Healthcare supply chains must aim to achieve high reliability as they seek solutions to the numerous and persistent challenges the industry is facing, from supply shortages and inflation to shrinking operating revenues.
Broadening the supply chain’s span of control across more spend categories – which is one of the six priorities of the high-reliability supply chain – is one method to address these challenges.
Another means of adhering to high-reliability principles while responding to supply chain challenges is shaping demand across thousands of purchasing decisions being made every day in the health system.
What Shaping Demand Means
Over the past two years, supply chain spend has increased more than 18% to encompass more than 37% of the total cost of patient care. Shaping demand matches the items presented to the requester based on their purchasing profile – such as their role within the organization, location, purchasing channel, and permissions. This ensures requesters receive the right item that has been approved for their use, from the right source that is the contracted vendor, at the right price that is compliant to the contracted price and terms.
Prodigo’s Marketplace shapes the decisions being made by influencing the search results being presented to the requester. By displaying preferred options higher in the search results, the supply chain can influence requesters toward preferred options, thereby directing spend to preferred – in other words, contractually compliant and cost optimized – options during the procurement process.
As a result, the supply chain achieves higher contract utilization, which maximizes savings tied to price incentives based on commitment terms within the contract. All of this reduces the cost footprint of healthcare while also supporting diversity and ESG (environmental, social, and governance) objectives that are essential components of building healthy communities.
By broadening its span of control, the supply chain can orchestrate demand signals within each purchasing pathway and expense category. This extends supply chain’s control across an expanding continuum of care – including acute, nonacute, clinics, offices, and direct-to-patient care.
Orchestrating Demand Helps Requesters Make the Right Choice
Unlike B2C e-commerce, which broadens the search options for items, the goal for healthcare procurement is to standardize the items being purchased within the system. Shaping demand is less about shopping and more about being directed to the best option quickly and efficiently. On average, more than 40,000 different items are purchased annually within a health system and most requesters do not know which vendor supplies the item nor do they know the contracted price of the item. One common approach is to maintain purchased items and prices in the ERP item master; however, as an industry less than 45% of purchase volume is covered by items in the ERP item master.
This makes the healthcare supply chain unique. Requesters are purchasing everything from facility maintenance and office supplies to implantable medical devices. Requesters must be shown the preferred options to comply with the clinical, operational, and financial objectives of the organization’s procurement policies.
For example, it is important that a requester has access to the correct UOM (units of measure) for their purchasing location. If they serve a low-volume location like a nonacute site or physician’s office, then they should be directed to purchase single units of the item through a low-volume distributor or a central distribution center. Conversely, requesters that are restocking a surgical supply room may need to buy in bulk quantities of a box or case.
With current disruptions and shortages of supplies, supply chain often needs to quickly redirect demand to alternative items or supply sources. Contract conversion is another use case where more cost advantaged, or lower-priced, items can be easily substituted at the point of service. Requesters can be redirected from items that have been discontinued or recalled for safety hazards to approved, functionally equivalent alternatives.
Supply chain’s value is to inform each purchasing decision and to drive preferred behavior. Demand orchestration aligns approved item formularies to the user based on role, location, and purchasing permissions. Shaping demand influences the decisions being made at the inception of demand to deliver preferred outcomes and minimize supply disruption due to back orders and special-request workflows that frequently result in the purchase of off-contract items, inefficient work processes, and match exceptions.
How Prodigo Helps
Prodigo shapes demand at the inception of demand.
Through its data enablement and demand orchestration platform, items are enriched with meaningful metadata and synchronized with pricing from the contract portfolio, creating a virtual item master. From this single source of truth, Prodigo’s directed buying matches the user’s demand signals with approved item formularies that support the clinical, diversity, and ESG initiatives of the organization, keeping supply chain compliant, equitable, and sustainable.
Prodigo’s replacement functionality offers dynamic substitution capabilities to combat risk during product recalls and redirect spend to preferred and approved alternative items during supply shortages. Mobile options extend Marketplace ordering functionality to serve requesters where they work, making for a more flexible ordering process.
Prodigo’s platforms and products ensure that health systems obtain the right items that serve the needs of care receivers and, by shaping demand, that these products are purchased at the right price from the right source. In doing so, Prodigo helps its clients to achieve this second tenet of the high-reliability healthcare organization.