Value analysis might be the most powerful non-salary savings technique ever devised to squeeze every dollar out of your supply chain expenses. However, very few healthcare organizations employ this technique to its fullest extent. Usually, value analysis is employed by hospitals, systems, and IDNs only for new product, service, and technology (or GPO contract) evaluations. Consequently, ignoring other VA savings and cost containment best practices.
Three Additional Savings or Cost Containment Best Practices You Need to Know About
- Establish Functional Bidding Specifications: One of the offshoots of the VA technique is the ability for you to prepare functional (what your product, service, or technology performs) specifications for bidding vs. brand name (Bard, Johnson and Johnson, Becton Dickenson, etc.) part number bidding, which only keeps your prices in parity with your peers. To have a breakthrough with pricing you need to bid functionally. This way your vendors can become creative in searching for lower cost products, services, and technologies for you. For instance, when I was a supply chain manager I bid all my storeroom supplies annually this way. You can’t imagine the below market low prices I received when I did so.
- Search for Lower Cost Alternatives: When you receive a department’s request for a new product, service, or technology, instead of just reviewing its applicability, suitability, and conformity to your healthcare organization’s standards, look for lower cost alternatives (not a better price) that meet your requesting department’s exact functional requirements. For example, one of our client’s supply chain directors received a request to buy disposable brand name BP cuffs for their ICU. Rather than just searching for the lowest priced disposable BP cuff on the market this supply chain director interviewed their ICU manager and discovered that their current BP cuffs’ covers were being soiled which was the functional reason or purpose for their request. The supply chain director’s VA solution to this troublesome issue was to buy disposable covers for their ICU’s existing BP cuffs as a lower cost alternative. This eliminated the need for disposable BP cuffs that were 10x the cost.
- Process Improvement: Before the advent of LEAN Management, value analysis practitioners were utilizing their value analysis techniques (a FAST Diagram) to reinvent the processes under study. As an example, my firm used a FAST Diagram to analyze the admission to discharge process for an outpatient mental health corporation in the Midwest at a savings of $50,000.
It’s been my experience that there are very few savings or cost containment challenges that can’t be addressed with value analysis. Think of value analysis as your Swiss Army knife and you will be on your way to even greater savings than ever before.
Move to the Next Level of Value Analysis Performance
Value analysis is a unique savings and cost containment tool since it is applicable to products, services, technologies, and processes. No other cost containment methodology, such as LEAN Management or Six Sigma, can make this claim. Therefore, it is to your advantage to employ the VA technique to its fullest extent as I have outlined above. This is because it is a breakthrough technology that can double or even triple your savings yield in 2017. I’m sure you would agree that would be a good thing!