Hospitals are struggling to make aging procurement models work in today’s tumultuous markets. The supply chain is second only to labor in healthcare facilities, and prices are on the rise. Cost-cutting measures must account for procurement workflows and the outdated strategies that produced them. Hospitals are searching for new ways to improve the bottom line. Is strategic sourcing the answer they’re seeking?

Strategic sourcing vs. procurement: What’s the difference?

Strategic sourcing is the logical evolution of outdated procurement models. Aided by big data and analytics, strategic sourcing promises better measurement of — and improved response to — today’s topsy-turvy supply chains. Strategic sourcing can help you understand and react to changes affecting individual vendors, raw materials, and the market itself.

When comparing strategic sourcing to traditional procurement, key differences include:

• Procurement seeks to fulfill a specific product or process need. Strategic sourcing uses spend analytics to better predict future demand and seek out better goods and services.
• Procurement switches suppliers based on external market forces. Strategic sourcing is a proactive approach to create supplier redundancy while staying on top of market trends.
• Traditional procurement focuses on price first. Strategic sourcing provides an overall big picture analysis of external and internal business goals for a more informed decision-making process.
• Procurement uses purchase orders with terms and conditions. Strategic sourcing seeks to eliminate risk by increasing legal and commercial protections.

Implemented effectively, strategic sourcing leverages IT to create a complete picture of the true cost of ownership (TCO) of any product or service. It seeks to build trust with your suppliers by creating advisor relationships instead of more traditional vendor/vendee management. The goal of strategic sourcing should be to leverage partnerships and integrate the products and services of your strategic partners to provide value and supply chain stability.

Strategic sourcing best practices

Strategic sourcing cannot be achieved without three organizational facilitators in place:

• Management infrastructure
• High-caliber talent in procurement
• Clinician involvement

Evolving from traditional procurement methods to a strategic sourcing model requires careful planning and deliberate effort. Get started on the right foot with these best practices:

• Improve supplier communication by evolving beyond outdated request for proposal (RFP) models. Technology is key. Modern contract management software can help you set up vendor profiles and create templates for faster and clearer sourcing. These tools offer analytics for tracking supplier performance with weighted scoring for more informed choices about your vendor partnerships.
• Define the goals of your strategic sourcing team. Look beyond the C-suite to include other business functions, such as finance, IT, and operations. Focus on continuous improvement with specific goals in mind.
• Think beyond price. Price obviously matters, but it cannot and should not be the final — or only — consideration. Cutting costs should tie to improving outcomes you define as priorities.
• Establish a supplier contract evaluation and management process for maintaining open communication channels. Think of your contractors less as “vendors” and more as strategic partners. Take the temperature of these relationships regularly. What works well from the perspective of your end users? When should you worry things are going south?

The right plan, an effective team, and relevant technology are essential for strategic sourcing success. But in healthcare, there is another vital element to consider: clinician buy-in.

Engaging physicians in strategic sourcing

Engaging your entire organization in efforts to cut costs and improve the supply chain is crucial for capturing on-the-ground details about materials and services from an end-user perspective. Set up an evidence-based evaluation system to incorporate data from providers ensures more effective sourcing. This is true whether you’re evaluating an electronic health record (EHR) system, a medical device, or even a new medication. Alignment of senior leadership — including clinical leadership — is critical for any hospital-wide initiative to succeed. Engage your clinical teams in strategic sourcing efforts by including physicians and other clinical staff on procurement committees tasked with evaluating new IT tools or supply chain partners. Rotate this responsibility to create higher awareness of the need for continuous improvement.

Strategic sourcing is a potential center of excellence for your healthcare organization. The Windsor Group Sourcing Advisory team works with hospitals across the nation to help them evolve, adapt, and improve. Visit windzr.com to learn more.