Global benchmarks won’t uncover your actionable savings opportunities
Most supply chain departments are subscribing to global benchmarking services that provide them with benchmarks at 30,000 feet that leaves too many questions unanswered to be helpful in improving your supply chain expense management performance.
If you have questions, (such as “Which products are causing my overspends and whether it’s a price, standardization or utilization issue?”) they are never answered in these reports. This leaves supply chain professionals guessing at why their metrics are higher or lower than their peers. These reports are a poor substitute for identifying your actionable savings opportunities. In fact, they aren’t much better than flying blind!
This is why you need targeted benchmarks to answer these important questions. By target, I mean developing benchmarks on every one of your SKUs (storekeeping units) to uncover your price, standardization and utilization misalignments. This is the only way to marry up your global benchmarks to your actionable savings opportunities. For instance, if your benchmarking service is telling you that you are at the 70th percentile of all hospitals on your supply cost per operating room case, you can then review all of your operating room product’s targeted benchmarks to uncover why you are out of alignment with your peers.
Often through this process you’ll discover it’s not that your supply chain department is out-of-step with your peers, but your benchmarking service has your hospital, system or IDN in a wrong cohort group which is distorting your benchmarks. This is a common occurrence with global benchmarking services that has given benchmarking a bad reputation. To prevent this from happening to you, verify (yourself) that your healthcare organization is in the right cohort group when you receive your next report.
The best match up we have found for accurate benchmarking is to compare your hospital by its unique operating characteristics (i.e., adjusted discharges, operating room cases by type and volume, specialty units, emergency room trauma level, etc.) to your peers. Since no hospital is exactly the same, you try to get the best match possible. For instance, being measured by your occupied beds is the worst measurement possible, since occupied beds don’t reflect your hospital’s uniqueness, intensity of services or centers of excellences. Lastly, make sure your benchmarking service is using your correct operating characteristics to compare your hospital to their cohort group or your reports will be worthless!
Benchmarking is an effective technique to improve your supply chain operations, but it’s operationally ineffective when your benchmarking service is employing global metrics to identify anomalies in your supply streams since these high level metrics are too far removed from your supply chain operations to be useful, meaningful and actionable. You need to get to the ground level (or SKU level) with your benchmarking to provide you with actionable information that you can easily react to intelligently. That’s how you have breakthrough performance improvement to up your savings game.
Robert T. Yokl is president and chief value strategist of Strategic Value Analysis® In Healthcare, which is the acknowledged healthcare authority in value analysis and utilization management. Yokl has nearly 38 years of experience as a healthcare materials manager and supply chain consultant, and also is the co-creator of the new Utilizer® Dashboard that moves beyond price for even deeper and broader utilization savings. For more information, visit www.strategicva.com. For questions or comments, e-mail Yokl at email@example.com.