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Savings
Beyond Price -Weekly E-Zine-
November 18, 2005
Greetings!
I have found in my career as a supply chain professional
and as a consultant for 27 years that "Indecision
Holds Back More Supply Chain Savings Than Any Other
Cause" I can think of, except bureaucracies and
territoriality. If you don’t believe me just count up
the number of savings decisions that are pending at your
healthcare organizations because of indecision. From my
experience, it’s as high as 20, 30 or even 40 proposals
sitting on someone’s desk or in a committee that haven’t
been acted on for weeks, months or even years.
In my lead article today I’m going to explain why this
is happening, then give your five "decision starters"
to get your savings proposals moving again. This will
start to generate new supply chain savings that are
already in your pipeline but haven’t been acted on
because of "indecision".
Robert T. Yokl, President and CEO
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 Indecision
Holds Back More Supply Chain Savings Then Any Other Cause!
“It Is Said
That Non-decisions Are Rampant In Management Circles Today,
Because No One Has Ever Been Fired For Not Making A
Decision”
I find that the #1 reason (alongside other obstacles
such as bureaucracy and territoriality ) why hospitals,
systems and IDNs aren’t saving more money in their supply
chain expenses is because they can’t make a decision
to do so. Your administration and department heads and
managers abhor making decisions (even if it will save them
thousands of dollars) because of fear of making a bad
decision. It comes down to this fact
“no one has ever been fired for not making a
decision”.
Decision avoidance behaviors:
decision dodges such as unending questions,
meetings ending without any actions, requests
for more data or study, angry outbursts in
response to requests or hiring a consultant to
make the decision for you are all decision
avoiders
People fail to make decisions, says Christopher Anderson, an
assistant professor of psychology at Temple University, in a
recent interview with The Wall Street Journal since they are
spooked by uncertainty, focus on potential losses, lack a
sense of control that makes them more comfortable with
thumb-twiddling status quo, or believe additional time will
provide clarifying information.
That’s why they end up doing nothing!
Worse yet, many people believe that delaying decisions until
more information is available is the best way to make a
decision. Studies have shown that what they are really
waiting for is more information to reinforce their decision
to “do nothing”. A good example of this is the
“hurry up and wait” decision, where we burn the midnight
oil to have a presentation ready for our boss on a new
capital purchase (who told us that the decision had to be
made by Friday or the world would end) only to find that
Friday came and went and that no decision was made. Then
this issue disappeared from everyone’s radar screen --
forever!
Now that we all agree that NOT MAKING DECISIONS is a
fact of life in our healthcare organization what can we do
about these “non-decision makers”? Here are five
“decision starters” that will help you get the decisions
you are looking for:
1. Create
a sense of urgency:
People respond to deadlines, even if the decision is
to do nothing, e.g. the price will be going up 15% on
November 30th, we will lose $96,295.20 monthly by
waiting, or if we don’t make this decision by the end of the
November our IT department won’t be able to provide us with
the support we need until March 2006.
2. Show
them that others have done it:
we all are susceptible to the “herd mentality”. We
want to know that others have done what you are proposing
successfully, so show your decision makers testimonials,
case studies and proofs that he/she isn’t alone in making
this same decision.
3.
Take the risk out of the decision:
Always find a way to take the risk out of the decision by
having your vendors provide guarantees and warrantees or by
being very conservative with your savings estimates to
insure an excellent ROI even if you fall short on your
estimates.
4. Dollarize
all of your proposals:
Always show the return-on-investment on all your savings
proposals to demonstrate the value to your decision makers
of moving forward now. If they would just invest a little
bit of money to receive a return of 100%, 200%, 400% or even
600% few decision makers will turn you down on your
request.
5. Make
it easy to make a decision:
Always put your savings proposals in writing with all of
your supporting documents, arguments, ROIs, guarantees,
etc., so your decision maker can easily and
effortlessly have all the facts in front of them to make
a decision. In this way you won’t be letting them
procrastinate on a decision because they don’t have enough
information to make one.
Don’t feel like you are being manipulative when you
use these tactics I have recommended to speed up your
decision making, since it has been well documented that
“quick decisions” are as good as long thought out
decisions when you look at their outcomes. Warren Buffet,
for instance, can make a multi-million dollar decisions in
just 15 or 20 minutes and we all know that he has become a
billionaire by making good decisions. In fact, he makes all
of his decisions without consultants, advisors or committees
to slow down his decision making. You can help your
healthcare organization to make quick decisions on your
savings proposals, if you follow the 5 “decision
starters” I have just given you.
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MAILBOX
We were unable to personally attend your October “Supply
Chain For Peak Performance” seminar. However, we have
been doing a lot of work measuring and benchmarking our
performance. We have a couple of questions we are hoping
you can help us with. Our CFO is most interested in
benchmarking supply expense as a percent of net patient
revenue.
Here are our questions:
1). When measuring performance, is there a recommended
practice (standard) for including or excluding depreciation,
bad debt and interest? Should they be considered "above or
below the line?" 2). How should rebates and GPO share-backs
earned from supply purchases be treated when measuring
benchmark performance? V.A. & R.S.
The answers to your questions are as follows:
(1) exclude bad debit, depreciation and interest from your
benchmarking formula, and (2) all rebates and share-backs
should be deducted from your supply cost as well.
Also, you might want to take advantage of our
“no cost – no obligation” Supply Savings Benchmarking
Scorecard
www.strategicvalueanalysis.com
that will give you the answers that your CFO and you are
looking for to determine your supply expense as a percentage
of revenues without breaking into a sweat
Good
luck,
Bob
Yokl, Sr.
Chief Value Strategist
Strategic Value Analysis In
Healthcare
800-220-4274
bobpres@strategicvalueanalysis.com
P.S. If anyone
else has a burning question that you would like me to answer, please
call or e-mail me and I would be delighted to answer.
There Is Still “Gold In them Thar Hills”
Saving Money Is All About Being Organized To Save
If You Are Organized To Save
Your Savings Will Flow Like A River, Not A Stream!
We are
all looking for that “magic bullet” to make savings
happened for our hospital, system or IDN. We mistakenly
think that this means having the latest and greatest MMIS
system, e-commerce platform and having our data cleansed
(not that there is anything wrong with these goals).
However, none of this technology is really needed to
save big bucks at your healthcare organization. What is
really needed is for you to be organized to save --
with a system to save.
How can
I make this outrageous statement? Well, I can make
this statement because I’m responsible for over $1
billion dollars in savings for healthcare organizations
in my career without the benefit of these costly
technologies. I have done it with paper inventory systems,
traveling requisition cards, searching general ledgers and
copying invoices from account’s payable files. It wasn’t the
technology (old, new or outdated) I used to save
money that made the savings happen. It was the system
or organizational scheme I used to save money that was and
is my key to success. This should
be your mindset too!
It all
comes down to you “gotta” have a system to save money, which
will get you organized to save. Technology is only an
enabler to make your system work faster, better and
smarter than you can do it manually (as I did for
years). This reminds me of a story a friend told me
yesterday to bring this point home to you. My friend has a
photo studio where he takes film portraits and has a selling
system that he developed over the last 14 years that yielded
him, on average, $55.00 for his portrait package. He told me
that four weeks ago he invested in a $12,000 digital photo
system for taking portraits and selling his portrait
packages (the software in the system actually sells the
portrait package for him). He tells me that his average
yield now per portrait has jumped to $78.00 (or 78%). I
asked him if he thought this increase in sales was due to
his new digital camera or the new selling system that
increased his yield. He said it was the new selling
SYSTEM software that increased his yield, since it
enables his clients to visually make better (and for him
more profitable) buying decisions!
Your
money-saving system should do the same for your healthcare
organization as it did for my friend. Take your manual
system and enhance it with faster, better and smarter
technologies that give you an even better savings yield than
before. It all starts with having a SYSTEM or being
organized to save. So if you don’t have a system go beg,
borrow, steal or buy one so you can have the “magic
savings bullet” you have been looking for.
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