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National Medical Logistics Newsletter |
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Dear Friends,
The days are getting shorter and the nights noticeably cooler, which can only mean one thing - if you're on a calendar fiscal year, you're in the middle of budgeting.
If you're being asked to look for increased savings and having a hard time knowing where to look, give National Medical Logistics a call. While many of our engagements are relatively long term in nature, we've also worked with clients on brief, encapsulated engagements lasting only a couple of days, including helping during budget season. Our outside perspective and analytical tools can often find hidden savings in your operations. For more thoughts on how we might help, be sure to read the budget article below.
Sincerely,
Tom Seliquini and Greg Swanson
To contact us now, click here.
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Budgeting & The Supply Chain
If you've managed through more than one full business cycle, you know what budgeting can be like in uncertain times. The question is not will you be asked to make cuts. It's more a question of where will the cuts come from and when will they end?
For managers who have already cut "into the bone" and are left with skeleton staffs, the good news is that budget cuts don't always have to mean FTE reductions. Four places where we help clients look for savings include:
1. Process Improvement: A fresh set of external eyes can often identify key operational processes that contain redundancies or non-valued added activities. Revealing and acting on these situations can help to improve operations and reduce costs. Outside assistance can also be used to help implement or validate opportunities that you and your staff may have already identified but need help implementing.
2. Restructuring/Performance Measurement: We have helped organizations become more efficient by conducting a top to bottom review of organizational structures and associated functional responsibilities. By applying best practice procedures and developing Key Performance Indicators [KPIs] our clients are able to effectively manage performance against established goals and keep the focus on continuous improvements.
3. Self funding initiatives: These are projects that produce savings opportunities where the funding comes from the savings garnered. They usually attack issues that are considered to be "low hanging fruit" and can often be converted to savings within a 3 - 4 month timeline. A gain sharing fee structure is sometimes attractive as it allows the client to use actual savings to pay for any outside assistance.
4. Review of Budget Controls: A budget is a really just a financial representation of your plan for the upcoming year. The best laid plans, however, often go astray in loose controls. We have been able to identify gaps in financial performance simply by testing budget controls to see if what you budgeted actually was executed. For instance, you may budget contract terms that take advantage of certain supplier discounts, expecting those savings to flow through during the course of the year. But have you ever pulled a random sample of records to make sure that invoices have been processed according to those terms and discounts realized?
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Trend Spotlight: Maintaining Perspective When Considering Self Distribution
Self distribution includes taking control of all aspects of the supply chain, including inventory, the warehouse management system, facilities and personnel. We find that most hospital systems that are considering self distribution do so to realize both the savings available, as well as that increased control.
If you're considering the self distribution path, it is helpful to keep some key concepts in mind:
Misunderstood Strategy: This supply chain model is not intended to "compete" with medical products distributors - the business models are very different. The self distribution Service Centers provide much more in the way of products and services to participating institutions like: traditionally direct items, cross docking services, implants, ancillary services [printing, shredding, kit packing, unit dose pharmaceuticals, etc.]
Funding: Dollars required for facility and equipment capital can be significant, as are start-up expenses. However, there are other courses of action such as using a third party logistics company like NML as a capital offering "partner'. This might allow a hospital system to begin implementing the model using NML for the start up phase. Taking control of the operation and its assets can be done at a later date, after savings projections have been met. This strategy would delay the need to obtain board approval for capital expenditures until later years.
Talent: Converting to self distribution is a major shift for most organizations. It takes one or more strong internal supply chain champions with deep skill sets to drive change and an experienced partner like NML to help implement.
Patience: The entire process can take as much as 2 years to completely implement from analysis through project planning to execution. Stake holders need to be coached that the process takes time and view it as a comprehensive change management program.
Technology: The most satisfied systems that have converted to self distribution are those who had the strongest information technology support and integration. Critical to that success was their ability to procure and maintain adequate warehouse management technology that bolts-on to existing MMIS platforms.
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