Supply Chain Cost Savings Strategies. Jean Sargent, CMRP, FAHRMM Director, Supply Chain University Kentucky Healthcare Vicki Smith-Daniels, Ph.D. Professor of Supply Chain Management Arizona State University. Agenda. Perspectives on Supply Chain Challenges The UK Healthcare Story
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Jean Sargent, CMRP, FAHRMM
Director, Supply Chain
University Kentucky Healthcare
Vicki Smith-Daniels, Ph.D.
Professor of Supply Chain Management
Arizona State University
Source: The Advisory Board Company, 2005 – Expense Growth Rates 2002-04
Total Supply Chain Expense as a Percentage of Total Hospital Expense
Logistics & Distribution
Supply Chain Management
To a tipping point size slice: >50% of the budget
Total Cost Incurred by Hospitals
* Figures based on HFMA estimates. Labor cost includes salaries, wages and benefits based on average of leading hospitals in the U.S. and Others is inclusive of profits to the hospitals. Source: S&P Industry Surveys: Healthcare Facilities; HFMA; industry reporting; Pipal Research analysis.
Source: HFM Magazine, 2008
Rising Oil Prices
Relentless Pressure to
Product Innovation to Drive
Pursuit of New Markets
Issues on the Minds of Manufacturing Supply Chain Executives
Frequency of Occurrence
ReturnIntegrated Supply Chain
Internal or External
Internal or External
Synchronizing material, information and financial flows both within and across organizational boundaries
CMO & Associate CMOs (5)
Medical Directors (63)
…a system in the relentless pursuit to eliminate waste and non value added activities.
Standard Supply Expense Definition
The net cost of all tangible items that are expensed including freight, standard distribution cost, and sales and use tax minus rebates. This would exclude labor, labor related expenses, and services as well as some tangible items that are frequently provided as part of service costs.
Pursuit of the Single Best Metric
Reasonably good benchmark when peer group has
a. similar bed size
b. similar outpatient to inpatient revenue ratio
c. similar output of high supply intensity services
Sun Devil has lower
labor costs than
hospitals in the
peer benchmarking group
Need to investigate Pharma utilization reports!!!
Consider another benchmarking peer group with
Rightsizing Your Supply Chain Organization
Need more SC FTEs!! What type of FTEs?
Where should they focus their attention?
Consider More Product Delivery FTEs!
What about other areas?
Hire Additional Contract Personnel to Focus
on Self-Managed Contracts?
Hire FTEs to formalize and centralize SC policies
Supply chain is strategic aspect of providers’ business, success
Supply chain optimization imperative
SC Leader must facilitate future vision, strategic plan, education, communication, metrics
SC Leader must ensure it is achieved
Executives recognize, understand, promote supply chain opportunity, impact, role
Use of standards
Use of benchmarking tools
The New Measurement Paradigm