Healthcare procurement leaders face a new landscape as the industry recovers from the pandemic. Uncertain economic conditions, persistent supply shortages, and an expanding range of settings under their control create significant challenges.
Efficiency is key to overcoming these hurdles. A 2024 State of Healthcare Procurement report, based on a survey of over 170 leaders, identified efficiency as a top mandate alongside quality and innovation. In fact, six out of the top ten priorities for these leaders directly address efficiency.
Top Efficiency Priorities for Procurement Leaders
- Reducing overall cost of supplies (83%)
- Optimizing the ordering process (82%)
- Increasing procurement efficiency (81%)
- Eliminating product waste (79%)
- Controlling rogue spending (76%)
- Accurately forecasting demand (74%)
The Three Keys of Efficiency: Price, Process, and Product
The survey identified three key areas where leaders can achieve significant efficiency gains:
price, process, and product.
Price
The top priority for most procurement leaders (83%) is reducing the overall cost of supplies. Additionally, 76% aim to control unauthorized spending. Achieving these goals can be difficult due to tightening budgets, rising costs, and a lack of transparency in pricing structures.
"The biggest challenge is price transparency," commented a survey participant. "It's about being able to clearly understand the costs to assess the budget effectively."
However, cost-cutting initiatives shouldn't compromise safety and security, warns Daniel Uzupis, Chief Information and Information Security Officer at Union Community Care. He highlights the importance of strategic investments, especially in areas like robust cybersecurity.
According to McKinsey & Company, high-performing healthcare supply chains prioritize investments in strong data analytics, collaboration with frontline clinicians, and talent development.
Process
Beyond cost reduction, streamlining procurement processes can yield substantial benefits. This explains why leaders are laser-focused on:
- Optimizing the ordering process (82%)
- Increasing procurement efficiency (81%)
- Accurately forecasting demand (74%)
Implementing these improvements can be challenging due to external factors like fluctuating market conditions, complex vendor management, regulatory compliance, and balancing costeffectiveness with quality standards.
Leaders can address these complexities by identifying areas for simplification. One respondent suggests eliminating repetitive tasks that prolong the procurement cycle. Another emphasizes building capabilities to address issues like disorganized purchasing, limited visibility, and potential fraud or human errors.
To create a more resilient supply chain against future disruptions, McKinsey recommends improving transparency and alignment. Internally, this could involve consolidating inventory data across locations, upgrading inventory systems, and implementing dashboards for a comprehensive view of organizational performance. Collaboration with Group Purchasing Organizations (GPOs) and distributors can also be beneficial. Contracts stipulating daily updates on inventory levels across distribution centers can help anticipate and mitigate disruptions.
Product
Nearly 80% of procurement leaders are prioritizing the elimination of product waste as part of their optimization efforts. Technology plays a crucial role in achieving this goal. Jack Koczela emphasizes the value of data analysis in identifying and reducing waste. He suggests that AI or machine learning models trained on this data can generate valuable insights quickly.
Another key focus area for leaders is ensuring the timely availability of the right products. This helps avoid situations where they must resort to using alternative options while waiting for backordered items. To address this challenge, McKinsey recommends creating contingency plans for critical products. These plans should consider factors like the life-saving potential of the product, availability of substitutes, frequency of use, and potential financial impact in case of stockouts.
Additional Considerations
Beyond the three pillars of price, process, and product, several other factors influence procurement efficiency. These include:
- Sustainability: As sustainability becomes a growing concern, healthcare organizations are increasingly focused on sourcing environmentally friendly products and reducing their carbon footprint.
- Risk Management: Managing risks such as supply chain disruptions, quality issues, and fraud is essential for efficient procurement.
- Data Analytics: Advanced data analytics tools can provide valuable insights into procurement processes, identify areas for improvement, and support decision-making.
- Collaboration: Effective collaboration with suppliers, stakeholders, and other departments is crucial for achieving procurement efficiency goals.
Conclusion
Efficiency is a cornerstone of a robust and resilient healthcare supply chain. By comprehending the elements that can impede or expedite efficiency advancements, procurement leaders can make well-informed choices and overcome present challenges effectively. As the healthcare industry undergoes continuous transformation, the significance of efficient procurement will only increase. Get the full report.