Value Analysis Non-Salary Expense Reduction Supply Chain Management Savings

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SPANNING THREE DECADES OF VALUE MANAGEMENT LEADERSHIP

August 20, 2001

Value Analysis Technology Connection

How Do We Save Money On High Dollar Technology Purchases with Value Analysis? For Example: Purchase of MMIS Software

Let’s Start with The Budget and Purchase Process That Are Popular In Today’s Marketplace. Today and for many years to come the first line of defense in healthcare organizations to control their spending is the Budget Process. This is a vital process that allows organizations to evaluate their purchase of technologies from the highest level of the organization to the requesting department. In most cases the organization has already submitted Request for Quotation to Ballpark the price of the technology for the budget process. This is necessary and recommended.

Who now takes control of this purchase decision in a healthcare organization once budget approval has been granted? Most likely the Director of Materials/Purchasing (he/she knows the most about such a system right?) and the CFO/VP of Finance for the final sign off, prior to purchase. In most cases budget approval is only the first step in the purchase and will re-institute the bid process from all of the MMIS Software Vendors that sent proposals for the Request for Quotation Process for budget projections. Next:

	You will Meet With All of The Software Vendors
	Have Demonstrations of All of Their Software with the Latest Bells and Whistles
	You Will Have Key Department Heads Sit In On The Demonstrations to See How They Like the Software Products
	You Will Receive Formal Proposals
	You Will Identify What You Like and What You Don’t Like About Each Vendors products
	You Will Identify The Key Features That You and Your Users Feel Will Benefit Your Organization
	You Will Ask The Vendor To Sharpen His Pencil Once You Have Chosen His Company (Give Me Your Best Price)
	You Will Make A Final Recommendation to Your CFO and Senior Management on Why You Want The Vendor you Chosen and the Contract Is Awarded and Implementation is Started.

What’s Wrong With This Process?

Just because you have approval and theoretical best price on $750,000 of new Materials Management Information System Software (and numerous other software products too) from your Finance Committee, it doesn’t mean that you are getting this best VALUE for your converted dollars.

LET’S LOOK TO VALUE ANALYSIS FIRST BEFORE YOU START THE BIDDING PROCESS

	Before requesting a RFP, establish A Value Analysis Team of customers, stakeholders and experts to evaluate your current situation and develop performance specification for your new MMIS system based on your functional requirements. I.E.
	Identify key Issues/challenges that are problematic with your current software/hardware configuration
	Compare your organization’s challenges to similar organizations that are current utilizing same or similar MMIS Technology and/or have recently upgraded
	Determine the functions (primary, secondary and aesthetic) that are ABSOLUTELY require for your MMIS
	Develop performance specifications based on your functional requirements
	Prepare bidders list for only qualified vendors that can meet or exceed your performance specifications
	Prepare your performance specifications in the form of a RFP and submit to qualified MMIS vendors
	When bids are returned from MMIS vendors rate vendors (1-10) on how well they met your functional requirements and the associated cost to meet them (this might require software demo’s and site visits to vendors customers to properly rate and weigh these factors)
	Select MMIS with highest rating and lowest overall total cost that met your required functions.
	Lastly, negotiate with this bidder to reduce their cost even further on the functions that you have identified through your VA process that are not need or required for the optimal performance of your new MMIS.

Through this VA Process you will find that you will save up to 25% off you theoretical best price because you predetermined what’s important to you and what’s not. As opposed to letting your MMIS vendors overwhelm you with feature rich options that you will NEVER, NEVER USE or even understand.

Do not under estimate the simple yet powerful Value Analysis Process. If you employ the process correctly, you will lower your acquisition cost, improve your quality and more importantly give your customers and yourself exactly what you need and want!!

Advancing Healthcare Organizations to the Next Level of Supply Chain Savings^TM