Lack of planning and inefficient processes can lead to poor decision-making. Learn how to avoid such mistakes here.
By Will Kinsey
Finding the right repair parts and services is not an easy task. In fact, it can get overwhelming to search for quality medical suppliers. Therefore, there is a lot of time spent on the phone—sometimes up to an hour per call to ensure you are ordering the correct part. This can be significant when considering the total amount of orders clinical engineering manages.
Additionally, budgeting for medical parts can be difficult since parts spend may be spread across various hospital departments. This results in the typical technician spending more time than necessary on parts research and procurement. All of these factors demonstrate why intelligent consolidation can produce substantial savings for your healthcare facility.
After all, by looking for ways to streamline and improve the overall procurement process, you will reap the benefits of vendor consolidation.
The Complexity of Product Sourcing
As more medical products are ordered, healthcare facilities invariably end up buying the same products from the same vendors at varying costs—or the facilities end up ordering from different suppliers at varying costs while not leveraging savings opportunities.
Plus, it’s not uncommon for a department to have one person who saves every part possible while another person places their order with their first call. Therefore, hard-dollar savings has become challenging with traditional product sourcing.
According to research done by PartsSource, there is an extreme lack of efficiency within today’s purchasing environment. By looking through multiple years of online orders, the company noticed that clinical engineering departments spent the majority of time ordering parts under $1,000.
Out of those orders, more than 50% were purchased only once per year. In addition, according to “Assessing the Financial Impacts of RFID Technologies on the Retail and Healthcare Sectors”, a study conducted by The University of Texas in Austin, healthcare facilities overbuy equipment by 50%—and utilization of that medical equipment is 45%.
When a hospital consolidates, quality analytics can be leveraged to help drive supply chain efficiencies in areas needing improvement within the procurement process. One technology platform can be a proven strategy to increase buying power, thus reducing overall spend.
By simplifying and automating interactions with select, preferred medical suppliers and original equipment manufacturers (OEMs), you will be able to focus your efforts of supply chain development, resulting in support for more strategic initiatives regarding sustainability, innovation, risk reduction, and other key organizational initiatives. You will find the greatest opportunity for organizational success by harnessing these broader benefits.
Cold, Hard Data
When parts spend is spread throughout the hospital or health system, it is hard to track cost centers. By consolidating your vendors and mandating efficient online procurement tools, you will be able to leverage data to drive purchasing decisions and forecast for future spend.
If you work at a larger healthcare system with multiple hospitals, one platform will also enable you to compare spend between hospitals. Remember: A healthcare organization should always consider the reporting and analytics that it receives or will receive from a vendor when selecting a partner.
So, ask yourself these questions:
- “Am I receiving reporting that helps me validate my savings?”
- “Does the reporting provide me with appropriate quality analytics?”
- “Do I have visibility surrounding my employees’ purchasing behaviors?”
- “Does my partner consistently communicate to me about where there are additional savings opportunities?”
Moreover, the same study by The University of Texas in Austin estimated that lost and stolen equipment cost institutions approximately $4,000 per bed annually. By consolidating vendors, you will gain visibility into your department’s orders, which helps to decrease theft and fraud since most items go missing within a healthcare facility during the repair process.
Supplier Management 101
Utilizing strategic sourcing processes allows hospitals to leverage their relationships with a narrowed group of vendors who can negotiate on their behalf, rather than burdening staff to attempt to build relationships with hundreds of OEMs and other vendors.
While lower prices represent the largest source of hard-dollar savings from supplier consolidation, the reduction in processes can be the largest opportunity for savings. With fewer suppliers, the number of separate transactions decreases—which also lessens the amount of time it takes to manage every supplier and their terms.
The sourcing of every repair part can be exponentially larger than the price tag when looking at the cost for labor and related overhead. Therefore, establishing internal systems and working with fewer trusted suppliers can greatly decrease spend and internal expenses. When mulling a consolidation partner, however, you should ask the following questions: (After all, these areas significantly contribute to a time reduction in the procure-to-pay process)
- “Can this supplier integrate with my enterprise resource planning (ERP) and CMMS systems?”
- “Is this supplier able to communicate via electronic data exchange?”
- “Can this supplier reduce the number of reconciliation issues that we manage?”
Increasing Stakeholder Satisfaction
Vendor consolidation provides a large opportunity for clinical engineering departments to demonstrate a return on investment. Furthermore, quality analytics can help drive supply chain efficiencies in areas needing improvement. The graph in the link below demonstrates the extreme price variance that can occur when a department does not have a standardized relationship with trusted parts suppliers.
In fact, based on the vendor you call, one part can vary hundreds of dollars. But if you reduce the number of vendors you work with, the purchasing price can become standard and save a hospital approximately 70%. You’ll also save a significant amount of time by implementing a standardized purchasing process on a single platform.
The Solution to Streamlining Processes
Fortunately, technology is available to help consolidate vendors and streamline the procurement process. And utilizing the right platform will not only enable simple purchasing of on-demand parts, accessories, and services online, but it will also integrate with asset management (CMMS) and ERP systems.
By leveraging this type of platform, you can take advantage of both procurement decision support with technology that fits into your procurement workflows—instead of changing them.
As an example of how a technology platform can be leveraged to facilitate better procurement, PartsSource uses a patented Supplier Ranking Module that contains qualitative and quantitative data to evaluate the quality and price of more than 1,000 OEMs and 5,000 aftermarket suppliers.
But by leveraging a single technology platform, you can take advantage of this type of ranking module—rather than just basing your decisions on prior experiences, recommendations, or effective salespeople. Moreover, when searching for a quality procurement platform, consider these two aspects:
- Quality management: This can be determined by looking for International Organization for Standardization (ISO) 9001:2015 certification, which validates the strength of a medical parts provider’s quality management system. The ISO evaluation process can be a long one; so if a company has received this certification, you will know they have key performance indicators. Some providers have ISO-certified quality controls for hospitals, meaning the provider will give the healthcare facility a certificate to reference in the organization’s procurement policy.
- Regulatory compliance: This can be difficult for healthcare facilities, especially with the Sarbanes-Oxley (SOX) Act, which explains the separation of duties to prevent fraud. By increasing your visibility with a procurement technology platform, you will see who is purchasing what at your healthcare facility.
When considering vendor consolidation, think of reducing your vendor base to a select few. Choose a provider that will help reduce supply chain costs through standardized processes. Choose a platform that leverages quality data to help you make better decisions for organizational success.
After all, innovative approaches to consolidating suppliers beyond traditional boundaries is critical to maximizing the value from repair parts and services spending.
Will Kinsey is vice president of client services at Aurora, Ohio-based PartsSource.