How to Reduce Medical Procurement Cost

Reducing cost in medical purchasing seems simple in theory, but is rarely so in reality. A large number of buyers fixate on obtaining penny unit prices that ultimately drive observably less total cost through the pipe due to compromised quality, delivery failures, and expensive rework.

In order to get medical procurement cost down, you need to focus on how things work, how suppliers work, and how you will achieve cost effective supply chain management in the medium to longer term. This is particularly true for high volume consumables like breathing circuits, HME filters, anesthesia accessories, humidifier chambers, where a fraction of a penny/game is added to your costs sometime unbeknown to you.

Understand Total Cost Not Just Unit Price

Perhaps the worst phrase to utter while doing you buying is “oh, but it only costs ___”, an error that assumes that cheaper = lower cost.

Total cost includes:

• Cost of product
• Cost of transport and generally logistics to get neatly into your stockroom
• Cost of storing and keeping; that is, the cost of carrying and perhaps inventorying granted you are carrying it
• Cost of having to return it and cost of product failure
• Labor of using it, at least if it is reusable

A low-cost breathing circuit without any means of assuring effective quality control, for example, soon has people worried about leaking; replacements have to be previewe; an upsetting customers generally and that soon proves to be your real cost.

Choose The Right Product Makes

Both over-specifying and under-specifying gives rise to a self-inflated cost.

Examples:

Choosing HMEF filters that really deliver nothing we actually need them for → increased price with nothing gain
Smoothbore breathing circuit where we could have corrugated just as well → greater price and no greater good, if at all
Reusable system chosen without thought to what we have to do to it to “save” it → hidden cost

Work With the Right Supplier

Supplier choice will directly affect cost, and a reputable manufacturer can help you on holiday with:

Product quality consistency (which cuts returns)
Stable pricing
Reliable production
Good communication

Working with a breathing circuit factory China throughout, instead of a medley of resellers, reduces cost in the long run.

Optimize Order Quantity and MOQ

Order size immediately affects price. In general:

Small number of orders = small order sizes = high order cost per unit.
Bulk orders at a breathing circuit manufacturer = lower unit price.

Caution: don’t over-order in bulk. You will pay higher warehousing costs and lose the value of cash tied to too many orders.

Reduce Supplier Switching

Changing suppliers often seems like a neat way to pursue profit, although costs do go up with far fewer suppliers. Problems that crop up when changing suppliers include:

Retesting
Unreliable product
Ineffective communication
Late delivery risks

Maintaining a long-term partnership with just 1 or 2 suppliers saves you money.

Improve Demand Forecasting

Problems arise when you have no trends to enable high quality forecasting. An emergency order will inevitably cost more. Working out an ordering pattern will save you money with help from:

Usage monitoring
Purchasing in advance
Less urgent, lower-cost air shipments

Planning on sea shipment of breathing circuits will save you money.

Control Logistics, Shipping

Shipping is expensive, especially for orders that come from abroad. Things to consider to save money are:

Consolidation
Bulk orders, i.e. sea freight
Low hassle suppliers who are familiar with export processes

Minor adjustments in shipping schedules can cut costs during the life of the contract.

Evaluate Disposable versus Reusable Products

If product longevity isn’t done to death, we will move on to items that reduce the long-term cost for our practice. Choosing between disposable breathing circuits and standard quality, reusable, low price, breathing circuits is the first one that comes to mind.

Disposables have:

Low purchase price
No risks of cross contamination
High ongoing use

Reusable low price, breathing circuits have:

Horrible price initially
Cleaners, sterilizers…
As well as
Lower units cost!

Evaluate your labor cost and layout to identify what is the “right choice” for you.

Minimize Quality Losses and Costs

Quality issues or problems in manufacturing are some of the more expensive hidden costs of all. Quality Issues occur due to:

Pocket error, Product defect
Color variances from order to order
Packaging damage

Using a breathing circuit supplier/provider with specialist knowledge of the environment reduces the issues at the factory, and hence saves you money.

Use OEM, but be wary

Actually, there’s no way you’re not a sucker if you allow the wrong hardware maker to convince you it’s safe to allow them to tag their products. If you have somebody make you an OEM logo breathing circuit, just do one thing, strategically spot reduce the logo size and watch the general once-off fee disappear and replaced with a batch order, reduced price, capable of clearing a standard planogram for just number less each year!.

In Closing

Speaking of licensorship, if you want pricing cut you’re going to need to think lie in terms of systems, not stickers. That includes those for breathing circuits, HME filters and humidifier chambers, etc. One place you get a cut is less is high quality merchandise, low supply, exact amounts and even sales that keep on selling all summer!!