Supply Cost Reduction & Procurement Control

Client Profile: 

Healthcare company with 139 locations in 14 states.

Scenario:

This company, one of the largest in its industry, engaged the services of drs4drs to find methods of controlling supply buying workflow across all locations and more than 150 buying staff, as well as to lower overall cost of goods.  Because of reimbursement reductions in this sector, revenue and profit margins were declining while operational and supply costs continued to rise.

Action:

drs4drs analyzed all areas of supply costs as well as existing systems of procurement and supply sources, then provided supplies at 14% below the client’s current pricing, and designed a custom catalog in which a restricted formulary of supplies was available to only certain staff authorized to buy.  OTTO housed – in one place – the supplies previously obtained from 38 sources/sellers.

OTTO applied spend limits and order frequency limits to buyers and electronically pushed orders from all locations to various levels of management so that every purchase, every dollar was controlled in real-time prior to shipment.

Finally, OTTO created a single invoice that compartmentalized charges by GL and allocation codes, then directly imported it into the client accounting software.

Results:

  • OTTO gave company ownership/leadership FULL control over every dollar spent on supplies in all locations.

  • Hard dollar savings of 14%.

  • Additional hard dollar savings of 5.8% in year two via data analyses and re-negotiations with vendors.

  • No price increases over 8 years on 90% of all supplies.

  • Further price decreases in subsequent years on 11% of all supplies through continued negotiations.

  • Reduction of accounting department staff from 7 to 2 (six figure reduction in overhead).

  • Generation of analyses to compare supply usage levels in various markets, and among locations.

 

Hope