Successful supply chain negotiations require multifaceted approach

Supply chain managers are under increased pressure to reduce the cost of operational, medical and surgical supplies at their facilities, making successful negotiating a necessity.
"Hospitals are being challenged to leave no stone unturned," said Curtis Rooney, president of the Healthcare Supply Chain Association. "And the focus of all of these cuts is on the supply chain."
Supply chain managers know some of the keys to successful negotiating, like having a thorough understanding of the market and what impacts it, but some things are harder to manage. Like physicians.
Supply chain management director Jerry Ramirez is doing all that he can to help keep costs under control for his employer, Colorado-based Centura Health, but he often feels that he is negotiating with suppliers from a position of weakness. The problem: Vendors dealing with doctors directly for physician-preferred medical supplies - artificial knees, specialty surgical tools and the like. It makes for a tough time at the bargaining table.
"They view the physician as their actual customer, even though it is the hospital that is paying for the device," Ramirez said.
"The surgeon selects the product, and then we have to negotiate the price," said William Chapelle, corporate director of supply chain management at Adventist Healthcare in Washington D.C. "They use things that I just can't argue against."
More and more, physicians are making purchasing decisions themselves, and suppliers are certainly not discouraging the practice. Both parties then leave it up to the supply chain director to negotiate an attractive price when the customer is already a guaranteed sale. It's like having your spouse go gaga over the showroom model, while you're trying to play hardball with the car salesman.
It's not a good place to be in when your critical need is to bring costs down so supply chain managers must mitigate the damage by negotiating smarter elsewhere.
To achieve a negotiating edge, many organizations are banding together by joining group purchasing organizations, or GPOs, where they can purchase supplies in larger volume and get better prices as a result.
"Most healthcare organizations participate with buying groups to leverage national volume for improved pricing," Ramirez said. Centura participates in a national buying group through its sponsor, Catholic Health Initiatives.
Supply chain departments are also trying to work more closely than ever with their suppliers to find creative, mutually-rewarding, arrangements.
Because of the pressures on everyone, "suppliers must become true business partners," Ramirez said. "The sales cycle is a small part of their involvement with our organization. They help us achieve desired patient outcomes, all the while reducing supply expense."
It is important for supply chain managers, as they negotiate with vendors, to remember that the negotiations must achieve some of the goals of both parties, said Ramirez.
"Any pricing concessions must be sustainable during the term of the contract, and still offer sufficient margin to the vendor during the term of the agreement."