Healthcare supply chain management is complex due to the highly regulated nature of the industry and continuously evolving consumer expectations about cost-effective care. Supply chain is one of the major expenses in any health system’s financials, accounting for approximately 30% to 40% of the operating budget. Due to the supply chain’s dynamic nature, hospital leaders are on a constant lookout for ways to improve supply chain capabilities while also lowering overall costs. According to an analysis by Navigant, U.S. hospitals could save $25.7 billion in their supply chain operations by standardizing products, reducing waste, and streamlining processes.
By regularly tracking supply chain metrics, hospital leaders can keep tabs on performance to accomplish the business objective of lowering costs. This blog post explores some of the traditional supply chain metrics tracked by leaders that HBI has spoken to, and looks at some of the evolving metrics that supply chain leaders need to monitor.
Traditional supply chain metrics
The following are examples of metrics that supply chain leaders use to identify opportunities for improvement and implement changes:
- Time between requisition to purchase order dispatch
- Average number of orders processed per FTE
- Percentage of purchase orders issued as emergency orders
- Purchase order confirmations
- Volume of match exceptions between an invoice, purchase order, or receipt
Contract management KPIs:
- Contracts in progress
- Expired contracts
- Time (days) for contract to be finalized
Logistics and warehouse KPIs:
- Shipping accuracy
- On-time delivery
- Number of storage locations maintaining par level
Materials management KPIs:
- Volume of orders submitted to the storeroom
- Weekly inventory turns
- Scheduled vs. completed unit deliveries
Evolving supply chain metrics
Traditional supply chain metrics tracked by hospitals are often very focused on process efficiency. More recently, supply chain leaders are widening their horizons by exploring new avenues to determine the overall impact supply chain activities have on an organization’s performance.
At a webinar hosted by HBI in November 2019, leaders from Mayo Clinic revealed how they are collaborating across the revenue cycle and supply chain. When the hospital launched its “Challenge and Beyond” initiative, it started tracking the following KPIs to gain insight into how supply chain expenses are associated with overall revenues:
- Supplies as a % of medical service revenue: Tracked at the enterprise, region, and service line level to check if supply expenditures are in control compared to expense drivers like volume and acuity.
- Total Supply Investment: Defined as the total supply expense and supply labor investment as compared to operating revenue. This metric is tracked to gauge the overall impact of supply chain efforts and activities.
The future ahead
Supply chain staffing and productivity management are important categories where hospital leaders are increasingly seeking benchmarks to gauge performance. Providers need to track supply chain staffing and productivity indicators in order to manage and retain a talented workforce, to predict labor needs, and to manage staff schedules efficiently. However, staffing and productivity benchmarks are not widely available.
In a bid to fulfill this gap, HBI’s research team is planning to conduct a supply chain staffing and productivity survey this year. The benchmarks will help supply chain leaders to evaluate labor costs and opportunities while still providing a best-in-class experience for patients and internal stakeholders. Stay in touch with HBI for opportunities to participate in the benchmarking study.
To learn more about this survey and other healthcare supply chain metrics, fill out the form below and a member of our team will be in touch!
 Yousef Abdulsalam and Eugene Schneller. “Hospital Supply Expenses: An Important Ingredient in Health Services Research,” Medical Care Research and Review 76 (April 2019): 240-252, accessed October 6, 2020, doi: 10.1177/1077558717719928
 “Annual Supply Chain Savings Opportunity Reaches $25.7 Billion for U.S. Hospitals, Navigant Analysis Finds,” last modified November 13, 2019, https://guidehouse.com/news/corporate-news/2019/supply-chain-analysis-2019