Strategic sourcing is an approach that goes far beyond the traditional procurement method of focusing on cost and reducing costs. As the name suggests, it’s strategic in nature. That means formalizing procurement and supply chain management, looking longer-term than the price of a single contract. Strategic sourcing means tracking relations with suppliers and optimizing an organization’s sourcing program through constant market analysis. Strategic sourcing also means being able to measure performance and continuous improvement.
Few industries benefit more from strategic sourcing than healthcare.
Being able to effectively transition to strategic procurement requires advanced tools. For a growing number of healthcare organizations, that is, Arkestro, the only Predictive Procurement Orchestration Platform (PPO) built to keep your business ahead of the market.
Before discussing the solution, it’s essential to explore the hows and the whys. Why is strategy so critical to the healthcare industry? And how is the approach applied by procurement professionals working in healthcare?
Why strategic sourcing is vital in the healthcare industry
First is the question of why strategic sourcing is important in the healthcare industry. You need to look no further than what’s happened in the past year for one big reason. The COVID-19 pandemic caused a mad scramble throughout the industry. From a race to acquire PPE to a desperate search for ventilators, then the challenge of transporting vaccines with very specific (and demanding) refrigeration requirements, the pandemic has been a supply chain nightmare for the healthcare industry.
Organizations that adopted strategic sourcing have fared better than most. When the pandemic broke out, they were better positioned to find alternative and non-traditional suppliers of PPE and ventilators.
Looking beyond the pandemic, strategic sourcing has still proven to be invaluable in the healthcare industry. In particular, it has helped to lower healthcare and hospital costs at a time when treatment has become increasingly expensive and many expenses—such as staff salaries—are fixed. But strategic sourcing has gone beyond lowering costs to also make the organizations that adopt it more resilient.
It’s clear that strategic sourcing is critical to success in the healthcare industry, but how do organizations apply this approach? Here are five common ways of using strategic sourcing in the healthcare industry.
Sourcing software increases equipment supplier diversity
One of the challenges facing medical organizations such as hospitals, healthcare networks, and clinics is the equipment required for diagnosing and treating patients. There are a relatively small number of companies that manufacture and sell it. In traditional sourcing, organizations might purchase all their equipment from a single supplier, hoping for a volume discount.
Strategic procurement takes a different approach. Dealing with multiple vendors can reduce costs because they are competing for the business and can’t assume on winning it automatically. Strategic sourcing also encourages supplier diversity. This protects the organization from becoming overly reliant on a single supplier.
Procurement software helps equipment service programs
Many healthcare organizations—especially ones that are spread across multiple facilities — can easily end up paying more than they need to for equipment service programs. Managers for separate buildings often negotiate these contracts individually.
Under a strategic sourcing approach, the procurement team is able to negotiate much more favorable terms. Instead of having different teams negotiating multiple contracts, a single source is responsible. This means more competitive bidding for the contract, including volume discounts.
Strategic sourcing software finds medical supplies
Healthcare organizations require vast quantities of medical supplies, from surgical masks to syringes. There can be dozens or hundreds of individual vendors involved, or there could be just one or two large medical supply wholesalers. Only by using a planned approach can a healthcare organization determine which path is the best.
Dealing with a wholesaler may be more convenient, but with strategic sourcing, many healthcare organizations have discovered it is more cost-effective to work directly with a wide range of suppliers.
This diverse approach also provides additional resiliency, a factor that has proven critical over the past year when it has been a race to secure supplies of masks, gloves, gowns, and other PPE.
Can sourcing strategies impact effective treatments?
Can strategic sourcing be applied to actual treatments? This may sound like a stretch, but healthcare organizations have discovered that when strategic procurement is combined with medical treatment best practices, there is real synergy.
This combination helps to deliver consistency in treatment and cost reductions for the organization. When physicians set guidelines for specific medications to be used as the most effective treatment, that supports standardization of care. It also delivers cost savings because the procurement team can acquire quantities of approved medications instead of having to buy small batches of different drugs as dictated by individual physician preferences.
Traceability and transparency for regulatory approval
Strategic sourcing provides a single source of truth. It ensures that all acquisitions by a healthcare organization have an audit trail to verify regulatory compliance. It goes without saying that this is a critical requirement in the healthcare industry.
Arkestro: The Most Effective Way to Implement Strategic Sourcing
The challenge many healthcare organizations face isn’t the decision to adopt strategic sourcing. That makes sense on so many fronts that it’s essentially a foregone conclusion that strategic sourcing needs to be adopted. The problem is finding the right solution or tool to support the move.
Software used for traditional procurement methods is sorely lacking when it comes to the many complexities of strategic sourcing.
For healthcare organizations and companies operating in the health industry, the answer is Arkestro. With Arkestro you can quickly request the best price from the right supplier for any line item resulting in a 10-15x increase in quote velocity. Keep your healthcare business ahead of the market by predicting opportunities and never leave money on the table.
Ready to predict, procure and win? Visit Arkestro today to schedule a demo and learn more about how your organization can benefit from Arkestro.