and their own GPOs. In addition to this, they are directly buying from manufactures as far away as China. 

These healthcare organizations are in the vanguard of a new wave of “strategic sourcing” that has no boundaries.  Technically, what I have described above for the most part is what is known as “cooperative sourcing”. This is where manufactures will partner with your healthcare organization by supplying the raw materials that will go into your own manufacturing process, such as, custom packs, drug packaging and sterilization. The only down side to this tactic is that your manufacturing partner’s operations need to be stable in order to guarantee you a steady flow of raw materials.

Many industries go a step further with their “strategic sourcing” by employing algorithm to evaluate many sourcing factors (e.g., market conditions, supplier conditions, individual supply conditions, etc.) so they can have many options to match a buyer’s savings goals.

So as you can see “strategic sourcing” can be a very sophisticated endeavor if you want to optimize your sourcing strategies and tactics beyond just investigating, bidding and negotiating with a new supplier. To be truly strategic in your sourcing you will need to develop a whole new “mindset” that embraces the concept that there are no boundaries or limitations on who, where or how you buy (in-source, outsource or cooperative sourcing) your products, services and technologies. Only then can you be on the right path to maximizing your sourcing options to bring about a whole new world of savings for your healthcare organization.

Robert T. Yokl

Chief Value Strategist

Strategic Value Analysis® in Healthcare

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