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SPANNING THREE DECADES OF VALUE MANAGEMENT LEADERSHIP

August 29, 2002

Expanding Your Horizon From Products To Purchase Services Will Give You Big Wins And Added Value

“ Purchase Services Equal or Exceed The Cost of Products At Healthcare Organizations, Yet All Purchase Services Aren’t Being Purchased  By Purchasing Professionals at Our Nation’s Hospital’s Today”

Robert T. Yokl, President, The HCP Group, Ltd.

What is the difference between buying syringes, needles, catheters, and pacemakers Vs advertising, legal services, travel, temporary help, and security services?  In broad terms, not much, yet non-purchasing professionals at our nations’ hospitals and healthcare systems are purchasing billions of dollars of purchase services without involving purchasing professionals in these decisions.  Why, is purchasing being side stepped when it comes to these big-ticket purchases?  The answer is three-fold: (i) historically, purchase services have been considered the territory of senior management and department head specialists, (ii) purchasing professionals haven’t considered that all purchase services procurement should also be their responsibility and (iii) purchasing professionals feel uncomfortable purchasing services that they know nothing about. Let’s examine these three reasons in-depth.

Purchase Services Have Been Senior Management’s Responsibility

Although senior management and department head specialists, in the majority of circumstances, haven’t had one day of sourcing, bidding, legal or negotiations training, it has been the tradition at our nation’s hospitals and healthcare systems, to give these individuals total responsibility over billions of dollars of purchase service purchases with debatable results.  However, if these purchases were left in the hands of purchasing professionals (in consultation with senior management and department head specialist) to source, bid, and negotiate these purchases, I can assure you from my own experience, that the quality of these purchases and the savings yield would be 5x to 10x the outcome that hospitals and systems are experiencing now. 

Purchasing Professionals Don’t Think It’s Their Responsibility

For decades it has been the conventional wisdom amongst purchasing professionals that their job is to purchase the right product, in the right quantities, at the right time, at the right price and have it delivered to the right place to fulfill their responsibilities.  The question I would like you to answer is -- who made this rule?    If you believe this is your job description in the 21^st century then you have bought into a viewpoint that is inflexible, self-limiting, and can only lead to a career dead end.

In the 21^st century your actual job description should read that you are responsible for the “acquisitions to disposition of ALL goods, services and technologies required for the operation of your healthcare organization in consultation with your internal and external customers”.  The reason for this expanded view of your role is that you and you alone have a preponderance of matchless purchasing training and more experience in this area than any individual in your organization. This adds tremendous value to any purchasing decision required by your hospital or system.  It is a strategic error for your organization to let amateurs make million dollar-purchases on purchase service contracts without the assistance of a purchasing professional.

Purchasing Professionals Feel Uncomfortable Purchasing Services

For some reason, purchasing professionals can speak fluently about pacemaker and orthopedic appliance purchasing strategies and tactics, but draw a blank when asked what are the best practices and benchmarks being employed for the purchase of temporary help or legal services. What purchasing professionals don’t realize is that they would do the same research (industry, benchmarks, best practices, etc.) and ask the same questions (personnel, financial, delivery, price, legal, etc.) that they are asking now in relation to   products and related services they are buying.

Let me give you an example of how you can add value to any purchase service with you purchasing skills.  On one client assignment, I was delegated the task of investigating, sourcing and contracting for transcription services for a 1,500 bed hospital (in consultation with their department head specialists) with an annual purchase value of $500,000.  I hadn’t any idea of where to start, but, when I was finished with my research, bench-marking, price analysis, sourcing, bidding and then writing a new transcription service contract, I was able to add value by: (i) standardizing on one vendor (they had five before), (ii) establishing quality standards (they had none before) and, (iii) saving $50,000 annually on the new transcription service contract.

I once felt the same way you do about purchase services until I investigated these commodities and found that my unique purchasing skills and experience also had a direct correlation to my success with these purchases, which gave my clients big wins and added value.

Adding Value To Purchase Services Is A Purchasing Professionals Job Too!

Adding value to purchase services procurement requires the same purchasing skills, training and knowledge that you employ day-to-day with the other commodities you purchase. There is absolutely no difference in buying purchase services Vs products and related services. In either case, you must educate yourself about these commodities as you have done hundreds of times when a new product reaches your desk and you must start from scratch to learn this new commodity group too. By doing so, you will be expanding your horizon from products to purchase services, which will give your health-care organization big wins and added value too.

Robert T. Yokl, President, The HCP Group, Ltd., has over 35 years of experience as a consultant and manager in the field of Supply/Value Chain Management and is one of the country's leading healthcare experts in value analysis, value engineering and materials management. He is the developer and program leader of the award winning Certified Value Analysis Practitioner Training Program™. Mr. Yokl is also the developer of the healthcare industry's leading ValueNetCentral™ Value Analysis Software. Over the past two decades he has trained thousands of healthcare managers in his patented Strategic Value Analysis™ and Team-Based Project Management™ processes and has assisted scores of organizations in developing their own value management programs. He has published six books, videos and audios on supply/value chain management. His latest book being, “ Strategic Value Analysis™: The #1 Smart Strategy for Taking Cost Out of a Healthcare Organizations’ Supply/Value Chain”.