Facing ongoing pressure to reduce costs, hospitals and health systems are looking more closely at their supply chains as a source of significant, additional savings. An often-overlooked cost that impacts the entire supply chain is transportation, managing the daily flow of products delivered to and moving throughout hospitals and health systems.
Freight management isn’t a new idea; in fact, forward-thinking hospitals have employed it for years to better control shipping costs. Today, the need for effective freight management has never been more important, as health systems continue to grow through acquisitions and their networks of facilities become increasingly complex.
To address this complexity, many health systems are centralizing their receiving of inbound supply shipments and then redistributing them throughout their network. Doing so is helping to improve transportation efficiency and lower costs.
Just as hospitals are evolving, so too is the scope and role of freight management. A decade ago, freight management was focused primarily on managing inbound expenses. Then, the discipline broadened to outbound shipments. More advanced freight management programs now also encompass courier transportation solutions, which help centralized receiving and redistribution functions operate more effectively.
The goal of this next generation approach is to create a holistic, enterprise-wide strategy dedicated to managing total freight spend and improving efficiency every time an item moves from Point A to Point B. Hospitals and health systems can begin to implement this strategy by expanding the current role of freight management in two ways.
#1. Include all transportation costs in the freight management program
Traditional freight management programs include only inbound and outbound shipping expenses. By adding the remaining transportation costs under the umbrella of freight management, hospitals can have complete visibility to their actual, total freight spend.
To get an accurate picture, hospitals should be sure to include all of the additional transportation costs related to inbound and outbound deliveries, including couriers and private fleets, so they can make more informed decisions about how to best manage it all.
Once the expanded program is established, advanced data analytics can seek new opportunities to improve efficiency and savings across all modes of transportation at every touch point along the hospital supply chain.
#2: Manage the total cost of fulfillment
Beyond transportation costs alone, hospitals can broaden their focus even more and include the totality of inventory management—using data analytics to make more informed demand planning, purchasing and utilization tracking decisions across the entire supply chain. This approach would address the total cost of fulfillment, giving hospitals even greater control of their supply chain expenses.
On the clinical side, this total-cost strategy is already successfully used to reveal and better control the total cost per case—focusing not only on the line-item cost of supplies, but also eliminating waste and improving clinical practices.
Freight management professionals can take a page from the clinician’s playbook and apply the same strategy to fulfillment costs—starting with freight and then using data analytics to include and improve inventory management.
The ultimate goal: full visibility, full control
To better manage total transportation costs, hospitals and health systems can expand the role of freight management to optimize every mode of transportation—from inbound and outbound carriers to same-day couriers and private fleets. For institutions that have a private fleet, optimization may include supplementing it with third-party carriers and couriers, when it makes sense.
To better manage the total cost of fulfillment, providers can factor in inventory management expenses. And by using advanced data analytics to “connect the dots” all along the supply chain, providers can have clear visibility into how inventory moves throughout their network and can better control costs every step of the way.
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