In healthcare we typically operate in silos, with the right hand blind to what the left hand is doing. Take for instance finance in both provider and supplier organizations. While accounting and accounts payable/collections might communicate regularly with treasury and engage in all-team meetings, their structures, business processes and policies are often disjointed. Without an integrated approach throughout its financial functions, an organization cannot fully assess its activities and identify opportunities for cost savings.
It’s the same situation in supply chain within healthcare provider and supplier organizations. The contracting, sourcing, order management and inventory management functions might function well individually, but rarely do they work together in an integrated fashion to pursue meaningful cost reduction.
Think about your own organization — how well are you doing at identifying and assessing opportunities in a holistic fashion throughout finance and supply chain? Next, how effective are you in acting upon those opportunities you’ve uncovered? While either your finance or supply chain team might be operating individually at peak performance, what about the other side of the coin? If you’re not taking a big picture approach and understanding how these two departments interact and impact each other, you’re likely missing out on significant opportunities to drive out costs.
Here are examples from both the supplier and provider perspectives.
To what degree are disjointed supply chain and finance operations allowing customers to “double dip?” Very often in finance a team on the collections side will create a policy for net terms where the customer is granted a discount for paying early, let’s say 1 percent. At the same time, treasury will sign up with a credit card company and agree to pay 2 ½ to 3 percent in fees for each customer payment. When these two functions are not aligned customers could be both paying with a credit card and taking an early pay discount. In this example, the supplier could be losing up to 4 percent in revenue on each invoice payment.
To what degree does lack of automation, coordination and efficiency throughout your supply chain and finance functions prevent you from capitalizing on savings opportunities?
Those providers with disjointed, manual, and paper-based processes cannot gain a holistic view of their operations, nor can individual supply chain and finance functions work collaboratively to save money (e.g. discounts, rebates). Furthermore, a provider organization that has optimized business processes throughout its procure-to-pay cycle is typically in a better position to negotiate with their suppliers for better contract terms. For example, if they regularly make their payments on time, the supplier might be willing to provide more advantageous pricing or deeper payment discounts.