Finding a Healthcare Supply Chain Leader Who is Adept at Process and Spend Analytics
Why the skills in the procurement process and data are more critical than negotiations in the early stages of procurement transformation.
Chief financial officers and senior leadership at academic healthcare institutions are increasingly looking to increase the savings in the goods and services that they procure. Healthcare organizations often engage consultants to help find quick wins in terms of cost savings.
The senior leadership team may be tempted to look for a supply chain leader whose primary skill set is in negotiating with vendors. It is essential to seek out a leader who is equally strong in the process side of procurement and spend analytics.
Academic healthcare organizations frequently need to solve the tactical, operational, and process problems before internal customers are willing to be engaged on strategic sourcing initiatives.
Many senior leaders believe that better negotiations will yield a boatload of savings at their institutions. Researchers may value vendor performance more than the transactional cost.
The procurement team needs to look at the total cost of ownership of the good/service being procured. Organizations that focus exclusively on achieving savings solely vis-a-vis improving vendor negotiations are likely to be disappointed when those savings are not realized quickly.
Resolve the process bottlenecks first
Most healthcare and research organizations need to resolve bottlenecks and inefficiencies on the process side of procurement before they can achieve substantive savings. By process mapping the procurement process in great detail, leaders will begin to see where the greatest bottlenecks are occurring and can take action to resolve the issues causing delay..
Procurement leaders should review the following factors:
· Do the number of signatures needed for a purchase order correspond with the level of spend?
· Are a significant number of signatures needed for tail spend (small dollar volume) transactions?
· Does the organization send too many contracts to the general counsel for review? Are the same types of contracts repeatedly sent for review? This can often add weeks to the cycle time of requisition-to-source.
· Are there standard templates for the terms and conditions of purchase orders that can be used regularly in place of vendor terms and conditions?
· Are a lot of contracts issued on vendor paper, particularly with software contracts?
· Are there standard templates for various professional services agreements, or other categories related to services?
· How many people touch a purchase order before it gets approved?
· Is there a good contract lifecycle software module in place?
· Is the organization overengineering provisions around compliance?
Develop good tracking on requisition-to-source
Internal customers frequently have frustration if there is a black box around the status of their purchase order (requisition-to-source). A good contracting module can often give procurement leaders and internal customers a good sightline on where a requisition is in the contracting process.
Internal customers are less likely to circumvent the purchase order process if they are confident about when the contract will be issued.
Once the tactical operational bottlenecks are improved, a leader go on to spend data.
Researchers and clinicians are very quantitively focused. Good spend data can often be the most compelling reason to present to researchers in terms of increasing spend aggregation.
Does your organization have good spend data, or is your organization using data extracted solely from accounts payable?
A procurement executive needs quality spend data/analytics so that he/she can create a roadmap for sourcing initiatives and spend aggregation.
If an organization is deriving all of its spend data solely from accounts payable, it is not likely to get down to the granular level of data that it needs. Software as a service (SaaS) is an example of a category that can benefit from very effective spend analytics. For example, does the institution know how many licenses it is purchasing from Adobe or Microsoft?
Create a customer-centric interface between procurement and internal customers
The needs of the research community are diverse, and one size does not fit all. For example, a researcher may need a microscope that only one manufacturer makes. If the procurement team does not take the time to understand why a particular microscope is a sole source transaction, the researcher may walk away frustrated and misunderstood.
Sustainable change takes time
Process changes often take time. It may take up to one year, or more, to properly identify bottlenecks and resolve those issues.
It may take four or five years to build out a best-in class procurement organization. There are wins along the journey. The wins occur incrementally. Most importantly, good process organically leads to savings.
About the Author: Steven Lutzer is the president of Lutzer Global Inc., an executive search firm that specializes in procurement, strategic sourcing and supply chain management. Lutzer had a 20-plus year career in supply chain management and global sourcing before founding Lutzer Global. For more information, please visit www.lutzerglobal.com.