Savings Beyond Price™
Innovative Supply Savings and Quality Solutions That Work
by Strategic Value Analysis® in Healthcare
Did You Know...?
That Value Analysis Was Developed Back In the 1940's After World War II as a Way to Find Lower Cost but Higher Quality Alternative products and methods. This was Due to the Lack of Material Resources At The End of The War.
Savings Beyond Price -Weekly eNewsletter - September 17, 2010
Robert T. Yokl
President & Chief Value Strategist
Value Creation Starts with Negotiations
Greetings,
How can you squeeze even more dollars out of your value streams? How can you obtain consistent best values with your limited purchasing dollars? And how can you reduce your cost with sole source suppliers when they think they have all of the power?
These questions are not just an exercise in brainstorming, but should be an actuality in the healthcare marketplace today: Obtaining even more value on your purchases with your dwindling purchasing dollars.
As our healthcare purchasing dollars shrink, our goal as supply chain professionals should be to go deeper and broader into value creation on every commodity we purchase. This value creation starts with looking at the total cost of ownership (TCO) on every contract (GPO or otherwise) we are negotiating in the coming weeks, months and years.
Every product, service or technology you are buying has a TOTAL COST of OWNERSHIP factor (price, transportation, storage, distribution, training, upgrades, utilization, disposal, etc.), that needs to be negotiated downward or included in your price at the time of purchase to reduce your life cycle cost -- not just price. This is the time when your suppliers are ready, willing and able to completely satisfy you to get your business.
Martin Finkle of Scotwork tells us that “To incorporate value (creation) into your negotiations, use the “total cost of ownership analysis” approach, combining the hard and soft costs of owning (a product, service or technology).” He gives the example of the hard cost of a blood analysis machine’s TCO as the purchase price, implementation fees, upgrades maintenance contract, (supplies) contract and disposal cost.
Finkle says that it is even more important to focus also on the soft cost: management support, training, hidden costs and downtime. “Since these costs don’t occur at the time of acquisition, they’re often overlooked in budgets – leading to unexpected increases or even a transfer of management and responsibility to the end users.”
I think you get the idea: Purchase cost is just the tip of the iceberg when you are negotiating any and all of your purchases. This is how you create even more value for your healthcare organization. Best of all, your suppliers will be much more willing to negotiate your total cost of ownership, than their price in the new healthcare economy that is taking a bit out of their profits too.
Your Partner In Savings Beyond Price™,
Robert T Yokl
Chief Value Strategist
Strategic Value Analysis® In Healthcare
1-800-220-4274
P.S. If you want to read more about how to create more value creation at your healthcare organization, you might want to read my new blog article on the Journal of Healthcare Contracting’s website this week.
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