Supply chain costs are the second largest investment for hospitals behind only labor, accounting for as much as 40 percent of the total operating budget. While many organizations struggle to keep these costs in check, even modest improvements to supply chain performance and inventory management can significantly reduce operating costs, sometimes by as much as 12 percent.
For healthcare facilities looking to improve their supply chain performance, implementing and utilizing robust supply chain management (SCM) software can pay huge dividends over the long term by taking control of complex and time-consuming tasks and automating them internally. SCM solutions have the ability to provide hospital administrators with the critical insight needed to make better-informed decisions and keep their costs in check. Here are three areas where hospitals can improve supply chain processes through the implementation of such solutions.
Vendor Management
This is an enormously important priority in healthcare. Simply making sure that vendors are certified and that they abide by applicable Federal and State regulations is difficult enough; managing the relationships and procedural and financial details between a hospital and hundreds of different vendors can be exhausting and time-consuming. The best SCM software ensures that each vendor is doing what they have been contracted to do. SCM solutions make it possible to answer important questions about performance, such as are they continuously late, and are they sending the facility the wrong product. If the healthcare industry can monitor those relationships more rigorously, they can make better-educated decisions about what vendors they should (and should not) be utilizing.
Contract management
The best SCM software solutions answer the critical question of how to manage the contracts that healthcare institutions have with their suppliers. Prices can and do change, making it essential to engage in ongoing reconciliation between an initially agreed-upon price structure, and what might have changed based on unavoidable external factors (such as a manufacturer being unable to meet a delivery date). All too frequently, healthcare institutions struggle with that process and do not utilize best business practices for monitoring compliance and performance metrics, making them vulnerable to being overcharged, delivered the wrong product or the wrong quantities. Inefficiency drives up costs and contributes to shortages, impacting health and safety. In cases where there is a problem with the product and it has to be sent back to the manufacturer, lost performance and lost time only add to the price tag.
Automating processes
The transformative potential of SCM software is especially evident in its ability to automate processes within the supply chain. Complete SCM solutions eliminate the uncertainty and expense associated with determining when new product is needed, when it is going to be shipped, and when and how invoices and payments are going to be processed. Today, largely because of the increasingly complex and demanding regulatory environment, healthcare supply issues are more complicated than ever. This means the ability to automate many of these steps and reduce the processing time for things like receiving, matching and invoicing can make an enormous difference to a hospital’s operational efficiency and bottom line.
Other process automation benefits include supplier enablement, which allows suppliers to access an online system, self-register, and bid on specific commodities or services; and an e-settlement process, which provides ability to electronically manage the invoice and payment process without any human intervention
For healthcare facilities looking to right-size their supply chain processes, the introduction of SCM software solutions can provide enhanced insight into critical business processes and lead to more informed decision-making capabilities—ultimately leading to cost savings and an improved bottom line.