Ask Your Distributor for Help Meeting Your Savings Targets

By Elizabeth Hilla, HIDA

Your prime vendor has data on your spending history and may be able to mine that information for ideas and opportunities.

Predictions for 2019 are all over the news, and it’s no surprise that healthcare providers are expected to be under continued pressure to reduce costs.

As you look for ways to reduce your total supply chain spend, one of the questions you may hear is, “Why don’t we just buy direct from manufacturers and save on distribution fees?” You probably already know the answer to that: distribution services represent real value in your supply chain, and duplicating their services internally would increase other costs for things like staffing, inventory, and space.

So instead, include your distributor in the conversation about how to cut your total costs. Here are a few ideas that you might want to talk over with your prime vendor:

  • Low-unit-of-measure/just-in-time (LUM/JIT): Most distributors have programs that allow you to order in smaller quantities, often with products delivered in totes ready for delivery directly to patient care areas, rather than in cases or pallets. Talk with your distributor about whether such a program could allow you to reduce or eliminate storage areas and convert storage areas into revenue-producing space. LUM also reduces your inventory levels and therefore your carrying costs, and can reduce the risk of expired or overstock inventory.
  • Emergency preparedness: If you’re holding a lot of inventory in case of epidemics or other emergencies, talk with your vendor about ways to reduce this investment. For instance, having an agreement with your distributor to sequester certain items for you may allow you to have the safety stock you need without committing the storage space.
  • Standardization opportunities: Your prime vendor has data on your spending history and may be able to mine that information for ideas and opportunities. Ask for insights on what product lines could be standardized further, and what the savings opportunities might be.
  • Non-acute spend: Ask about ways to work together to drive contract compliance and standardization in your non-acute locations. Your vendor can also offer ideas for improving operational efficiencies, keeping in mind that most physician offices and clinics are short on both time and space.
  • Construction or expansion projects: If you’re planning to open new facilities or expand existing ones, bring your vendor into the conversation early. Some distributors have particular expertise in planning for projects like these and can ensure that the equipment and supplies you need are ready to install the moment the paint is dry.
  • Patient satisfaction: While cutting costs is probably the first, second, and third item on your to-do list, keeping those HCAHPS scores up is also critical. Talk with your prime vendor about products and services that can help. For example, your distributor might recommend lab tests that deliver fast results and eliminate waiting time, products that increase patient comfort, or items that create a more pleasing patient care environment.
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