5 Procurement Lessons from the Healthcare Industry
What do the healthcare and the multifamily housing industries have in common? While this might sound like the beginning of a not-so-hilarious riddle, it’s a serious question that could result in significant savings for building owners.
Believe it or not, multifamily housing shares many similarities with the healthcare industry. Aside from roots in the hospitality and customer service industries, both businesses require ongoing building maintenance, repair, and operations (MRO) purchasing that can end up being costly and challenging.
As the healthcare industry has grown even more competitive, the less effective organizations have been gobbled up by more cost-efficient healthcare organizations and conglomerates. The survivors have learned to optimize every efficiency. That’s why the healthcare industry has come to rely on Group Purchasing Organizations (GPO).
A GPO is a collective buying entity that helps healthcare providers — such as hospitals, nursing homes, and home health agencies — cut costs and run more efficiently by utilizing discounts negotiated with manufacturers, distributors, and other vendors based on the aggregated purchasing of all members. Since the benefits of GPOs aren’t restricted to one type of industry, building owners can leverage the healthcare industry’s learnings to find what works for them.
Here are 5 benefits the healthcare industry receives from using GPOs:
1. Greater Purchasing Power
GPOs provide greater purchasing power, no matter how big or small the organization. Even healthcare corporations that have acquired other hospitals and have tripled in size belong to GPOs because they provide even more flexibility and negotiating power. It also makes the supplier pool even more motivated to be agile and nimble by proactively preparing for issues like tariffs or natural disasters. Why? They don’t want to lose a large number of clients in one fell swoop if they make a mistake or aren’t prepared.
2. Better Data
GPOs are designed to offer better reporting than most healthcare organizations. This reporting allows them to conduct business more effectively with data that allows them to:
- Compare contract vs. non-contract spend
- Have visibility into what they are spending money on that is not under contract, but should be
- Manage compliance and spending across sprawling organizations with many locations
- Shine a light on service provider spend by allowing transparency into a normally murky—yet large—part of MRO spend.
3. Increased Compliance
What many building owners don’t realize is that the biggest procurement savings come from an increase in compliance, which is defined as buying only from suppliers who have negotiated deals/contracts with your company. As healthcare conglomerates have discovered, company growth often comes with even more difficulty enforcing compliance. While compliance will never be 100% for even the best organization, GPOs have helped to make growth much more efficient. How? Since employees often don’t realize how much unauthorized purchases are costing their organization, GPOs help with education and with easier-to-adopt purchasing platforms. Not to mention, recruiting only very motivated suppliers can speed up delivery of time-sensitive items, which is often an obstacle for employees who need to make repairs happen quickly. After all, much of compliance comes from the suppliers, which is why GPOs vet distributors/suppliers to ensure they have the tools, reporting, and SLAs necessary to effectively service their members.
4. Inventory Replenishment
In the old days, hospitals needed large stockrooms for supplies, which took up significant space—not to mention money. A GPO gives you the ability to work with efficient, reliable suppliers who will provide free, next-day deliveries so you don’t need to stock significant product – reducing inventory carrying cost and labor expense. Using suppliers as virtual warehouses saves time, money and resources. In addition, a GPO offers more dependability because their suppliers know that if they fail you, they are risking the business of hundreds of companies.
5. Increased Efficiency
With the adoption of GPOs, hospitals found they can redeploy personnel to areas that have greater efficiencies outside of pure purchasing tasks. That’s because GPOs are a turnkey service, handling everything from supplier negotiation to price auditing, which ensures hospitals are being charged what they negotiated in contracts. GPOs take on many of those roles more efficiently with increased leverage on suppliers so hospital personnel can focus on other critical areas that make them successful – patient care and increased HCAP scores.
In a nutshell, GPOs allow healthcare professionals to focus a greater amount of their time on the actual healthcare, instead of on the day-to-day supply chain details — and similarly, GPOs allow the multifamily industry to concentrate on their tenants. If you are a building owner looking to save and get the most bang for your buck, consider exploring Raiven’s MRO marketplace, a cloud-based platform that brings savings and efficiency to your MRO purchasing department.