For years I was a master at sensing supply expense savings opportunities for my clients. You might call this managing by gut feel. About 10 years ago, I started to employ value analytics to pinpoint savings with astounding accuracy. My batting average for uncovering savings with my gut feelings was about 150 percent (not bad when you consider I did it purely through my instincts), whereas now our hit rate today is about 500 percent or better using Value Analytics*.
I see most of my clients starting with price when they are looking to indentify their supply chain expense opportunities, but this imbedded cost only represents about 21 percent of the savings opportunities available to supply chain professionals in their supply streams. It’s easy, safe and predictable, but this type of one-sided thinking only leads to getting a hold of a few slices of the bread – not the whole loaf.
I can relate to this type of thinking since I have “been there – done that” for many years, which was usually a byproduct of my gut feel decisions – not hard data. By doing so, I estimate that I have left at least a half billion dollars in my 38-year consulting career on the table unintentionally that should have been captured in my fishing net for my clients. Well, that was then (about 10 years ago) and this is now where my gut feel decisions are always backed up with our Value Analytics.
For instance, just last week my vice president of operations showed me that one of our large teaching hospital clients was spending $826,239 annually on their specialty bed rentals which my gut told me was too much money. We then measured their usage of these bed rentals with our Value Analytics* (i.e., data, statistics and Activity-Based Costing) and quickly determined that our client was overspending by $472,333 on their rentals. Bingo! We now had the hard actionable data (not just gut feel) to share with our client, so they could investigate this price, standardization or most likely utilization anomaly in their rental bed cost.
The end game here is that if you want to be confident in your supply expense reduction decision making don’t base your decisions on simply your “gut feelings”. Invest your limited time, technology and resources in making emotionless and analytical decisions that will greatly improve your savings batting average. One unemotional decision at a time!
Robert T. Yokl
Chief Value Strategist
Strategic Value Analysis® in Healthcare
*If you would like to read more about Value Analytics: The New Science of Saving, you will find a detailed explanation in Chapter VII of our new book “Healthcare Supply Utilization Revolution”. You can request a FREE copy at www.strategicva.com to fill in the blanks for you.