The Healthcare Hub

Three Ways to Reduce Cost-to-Serve in Healthcare Today

Sunday, May 15, 2016

While most providers and suppliers spend countless hours hashing out issues around product price, few have examined an area that presents a greater area of savings for both parties – the actual total delivered cost of a product. This includes direct and indirect costs required on both sides of the supply chain to deliver the right product to the right place at the right time.

Healthcare providers and suppliers that have collaborated to address the inefficiencies and costs associated with procuring and delivering finished goods, known as Cost-to-Serve, have not only made tremendous gains in process efficiency but also achieved significant hard dollar savings.


Here are three ways you can reduce Cost-to-Serve today:

  1. Reduce Order Frequency: The practice of placing multiple, redundant orders increases costs for suppliers and providers alike. Both sides of the trading partner relationship must allocate resources to manage these orders and someone pays for this added labor, whether the supplier absorbs the cost or passes it onto the provider. Have a discussion with your trading partners (providers, distributors, manufacturers) to evaluate current ordering and shipping practices, and ways to reduce the volume and frequency of orders.


  1. Save Money on Freight: In healthcare today, many products are unnecessarily shipped in expensive ways (e.g. overnighted, via air). In some cases, the freight charges end up being more expensive than the products themselves. Work with your trading partners to come up with more effective ways to ship products, such as comparing the cost effectiveness of direct versus distribution methods.


  1. Eliminate Excess Inventory: Clinicians often order and store excess inventory in fear they will run out. As a result, trading partners lose money when products expire and must be discarded. Engage in a discussion with clinicians to determine how much inventory they need to be comfortable, implement processes for managing inventory on a daily basis, and develop a plan for addressing emergent or truly unexpected situations.


For more information, read the GHX white paper Reducing Cost-to-Serve in Healthcare

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Stacey Breeden

Director, Business Development - Supplier Sales