Member background and initial challenge
A network of unaffiliated health systems shared a common concern for managing rising freight costs. The group engaged Vizient Purchased Services to evaluate existing freight management practices and facilitate the development of a new, standardized program to meet the needs of each individual system.
Vizient assessment: the approach and methodology
The Vizient Purchased Services team initiated the engagement by conducting a comprehensive assessment. The purchased services assessment was all-encompassing, reaching from from small, rural hospitals to large, acute facilities. It included on-site interviews and thorough analyses of each hospital’s accounts payable spend and contracts.
Expert insight: diagnosing opportunities for improvement
The assessment data provided insight into potential cost-saving opportunities. The Vizient team shared indepth freight management market expertise and education with network health systems as part of the review process.
To dig even deeper, they asked participants to consider the following questions:
- What are your current freight costs per mode?
- How do you currently track your freight charges?
- How do you optimize shipping modes?
- Do you charge freight costs back to individual departments?
- How do you handle overcharges?
The research conducted across various network facilities brought commonalities and best practices into focus. Vizient subject matter experts discovered that two hospitals were using the same third-party logistics provider with great success. With this information, they worked with the network to implement a targeted sourcing strategy.
The subcommittee agreed to conduct a focused negotiation. In preparation, the Vizient Purchased Services team developed and analyzed the aggregation request for proposal, and presented the proposed cost savings to the subcommittee. The team considered qualitative factors throughout the process.
Vizient led the discussion surrounding the following criteria:
- Who would enroll the suppliers in the program?
- Who would verify supplier compliance to the approved freight code?
- What suppliers would participate in the program?
- How much time would be required to implement the program?
- What data would be necessary to track freight on a monthly basis?
Vizient negotiated the final contract terms and conditions, resulting best-in-class per-mode pricing and growth incentives. The Vizient team identified 33 percent savings, or $630,000, on freight management services for these health systems.