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7 Supply Chain Management Best Practices

By CME on Oct 2, 2014 7:37:11 AM

medium_6947664079With the multitude of tasks required in supply chain management, defining processes that are efficient and cost effective is important to ensure that you act in the best interests of both your own organization and that of your customers.  Since materials management and purchasing exist in all fields of business, best practices tend to be germane to all industries, but there are some that are more specific to given industries, including healthcare.  

Here are seven such best practices for healthcare supply chain management:

1.) Align with key suppliers  

Establish relationships with your primary suppliers, your key distributors and your prime vendors, so that you are able to understand each other’s goals.  Aligning with your suppliers will benefit you in timing and cost of purchases, and will give you an edge when dealing with issues like a materials shortage.

2.) Purchase in volume for cost reduction

We all know the benefits of buying in bulk when it comes to cost, but this is one practice that should be carefully managed. You don’t want to make this a rule for everything – you do want to look at how inventory moves and make volume purchases sensibly.   Most vendors are agreeable to Standing or Blanket purchase orders for specific products or groups of products to help with storage space utilization.

  • Blanket Order - Typically, a blanket order provides price protection for a specific volume of purchases over a given period of time - usually one year - which may be delivered in different quantities as required by the purchaser.

  • Standing Order - Typically, a standing order stipulates a protected purchase price and a specific volume delivery schedule, e.g. 20 cases a month to be delivered on the 15th of each month for 12 months.

3.) Use GPO purchase contracts

Most industries have a group purchasing organization (GPO) that you can join and leverage your purchasing power with contracted vendors.  By taking advantage of the collective buying power of the GPO members, you can get discounts you might not get as an individual buyer.

4.) Establish par level inventory maintenance

Determine what your “par inventory level” is and create processes that keep your inventory levels there.  Par is the lowest number you can keep in stock without risking running short.  For example, if you use four widgets a day, and it takes three days to get widgets from the supplier, you will go through about 12 widgets while waiting for your next delivery.  So your par level should be more than 13 – when inventory gets to that point you order more.  Your par levels should be high enough to ensure you have stock, but low enough that you’re not overstocking.

5.) Obtain JIT Delivery Agreements

Along with having par level inventory, you should work to create just-in-time (JIT) delivery with your vendors.  Just-in-time delivery goes hand-in-hand with par level inventory management.  By properly managing your inventory and your delivery schedule, you can assure the availability of materials without overtaxing limited available storage space.

6.) Use technology where needed

All of these practices will be better managed if you make use of technology where needed.  Purchasing and inventory software applications can help with maintaining supplies while reducing the labor time involved.

7.) Manage risk and compliance

With all business enterprises there are opportunities for risks and rewards.  The same is true in healthcare.  There may be opportunities to obtain greater rewards by going outside of an established vendor or GPO contract, but there is also the risk of being penalized for not being in compliance with the established contract.  Managing risk and compliance is an important function for supply chain management.  Modern times have brought competition, global purchasing regions, socio- and ecological concerns, and increasingly discerning customers.  Selecting and working with suppliers is increasingly more complicated and requires a vigilance in monitoring social and ethical performance.  Understanding possible risks and managing for them is an ongoing duty in today’s economy.  

At CME, we are equipment specialists with over 30 years experience in the medical equipment procurement and delivery business.  Our goal is to help provide our customers with the most efficient purchasing processes possible, and to benefit you through our best practices.  

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Topics: GPO, Supply Chain Management

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