When Does Something Become a No-Brainer?
I just read an article about how all of our nation’s hospitals aren’t reprocessing the numerous medical devices that have been approved as safe by the FDA to do so – even though you can save 50% of your medical devices’ original cost. Wouldn’t you think this was a “no-brainer” for all hospitals? Here’s the rest of the story!
The reason given in the article on why all hospitals haven’t jumped on the reprocessing bandwagon is that they think it will be too time-consuming to do so because of the numerous internal changes in behavior that would be needed to achieve this savings.
So maybe this reprocessing idea isn’t a “No-Brainer” after all or is it? But how would you know unless you tried it? This is the key for knowing when something is a “No-Brainer” or not. Experiment to find the real answers instead of tuning out the sales rep because his or her “its easy” message seems to implausible to believe.
Nothing good happens unless you are willing to experiment with a pilot study to determine the financial, quality and service fitness of any proposed new product, service or technology. This way, you will know with certainty when something becomes a “No-Brainer” for your healthcare organization — or not.
How to Gain Control of Your Hospital’s Supply Chain
Savings Beyond Price -Weekly eNewsletter - July 16, 2008
Robert T. Yokl
President & Chief Value Strategist
Greetings!
How to gain control over your supply chain
When I sit back and analyze, as I do every week when I write this column, I ask myself what are the biggest challenges that supply chain professionals are facing today? I would say one of the top ten challenges would be “how to gain control over your supply chain” and not let it control you.
By control I mean that you always know where your savings reside, what defects (those things your customers don’t want or need) exist in your supply chain operations and how you would quantify these cost drivers down to the third decimal point.
To obtain these mission critical key performance indicators you don’t need to hire more staff, buy a new MMIS system or even normalize all of your data. What you do need to do is to develop short and long-range RADAR (I call these dashboards) that will quickly detect where your operational challenges are located and what their financial impact is on your supply chain. It then becomes much, much easier to solve these operational issues quickly and effectively without missing a beat.
We have numerous clients that are utilizing dashboards as their supply chain RADAR to detect anomalies in their supply chain performance. They tell us that they are now able to sleep much better because they are in control of their supply chain operations. No more guessing, assumptions or conjecture; they know precisely where to focus their resources and labors on their journey to operating excellence.
Wouldn’t having supply chain RADAR make your job easier too?
Your Partner In Savings Beyond PriceTM,
Bob Yokl
Robert T Yokl
Chief Value Strategist
Strategic Value Analysis® In Healthcare
800-220-4274
P.S. We are getting more requests for test drives on our Supply Chain Pilot since supply chain professionals are looking to re-energize, normalize and really control their VA process in order to increase their savings yield. If you are looking to increase your savings yield too, why not check out this power tool at www.strategicva.com/valuenet_main.htm.
P.P.S. Don’t forget to check out my new blog article “How to Identify and Develop Your Best VA Team Members”. This blog is all about not leaving to chance the selection of your VA Team Members, but basing your selection on facts.
How to Identify Your Best Value Analysis Team Members
Most hospitals, systems and IDNs have value analysis teams that evaluate and select the products, services and technologies that they are buying. The question I would like to pose to you is how do you identify the best VA team leaders and team members? Is it by chance or fact?
For years, we allowed our clients to select their value analysis team members by title or position, only to find that we were leaving this selection to chance – not facts! Our studies were showing that 76% of the team members that were selected by this chance method were failing in their team member roles.
We then realized that this selection process was really a hiring decision and it had to be made more scientifically if our clients were to have the best talent on their value analysis teams. That’s when we instituted our “Team Leader and Team Member Placement Test” based on the top value analysis team member competencies that we have observed were the most successful, more often, in the past.
The result, after eight years of using this test with our clients, shows that if you have a placement test for your team leaders and team members you have a 97% probability of having the best candidates for
your team’s jobs and you can, up front, eliminate any mismatches for this teamwork before it becomes too late or too embarrassing to do so.
So if you want to hit the bull’s-eye every time by truly predicting the performance beforehand of your new value analysis team leaders and team members you need to design a “Team Leader and Team Member Placement Test” for your new team hires based on FACTS, not chance.
Three Hidden Risks in Your Supply Chain
We all think our supply chain is humming along with no perceived dangers lurking in our value streams, except this thinking couldn’t be farther from the truth. We are seeing numerous supply chain risks lying beneath most healthcare organizations’ supply chains that can be a danger to your hospital, system or IDN’s financial health.
The first risk is over-standardization of the products, services and technologies you are buying that are costing your hospital, system or IDN thousands of dollars a year in unnecessary and unneeded cost. This is happening because of the misunderstanding that one size fits all customers, when, in fact, customization is the secret to having the lowest total supply cost.
The second risk is bulging inventories that at some hospitals can exceed two million dollars in safety stock that is two years old. As a result of this, damaged, out-of-date and unreliable products end up being used in medical procedures. Consequently, these hospitals are risking multi-million dollar law suits from medical misadventures that are directly caused by these old and outdated products.
The third risk is over-specifications of the products, services and technologies that you buy. I like to call this catalog buying! If you haven’t identified the exact functional specifications for the products, services and technologies that your hospital is buying (and are accepting what your department heads say are their specifications), then you are buying too much feature-rich and over-engineered stuff that you don’t need at all. Wouldn’t it be better to get the specs right the first time!
In a time when healthcare organizations are looking to reduce their cost even further and improve their quality (or they won’t be paid by third parties), the hidden risks in your supply chain need to be eliminated, and purged from your value streams.
To do less is risking the short and long-term financial fitness of your supply chain.
Your Partner In Savings Beyond Price™,
Bob Yokl
Robert T Yokl
Chief Value Strategist
Strategic Value Analysis® In Healthcare
800-220-4274
P.S. We have just announced our fall 3-day Certified Value Analysis Leadership Course that will be held on November 4th to 6th, 2008. Our attendees tell us that if you are looking to start-up, re-invent or re-energize your supply value analysis program this is the course for you. Our early bird special rate ends September 15th, so sign up now to save $200.
A Time for Action…Not Rumination!
Your management will be asking you to ratchet down your supply expenses even further this year due to the high cost of energy which affects almost everything your hospital buys. And still another reason is the slowing economy that could have an effect on your hospital’s revenues.
These challenging times call for action…not rumination. As leadership guru John C. Maxell tells us “The pessimist complains about the wind. The optimist expects it to change. The leader adjusts the sails” to catch a favorable wind. This is the attitude you need to keep your supply chain ship righted in these turbulent times.
Here are some questions I would like you to ponder to keep your boat afloat in this perfect storm. Are you adjusting the way you do business to weather this squall? Are you looking beyond price to uncover new savings for your healthcare organization? Are you re-specifying everything you buy to trim your sails?
The reason I’m asking you these three questions is that price savings alone won’t keep you from running aground. Only by attacking your utilization misalignments and value mismatches can you right your ship, and get wind in your sails. If you continue to pursue price savings alone you won’t have enough fuel to ignite your savings fire.
I see more and more supply chain professionals becoming believers in this new way of doing business, since they now realize that price isn’t king any longer. Isn’t it time you take massive action to alter your course and right your supply chain ship before the winds become too strong to change course?
New Pay for New Work!
President & Chief Value Strategist
Greetings!
New Pay for New Work!
We just held our summer session of our Certified Value Analysis 3-day Training Program which brought into the daylight that only a small number of healthcare organizations are rewarding and recognizing their value team members for the hard work that they do.
This hasn’t ever made sense to me, since hospitals, systems and IDNs should be authorizing new pay for new work that these value teams are doing. By incentivizing your value teams you can keep them on track, on budget and keyed up to save even more money for your healthcare organization.
I’m so convinced that this is the right thing to do that we mandate that every healthcare organization that installs our LEAN Value Analysis Program also establish a rewards and recognition program to encourage their value teams to be peak performers. Or, why else would their staff squeeze into their already busy days, weeks and months all this new work. Rewarding people for extra work is not only logical but it’s a key facet of human nature!
Every client of ours who has adopted this philosophy of “new pay for new work” has been repaid for their investment by at least 100 fold. Likewise, their value team members’ productivity, creativity and doggedness has risen to a new level of superior performance.
Reward and recognition programs aren’t just the right thing to do for your value teams, but are a prerequisite for everlasting savings and quality improvements. Without this your value teams aren’t firing on ALL eight cylinders, just meandering along on three or four cylinders!
Isn’t it time you get your value teams into high gear?
Your Partner In Savings Beyond Price™,
Robert T Yokl
Chief Value Strategist
Strategic Value Analysis® In Healthcare
800-220-4274
P.S. We have been told by our Value Analysis Resource Web members that our Value Analysis Leader Resource Web is the right product, at the right time and at the right price to fuel their value analysis teams performance. If you haven’t seen this unique knowledge management resource yet, may I suggest that you check it out now at www.strategicva.com/vaweb.htm
P.P.S. Don’t forget to check out my new blog article “Fail Often to Quickly Succeed”. This blog is all about how failure isn’t a stigma, but an opportunity for massive innovation.
Fail Often to Quickly Succeed!
At our CVAL Training Course last week one of my students, a supply chain operation’s manager for a large system in the Mid-West, told me that he goes out of his way to let his value team members know that it is OK to stumble, falter or even fail on the projects that they are working on given that it will lead to even more successes more often and quicker than ever before.
I was very impressed with this operation manager’s attitude toward failure since it is one of the critical success factors in trying, evaluating, experimenting, and adopting or discarding products, services and technologies that you are investigating. More importantly, “rapid decision(s) and swift follow-through are essential to keeping an organization innovative” according to Dan Quinn, CEO of Rath & Strong Management Consulting.
Unfortunately, too many healthcare organizations espouse “finger pointing” as their predominant management style which only stifles innovation, instead of encouraging rapid decision making. It should be your goal therefore, to encourage your project managers to “fail often to quickly succeed”, even if your management is preoccupied with the blame game.
As Thomas Edison once said about inventing the light bulb, “I haven’t failed; I just found 10,000 ways how not to make a light bulb”. If Thomas Edison can fail 10,000 times before he succeeded in making a workable light bulb, then I think that your project managers should be able to fail often and quickly while on their way to million dollar savings success.
The Supply Chain Energy Predicament!
I know that we are all feeling the pain at the gas pump. I just spent $74.41 today to fill up my own SUV. That’s more than I used to pay every two weeks — just a few months ago. But this isn’t the worst effect of the energy predicament we will be facing as supply chain professionals and as consumers over the next few decades. Yes, I said decades!
The reality is that a healthcare organization’s consumption of petroleum-based products, from needles and syringes to plastic bags, represents 86% of everything you buy. This figure doesn’t even factor in the higher energy cost your hospital will be paying to heat, light and cool your buildings and run your equipment. I can’t think of another industry that has this high an energy footprint. Can you?
What can we do about it? First, we must realize that your manufactures and suppliers won’t be able to hold their prices to you beyond their current GPO or local contract obligations. This could mean a 6%, 8%, 12% or more spikes in your prices, over the next 12 months. You then need to prepare your CFO for this eventuality by providing him or her with your estimated price increases in each commodity group you buy. This way he or she can plan ahead for this contingency.
Next, you will need to vigorously attack your utilization misalignments, because your CFO will desperately need these savings ($11,000 to $30,000 per occupied bed) to offset the price increases you will be experiencing over the next few years.
Lastly, you’ll need to re-specify all of your products, services and technologies you buy to find lower cost alternatives, since this is the ONLY way you will be able lower the cost of the commodities you are buying today.
What I’m suggesting herein will be like climbing a mountain for you, but I see no other choice for healthcare organizations if they want to survive in this energy predicament we find ourselves in now.
Don’t wait to put these recommendations in effect, given that what I have described to you is a “perfect storm” that could sweep your hospital away in these turbulent times. It also could be a very rewarding time for supply chain managers who want to sit elbow to elbow with their management team to solve this problem, and at the same time, gain tremendous recognition and gratitude by doing so!
Your Partner In Savings Beyond Price™,
Bob Yokl
Robert T Yokl
Chief Value Strategist
Strategic Value Analysis® In Healthcare
P.S. You heard my predictions about the future of supply chain management in this week’s column, but did you know that we could make your life easier in these turbulent times if you have our “Utilizer™ Dashboard” to pinpoint your savings opportunities. Learn more here!
New Supply Best Practices Webinar Announced!
Influence Your C-Suite for Positive Results!
Webinar Objectives:
What is Your C-Suite Thinking?
What Are They Really Thinking?
Solution: More and Better TLC
TEACH to Gain Respect
LEAD in the Right Direction
COACH to Gain Commitment
July 17, 2008 - 1:00pm EST.
Webinar Leader - Robert T. Yokl, President/Chief Value Strategist Strategic Value Analysis in Healthcare
Remember…The Webinar May Be FREE But The Information is Priceless
LEAN Six Sigma: The Future is Now!
I had an electronic interview last week with Rick Dana Barlow Senior Editor of Hospital Purchasing News, for a future article on LEAN Six Sigma. This HPN interview got me thinking about how important it is for supply chain professionals to get on the LEAN Six Sigma train to meet their huge challenges over the next decade. Here are some of the ideas I spoke about in my HPN interview that I think you will find of interest.
First of all, Lean Management and Six Sigma are two different, but complementary methodologies, linked together into a unifying process called LEAN Six Sigma. LEAN Six Sigma has helped thousands of companies and hundreds of healthcare organizations dramatically improve their quality and increase their bottom line. What makes Lean management and Six Sigma different from TQM/CQI is their highly disciplined approach, their focus on waste and inefficiencies in the supply chain, speed and reducing the wide variances in products, services and processes employed and then controlling them – forevermore!
The healthcare supply chains are an ideal application for the Lean management or Six Sigma principles because they are transaction-based functions. For example, one big lesson we have learned from Toyota, the creators of Lean Management, is that purchasing departments can have as much as 50% non-value-added activities (i.e. activities customers wouldn’t pay for if they knew about them) that can be reduced by as much as a third by employing the Lean Management methodology. In this age of doing more with less we in supply chain management need to embrace these proven concepts so that we can optimize our resources just to keep pace with the changing healthcare marketplace.
Just as important, Lean Management and Six Sigma offers supply chain managers a disciplined, standardized, repeatable, and measurable system to reduce their cost and improve their quality. Its tenets can be applied to any initiative that a supply chain manager is asked to undertake (inventory management, PPIs, standardization, utilization, etc.) These concepts are really a magic bullet for supply chain managers to have even faster, better and more consistent supply chain operations.
I believe that the reason that more supply chain managers haven’t adopted these concepts is their belief that it will take too much of their time for them to learn, manage and sustain these new ways of doing things. In reality these concepts will actually save thousands of hours of year in reduced time, effort and expenses for supply chain managers. Education is the answer to moving material managers from a passive to an active role in adopting these new ways to managing their complex multi-million dollar supply chains.
That’s it for the short excerpt from my HPN interview, but it shouldn’t be the end of our dialog on this important topic. I would like to hear your ideas on this subject matter as well so we can get all supply chain professionals on the LEAN Six Sigma train.
How Are You Selecting Your Value Analysis Projects?
First of all, don’t confuse new or renewal GPO contracts as being value analysis projects, because they are not. This is contract management in its purest sense, which is a whole other discipline that has its own rules and models.
What I’m talking about here is the way in which you selecting your VA projects, which can unearth millions of dollars of savings in your value streams. For the best results, you should establish criteria for the selection of your VA projects. Here are five criteria I would suggest you start with:
1. Dollar Threshold: No VA project should be undertaken on a product, service or technology that has less than a $25,000 annual spend. The reason: Your ROI would be very small, if at all!
2. Projected Timeline: If your VA project will take more than 90-days to complete it might be better to break the project into smaller projects. Projects that have long timelines tend to go off track. Keep your projects in bit size pieces!
3. Probability of Success: If you only have a 50% probability of success in implementing a project (e.g. orthopedic implant study) then delay the project until you have an 80% success factor.
4. Project Alignment: If your VA project is not supported by your management then I would delay it for another day. Why fight city hall – you rarely win!
5. Solution Clarity: If you already know the solution to a problem (e.g. defective material) then don’t initiate a VA project — just fix the problem. It will save you a lot of time and effort by doing so.
These are just a few ideas to get you on the road to selecting the best VA Projects using criteria vs. gut feel with the greatest possible ROIs.
Your Partner In Innovative Savings,
Bob Yokl
Robert T Yokl
Chief Value Strategist
Strategic Value Analysis® In Healthcare
P.S. My staff thinks I’m crazy to offer our e-newsletter subscribers a 30-day “test drive” on our Utilizer™ Dashboard and you only pay if it works! But I’m so convinced that once you try it you won’t want to live without it that I have turned a deaf ear to my staff’s objections to bring you this outrageous “pay if it works” guarantee. Email me to learn more about this special offer - bobpres@strategicva.com
P.P.S. Don’t forget to check out my new blog article “A Lean Way of Thinking! This will give you a new way of thinking about your workload.
A Lean Way of Thinking!
Doing less with more is a mantra in healthcare organizations today. Everyone is scrambling to get their routine, but important work done, while trying to find time for those special projects that seem to be coming up more frequently than ever before.
Supply chain professionals are caught up in this whirlwind of activity too and are having a hard time coming up for air. Instead of worrying about it, which is a waste of your imagination, I would suggest supply chain professionals embrace “a lean way of thinking” so that you can find time for those things that are really important to get done.
When I was a material manager for four hospitals and one system, over my long career, I never ever had enough staff, sufficient money in my budget or the technology to get everything done that needed to be done. But I did have “a lean way of thinking” that I call how thinking vs. what if thinking that led me to design new ways of doing things that reduced my workload 10-fold.
For example, I designed a “Debit Memo” that attached to my vendor’s invoice that authorized my payable’s department to deduct or adjust a vendor’s invoice’ for price discrepancy, missed discounts, freight charges, etc. that didn’t agree with my purchasing order. This tactic saved me and my hospital’s payable’s department hundreds of hours a year of haggling with vendors or waiting for their credits. Yes, sometimes we had to credit the vendor back for some of these debits, but this was a rare occasion because my PO was law. Case Closed!
The point here is that this is just one of my scores of how thinking ideas that enabled me to dig out of the holes I always inherited when I took on a new job as a material manager. By the time I left a hospital or system I had their operations humming with my “lean way of thinking”.
You can do the same thing at your healthcare organization by thinking about how you can improve your supply chain operations without spending any money or adding any staff. It’s a fun game you can win!
Finally, once you get the knack of how thinking you will be stunned at how many new and better innovations you can bring about in your supply chain. I’ve done it hundreds of times and I know you can do it too.
How to Save More in Less Time!
I can’t think of anyone in supply chain management who doesn’t want to save more in less time. However, this isn’t going to happen with more GPO contracts, more standardization, more capitation or even more custom contracts, since this ripe fruit has almost been picked clean in your vineyard.
This is just churning the same old savings, over and over again, without having any real effect on your hospital’s bottom line, since inflation (3.4% annually) has been eating into all of your so-called savings for years. The future of supply chain expense management isn’t in the old ways of doing things, but instead is all about utilization management.
This is where you will achieve double-digit savings (26% on average) on just about any utilization project that you decide to attack. More importantly, it will require less time than any of the above strategies, tactics and techniques, I just mentioned, to reduce your supply expenses!
So if you aren’t on the utilization management train already, may I suggest that you start thinking beyond price by digging deeper and broader in your supply chain to identify and remove the wasteful and inefficient consumption, misuse, misapplication and mismatches in your value streams.
Then, and only then, will you save more in less time which will be sustainable over the long-term.
Your Partner In Innovative Savings,
Bob Yokl
Robert T Yokl
Chief Value Strategist
Strategic Value Analysis® In Healthcare
P.S. Would it be worth .82 cents to have ALL of the resources you required to be wildly successful with your hospital or system’s supply value analysis program? Well this isn’t a fantasy, but a reality with our innovative Value Analysis Resource Web. Check it out for yourself at www.strategicva.com/vaweb.htm. i PROMISE You — YOU won’t be disappointed!
P.P.S. Don’t forget to check out my new blog article “Stop the Madness with Your GPO Contracts”. This will give you some ideas on how to manage this important chore more effectively.
Stop the Madness with Your GPO Contracts
I have been told by value analysis managers throughout the country that they spend 96% of their time evaluating new or renewal GPO contracts, which isn’t value analysis at all. When I tell them that there is only 1%, 2% or 3% savings to be achieved with their GPO contracts and, on average, 26% to be saved on any value analysis project they conduct, they soon understand that they are spending their time on the wrong side of the supply chain equation – price!
The next question I’m always asked by value analysis managers is, “How do I STOP THE MADNESS with my GPO contracts, so that I can spend the required time on my value analysis projects?” Here’s three strategies that I tell them to employ to get organized, prioritize and optimize their time to save even more:
- Start a campaign with your peers to insist that their GPOs write contracts with 3, 5 and 10 year lifecycles – not one year terms. Not only will this tactic reduce the number of GPO contract renewals, but will enable GPOs to lock in their prices over the long-term, since inflation is the real threat to price stability in the healthcare marketplace. For example, Southwest Airlines has not been affected by the current energy crisis since they locked in their fuel prices over the long-term. Your GPO can provide this same price protection for you!
- Don’t change your manufacturers just because there is a new GPO contract being offered by your GPO, because the cost of change will usually cost your more than the contract savings being offered. You can do this by searching out comparable contracts with other GPOs (yes, you might need to join more GPOs to do so), so that you can continue to purchase from your preferred manufacturer at competitive prices. Your justification: Contract churn isn’t and will never be a cost effective way to do business.
- If you are a large enough healthcare organization to do so, write long-term custom contracts with your GPOs assistance, so that you can lock in your prices for the foreseeable future.
I’m sure you can think of a few more and even better strategies to organize, prioritize and optimize the time you are now expending evaluating your GPO contracts now that I have opened Pandora’s Box. It’s my opinion, that if we don’t STOP THIS MADNESS it will have a stifling effect on your supply chain effectiveness in the sort and long-term.
If you agree or don’t agree with my take on this topic, I would love to hear your comments on this pressing problem.
Your Partner in Innovative savings,
Bob Yokl
President & Chief Value Strategist
Strategic Value Analysis® In Healthcare
800-220-4274
P.S. If you would like more powerful savings and quality ideas like this one I would recommend that you sign-up for our “no cost” weekly Savings Beyond Price™ e-Newsletter at www.Strategicva.com. You will also get a copy of my e-book “Your Target Blueprint for Supply Chain Management Success”, as a bonus.
**New Comic** Persistence is Key!
