Analysis of Supply Chain Proves Cost-Effective, Especially in Pediatric and Perioperative Settings

Hospital administrators continue to look for ways to save money and by taking a closer look at their supply chain processes, theyre finding them. A Thompson Reuters 2009 study reported 50 percent of hospitals surveyed were unprofitable in the third quarter of 2008, while the median margin for the 436 hospitals in the study was zero.

In the September issue of the AORN Journal from the Association of periOperative Registered Nurses, Janice Davis, MS, RN, CNOR, and Robert Doyle, MS, RN took a value-analysis approach to product selection and with data driven decisions were able to target overall supply chain savings at approximately 40 percent.

Pediatric hospitals face additional challenges in acquiring and managing products because specialized products in a variety of sizes are required to care for children of all ages. There is temptation to overstock. The supply costs associated with the perioperative department typically account for a significant part of a hospitals total nonlabor supply costs. A reduction in nonlabor supply expense in the perioperative department can affect the financial success of the entire hospital; the savings are dependent on the hospitals unique position in relation to purchasing alliances and contracts, and the status of the supply chain when a savings program is initiated. Perioperative departments can reap the benefits of supply chain optimization, including having a rational, well-defined approach to product choices; lower annual supply costs; lower inventory value; and improved inventory management practices.

The value analysis approach is an analytical methodology for product selection that involves product evaluation and recommendation based on consideration of clinical benefit, overall financial impact, and revenue implications. The process includes a review of the clinical and financial implications for the proposed product or process change before a trial. Finally, all supplies are scrutinized for safety in the pediatric population with consideration of safety restrictions by age or weight.

For hospitals that decide to evaluate the supply chain process for potential cost savings, Davis and Doyle suggest a core group analysis team be formed to follow the existing process. In regularly scheduled meetings, the team evaluates product proposals with clinical, financial, and supply chain implications.

According to Davis and Doyle, policies and procedures in product selection and supply chain management must be enforced throughout the organization for maximum success.