Most supply chain professionals don’t think much about their competition down the street or across town, because they think they are miles removed from the marketing initiatives of their hospital. But don’t kid yourself, your supply chain department is as much a marketing weapon as any other tool your hospital is employing to improve their market share.
I know this concept is foreign to you, so let me explain what I’m talking about. If, through your cost reduction and containment efforts, you can significantly lower your hospital’s cost per adjusted patient day and thereby impact your hospital’s bottom line vs. your competition – you win and they lose!
Specifically, you win since your hospital can then afford to hire the best talent, buy the latest technology and attract the top doctors. Your competition loses because their imbedded supply chain cost is much higher than yours and they are struggling just to survive. We know this to be true, since we look at hospitals financial statements every day and can see the effect of a hospital staying competitive with their supply expenses and how this influences their market share. It can be a game changer!
This isn’t a theory, but a fact! For instance, one of our client’s supply chain departments shaved 1.4 million in supply expenses in 12 months to boost their hospital’s bottom line by .01%. This bump in savings has helped this hospital to maintain a bottom line so they didn’t need to lay off any of their hospital personnel, which would of tarnish their image as well as shrink their market share in the community they served.
Another one of our client’s senior management actually talks about their supply chain department in terms of a strategic advantage over their competition. This hospital “gets it”. Their supply chain operations aren’t just cost cutters, service center and logistic experts but in reality a contributor to improving their market share.
Unfortunately, this scenario can’t happen unless your supply chain department is wringing the towel dry on supply savings. You can’t nibble around the edges! You need to aggressively attack every cost driver (price, standardization and utilization) in your supply chain expenses.
You then need to go one step further and then reinvent everything you are doing, so you always are one step ahead of your competition. This is a game of inches, not leaps and bounds! Nevertheless, we see progressive supply chain leaders doing this same thing every day. They are never satisfied with the status quo and are always looking for new and better ways to wring the last dollar out of their supply expenses, one cost center at a time!
Robert T. Yokl
Chief Value Strategist
Strategic Value Analysis® in Healthcare