Utilization Is Not a New Concept but How We View and Attack It Is!

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The other day I was browsing through my copy of the Charles Housley (Bellwether League Honoree 2008) edited book Product Standardization and Evaluation which was published back in 1985. This was a compilation of best practice articles from various healthcare purchasing and materials management leaders at that time. What amazes me with these best practices is that many of the strategies, tactics, and ideas still hold true today and with small modification can be employed effectively. I took notice to a number of articles that pertained to managing “usage” as it was called back then. Today, we refer to usage as “utilization”. It is fun to have this book in my library and I highly recommend it be in yours, too. Just like a good song, great strategies and ideas do stand the test of time.

Even back in the mid-1980’s, our healthcare supply chain leaders were writing articles about managing utilization, but when you look at it, high utilization in your supply chain has not changed. Yes, the product master files have gotten larger and the products more complex, but the fact is that using more product than you expect to use is going to drive your costs up. If you project to use 10,000 widgets on your new contract implementation that is going to save you 15% on new pricing but with the new implementation your annual usage/utilization increases by 22%, I have got news for you, your new contract is not saving you a dime but is costing you money! Front line strategies have always been to try to knock down as much of the cost overruns with the best prices and contract terms, but a good price will only go so far. You need to have strategies and systems in place to attack the usage/utilization. First, you must come to the realization that utilization is a growing issue that is not going away in our supply chains.

I like to use the analogy of the hospital supply chain being a big Victory Garden with the products and services being the various flowers, fruits, and vegetables that we manage every day. You have to realize that every garden, no matter how pretty or well-maintained, has weeds. The weeds represent the regression, the unforeseen cost overruns, the waste, the product misuse, and alike. Instead of saying that there are no weeds in our garden, when every garden has weeds, we should put our efforts into picking these weeds as fast as possible and moving on. But we must always be on the lookout (tracking, trending, and monitoring) for new or old weeds popping up in our value analysis programs.

Back in the 1980’s they had weeds (utilization/usage misalignments) and in 2013 we still have weeds. Yes, I can say with certainty that we have had weeds every year in-between. We need to now take on these weeds as a serious threat to our bottom lines and start eliminating, managing, and controlling the needless waste of our supply chain dollars. We need to act before we end up having to lay off people when we could save their jobs by eliminating the millions of dollars in utilization cost overruns in our supply chains.  

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