Supply Chain Management
Supply costs are the second largest expense after labor, making it critical that Texas Health conscientiously manage our procurement processes to ensure competitiveness, financial viability and operational efficiency. We do this while also selecting the highest quality of materials and services to deliver outstanding patient care.
Similar to other organizations of our size and scope, we face the following risks to our supply chain:
- Extreme weather and/or other unforeseen events that may delay or interrupt supply delivery.
- Escalating costs for high-end or high-tech medical technologies, equipment and other related products and services.
- Sourcing from manufacturers that outsource production in countries that may have additional political, social, health or weather risks.
- Underperforming or unethical contractors.
Our business practices and performance management systems are designed to monitor and reduce these risks, as well as ensure compliance with federal and state laws and regulations. To effectively and responsibly procure materials, equipment and services, we deploy the following key strategies:
Buy Green and Buy Local
Texas Health considers sustainability in our purchasing decisions, and will procure environmentally friendly and recycled materials when it is cost-effective. We also purchase some of our services and products locally, which helps create jobs and sustain local economic growth in the communities we serve.
Harness Buying Power
Texas Health is a member of Premier, a national group purchasing organization that leverages members’ purchasing power to source quality products at a lower price. Premier also helps us identify cost-reduction opportunities, supply chain management best practices, and offers a robust diversity supplier program that we actively utilize.
Test Quality Prior to Purchasing
We have rigorous quality standards at Texas Health Resources. To ensure that manufacturers’ clinical innovations meet our high standards, they are evaluated and tested by our clinical teams. Vendors also can have our Texas Health Research & Education Institute evaluate their products’ quality and effectiveness for a fee.
Require Responsible Practices
Vendor business activities must be conducted in accordance with our Business Code of Conduct and Business Ethics and System Compliance Program, as well as all aspects of our written policies and procedures on the federal False Claims Act, whistle-blower provisions, and the detection and prevention of fraud.
Periodically, we meet with approximately 20 of our key business partners to discuss local and industry challenges as well as opportunities for improvement. We review sales results, business trends, opportunities, special projects, and a number of other pertinent business metrics.
We continuously engage suppliers on how to improve cost controls within supply chain processes and programs, as well as how to standardize best practices related to the purchasing, storage and distribution of materials.
Support Minority Businesses
Doing business with enterprises owned by women, minorities and veterans can provide cost-effective products and services to our organization. By contracting with these organizations, we help sustain their companies, which in turn, help strengthen the local economy. While we do not have specific targets for annual spending with minority suppliers, in 2012, we spent more than $25 million with these vendors.
Texas Health’s supplier contracts are designed to reduce costs and establish quality and performance expectations. We evaluate key vendors’ performance using a quantitative tool based on approximately 30 criteria, including cost, quality, responsiveness and assurance of supply on an annual basis. We also discuss what vendors are doing to reduce their own environmental and social impacts, as well as what they do with their diverse suppliers.
We collaborate with underperforming suppliers to establish improvement plans if needed. If sufficient progress is not made and we see little change in resolving issues, a contract may be terminated. While Texas Health always seeks to improve our procurement strategies and vendor relationships, we have realized substantial savings and benefits over the years. In 2012, we:
- Identified numerous initiatives that resulted in more than $20 million in savings.
- Continued to standardized and reduce physician preference implants, which saved $11.8 million.
- Expanded our physician office supply program realizing more than $2 million in savings.
- Continued to partner with clinicians and physicians to reduce costs, while increasing the quality of medical supplies, equipment and services.
- Expanded the already successful systemwide print management program, saving more than $500,000.
In 2013, we plan to:
- Continue to reduce the costs of physician preference supplies and implants throughout the system.
- Continue to reduce medical supply costs; our goal is to save $11 million.
- Work closely with our physician office program to reduce their costs and improve automation.
- Leverage technology, where appropriate, to speed and automate the supply replenishment process throughout the system.
- Advance the supply chain presence in non-acute areas.
- Continue ongoing activities to reduce supply and equipment costs through clinical involvement.
- Reduce waste management expenses by approximately 18 percent.