If you are still purchasing supplies for your long-term care facility, stop.
You could save hundreds, even thousands, of dollars each year if you switch from purchasing supplies to procurement.
Most people believe purchasing and procurement are the same, so if this includes you, join the club. However, they are quite different. Purchasing is what most of us do every day, both for our care facilities and in our own lives. Running low on paper towels? We place an order either online or with a call or text message. Need milk for breakfast? We pick some up on the way home.
In other words, purchasing is a simple transaction that is performed when something is needed with little thought given to product selection.
Is the product selected the best performing in its category and the most cost-effective; is it easy to use and healthy for the environment? These are variables that are not even considered. Worse, this entire purchasing procedure goes on “autopilot,” to be repeated over and over again. We’ve been ordering XXX paper towels for years, so automatically, we order XXX towels again.
Among the other issues that often materialize with purchasing is that very often, there are no purchase orders. It sounds like a simple thing, but when it comes to reconciling what was ordered, delivered, and paid for, care administrators may be at a loss for an explanation.
Ineffective oversight can lead to other problems. What if one administrator in a care facility or one division of the facility places an order for our XXX paper towels, unaware that another administrator in another department in the facility has just ordered them and has more than enough to share? This is when the lack of oversight becomes a cost issue, often resulting in “spend” that is out of control.
The procurement alternative
Procurement is far more comprehensive. It’s a supply chain management strategy. What the words “supply chain” mean is not often clear. For our purposes here, it merely refers to the way products are moved from the manufacturer to the distributor, and then on to the care facility. In supply chain jargon, the care facility is the “end-customer.” Components of an effective procurement program include the following:
Meeting with different distributors
We need to stop the autopilot ordering. It’s essential to meet with different distributors, not necessarily to see what products they are marketing at this juncture, but to see if administrators and the distributor are the right “fit.” Invariably, these are long-term relationships, and a comfortable working relationship is mandatory.
Understanding a facility’s specific needs
No two care facilities are the same. For instance, many of our distributor-members market cleaning supplies. The floorcare solutions used in one care facility may not be appropriate for another. To address this situation, some distributors now have access to online dashboard systems that suggest which products would be best for, in this case, the floors installed in your facility. There will likely be multiple products, so the dashboards can suggest products and then compare them as to price, performance, cost of ownership, ease of use, and other factors. (See “What is cost of ownership?” sidebar.)
In some cases, it may be more cost-effective, and ensure more timely deliveries if a supplier near the care facility is selected. If your center is located in Illinois, but the supplier delivers products from California, it can take more time to receive your goods. There may also be additional transportation expenses added.
This often comes up when there is a delivery problem. There may be a situation when a product ordered cannot be delivered because, for instance, it is out of stock. Today, another issue has materialized: climate change. Possibly the product cannot be delivered due to a flood or hurricane. A procurement strategy would have a “Plan B” alternative in place to help ensure there is no disruption of deliveries in the supply chain.
Budget and ‘spend’
Ultimately, one of the key benefits of an effective procurement strategy is not only cost reduction but budget control. The strategy helps administrators consolidate spending so that budgets can be created and adhered to. The process can help identify spend categories and then help tighten purchasing and spend, eliminating the unnecessary duplicate purchasing we referenced earlier. It also helps verify purchases.
Remember the purchase order issue mentioned earlier? With a procurement program in place, the accounting department can check what was ordered, what was delivered, flag any items for which there is not a goods receipt, and determine if there are cost incentives for paying early. We must also add, a procurement strategy is an ongoing program. View it as an ongoing process, working with an astute distributor, designed to help care facility administrators streamline purchasing, stay up to date on goods, optimize supplier relationships, and lower supply chain costs.
WHAT IS COST OF OWNERSHIP?
Cost of ownership of a product can be confusing. Let’s say two disinfectants both cost $20 per container. However, disinfectant “A” is highly concentrated and lasts twice as long as disinfectant “B.” In this case, it would cost twice as much to own product B.
Michael Wilson is AFFLINK’s vice president of marketing and packaging. He has been with the organization since 2005 and provides strategic leadership for the entire supply chain team. In his free time Michael enjoys working with the Wounded Warrior Project, fishing and improving his cooking skills. He can be reached through his company website at AFFLINK.com.