Yokl: Lessons from Wal-Mart on Boosting Buying Power

You might not be aware of it, but most of our healthcare supply chain innovations have been swiped from other industries (RFID, MMIS, MRP, spend managers, Just-In-Time, etc.). Not that there is anything wrong with doing that. Industry has more time, ample resources and considerable money to invest in research and development of new supply chain breakthroughs, and we in the healthcare industry can reap the benefits of it without the large investment necessary to do so. That’s why we must constantly keep our eye on what other industries are doing to improve supply chain performance.

One such example of a new emerging supply chain practice is Wal-Mart’s “Collaborative Sourcing Programs.” Basically, Wal-Mart piggybacks on its supplier’s purchases to boost its own buying power. Wal-Mart is now buying its sugar, (which goes into its store-brand soda), bags and paper to cut even bigger deals by consolidating its purchases with its suppliers. You might consider this a form of group purchasing — with a twist. There is no middleman cost (i.e. no administrative or marketing fees) incurred in this kind of collaborative purchasing.

 

I have recommended this approach to many of my clients over the years without giving it a fancy name like “Collaborative Sourcing.” I just thought it was a better way to leverage a client’s buying power without adding cost to their purchasing budgets. By way of example, one of my clients purchases all of their environmental and paper products through their food service contractor at double-digit savings. Another buys all of their telecom and IT services with a local supplier at significant savings to both collaborative partners.   

How can you do the same?  If I was looking to start a “Collaborative Sourcing Program” today for my hospital, I would look at the companies that are represented on my board of directors. I just Googled a list of the board members for a prominent hospital in the Northeast and found that they have board members representing the banking, petroleum, government, construction, college, telecom, and finance industries sitting on their board.   I would start working with these companies to piggyback selected purchases (e.g., oil, gas, telecom, construction materials, office supplies, forms, furniture, etc.) where it is deemed cost effective to do so – all other things being equal.

This doesn’t mean I would stop utilizing my group purchasing organizations for my overall volume purchases, but instead only employ the collaborative sourcing technique on those commodities that it makes sense to do so. It’s just another arrow in our quiver to enable supply chain professionals to hit their savings target each and every year.  

Robert T. Yokl, Chief Value Strategist, Strategic Value Analysis® in Healthcare