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November 12, 2004         

by Robert T. Yokl, President

How Using Data-Driven Logic-Based Strategies Can Give You The Focus You Need On Your Customers To Make Savings Happen!

Uncovering Savings Opportunities In The 21^st Century Requires You To Use  Predictive Analytics (data mining) To Understand Your Customer’s Behavior – then modify them.

In the 20^th century supply chain professionals were fixated on price savings to reduce the cost of acquisition of their products, services and technologies, thereby making a big dent in their healthcare organization’s cost composition by partnering with their GPOs. Now that these “no-brainer” savings have run their course, it’s the optimum time for supply chain professionals to move from a price focused to data-driven, logic-based strategies and tactics to continue to make savings happen! 

I would guess that 80% of the hospitals and healthcare systems in the country have purchased new material management information systems within the last five years. From my viewpoint these systems are only being utilized to house raw purchasing data as opposed to utilizing them as fuel for value studies of their customers’ behaviors where literally acres of diamonds can be found in savings.

How To Uncover Your Customer’s Behaviors That Are Hidden From Your View

The precise science of data mining using predictive analytics (or the analysis of trends, patterns, movements or directions of customer behaviors) requires four steps:

1.                Segmenting Your Customers Into Groups With Shared Characteristics Or Buying Preferences

This means isolating all of your customers who have purchased the same commodities (e.g., pacemakers, I.V. sets or catheter care kits) for the last 12 months by department.

2.                Organize These Groupings By Order Of Importance (80/20 rule)

Sort all of your customer group’s purchases by descending dollar, and then isolate those 20% of your customers that purchase 80% of the commodities into neat piles.

3.                Analyze Your Customer’s Purchasing Data To Reveal Savings Opportunities

Once step one and two have been completed, analyze your data for unfavorable trends, patterns, movements or directions that aren’t logical from you 20% customer pile.  For example:

These findings and many more unpredictable discoveries will jump off the page at you without you breaking a sweat.

4.       Decide With Your Customers What Behaviors Need To Be Modified, Eliminated or Value Justified.

Once you have discovered, through your analysis, the various unfavorable trends, patterns, movements and directions in your customers’ behaviors you then need to meet with these customers to understand the WHAT, WHEN, WHY, HOW AND WHO of these buying decisions. Then, with your customers decide what behaviors need to be modified, eliminated or value justified.   

The structure that I have outlined for you herein to uncover unfavorable customer behaviors which are now hidden from view will enable you to move beyond price to the next level of savings performance.

Never Underestimate The Power Of Data!

No matter how many times I teach, preach and educate supply chain managers on the importance of data mining their raw purchasing data, few take my advice because it is -- hard work. Let me state with no qualifications that data-driven, logic-based strategies and tactics, focused on your customer’s behaviors, is the future of supply chain management in the 21^st century. Sophisticated analytical tools are available to perform this challenging work that you must master if you are to stay relevant, credible and employable in the ever changing and fast paced world of supply chain management.