We often have clients call or e-mail us, especially around budget time, in a panic telling us that their executive management has directed them to shave 3%, 5% or even 8% out of their supply chain expense budgets and they don’t know where to get started. After we calm them down a bit and get the facts of their situation, we ask them if they have an action plan in mind to make these savings happen. The answer is inevitably…NO!
We then tell them that without a well thought out action plan, they might as well be driving a car without a steering wheel since they will be going in every direction but forward. Specifically, we tell them that they need to perform three-steps to prepare their action plan: (1) Specific Tasks: What needs to be done and by whom? (2) Time Horizon: When will it be done? (3) Resources Allocation: What specific people, things and funds are needed to accomplish the tasks? This then gives our clients a solid foundation to move forward with their action planning exercise.
As we coach our clients through this action planning exercise we help them to isolate each task as follows: benchmarking, classification and prioritization. For instance, with a recent client assignment we determined through benchmarking savings for our client in purchase services $9,099,769; price $1,540,460 and utilization of $494,780 for a total projected annualized savings of $11,148,808. This client then established a supply chain team to attack these identified savings starting with price savings since it was the easiest to get their hands around. The client then set milestones and deadlines for accomplishing all of their tasks to reduce their supply chain expenses by 5% over the next 12 months.
There is also a little known benefit of developing an action plan and that is that you will know with certainty what can and can’t be done. Case in point! We often hear from clients or prospects that their executive management wants them to cut their supply expenses by 12% or more. My immediate reaction is to ask our client or prospect where their executive management got that number. The answer is that they just pulled it out of thin air. We then go through the planning exercise above with them to see if a 12% cut is realistic. More often than not, the number is unrealistic or unobtainable. That’s when we suggest to our client or prospect that they show their executive management the action plan we have helped them develop that contains a more accurate and reasonable savings goal; we then ask them to negotiate a realistic savings goal with their executive management. Otherwise, they would be trying to reach an arbitrary savings goal that is unreachable and detrimental to their healthcare organization.
All of this might seem rudimentary to you, but when panic sets in most supply chain professionals become anxious and then forget the basics of their management training: plan, organize, and control. It’s like a military operation; no army would face their enemy without a comprehensive action plan. You must remember to do the same, even when the challenge seems like mission impossible. It is a rare situation when an action plan won’t give you the power to overcome just about any problem, test or encounter that will come your way!
Robert T. Yokl
Chief Value Strategist
Strategic Value Analysis® in Healthcare