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Sourcing and Procurement

How smarter procurement can generate cost savings in healthcare

Supply chain management costs are the second-highest expenditure for healthcare organisations today, and procurement plays a central role in it. Since the healthcare industry has recently experienced the pitfalls of not having a fool-proof procurement strategy, largely due to the COVID-19 pandemic, here’s how smarter procurement decisions can help businesses save costs and time.

The primary function or role of procurement in the healthcare industry is to efficiently manage and reduce unnecessary expenditures through proper contract, vendor, and inventory management. However, the pandemic threw entire economies and the healthcare industry into a tailspin, revealing costly gaps in the supply chain cycle.

Top procurement expenses in the healthcare industry

The pandemic brought to light the various areas where procurement costs were high and processes ineffective. 

  • Wasteful spending
  • Overspending became an undesirable reality as the pandemic placed excess pressure on healthcare supply chains. The unavailability or limited availability of supplies led to a direct increase in costs, with no room for negotiations. Precious time and money were spent on sourcing supplies, managing the workforce, ensuring just-in-time deliveries, and panic buying. The absence of a streamlined supplier management system further added to the chaotic spend management.

  • Costly logistics
  • Lack of inventory, decentralised distribution management, delivery delays, disorderly shipping, and far-from-ideal tracking systems contributed to the logistical challenges during the COVID-19 pandemic, thus increasing the logistics costs to an all-time high and impacting the bottom line.

  • Shortage of funding
  • It is no secret that you need a constant flow of funds to keep any business running smoothly. The healthcare domain, which relies quite heavily on government funding, struggled in this regard during the pandemic. The increase in demand for services, along with the shortage of people, supplies, and funding, meant that the industry was unable to cope up with the situation.  


How to curtail costs through smarter procurement in healthcare?

Here’s how healthcare organisations can ensure cost reductions by planning better, investing in smarter procurement solutions, and making data-backed decisions:

Purchase demand management

  • Reducing consumption/purchase of products that are not necessarily required and focusing on needs-based (yet pre-emptive) spending.
  • Minimising expenses through modifications such as technological developments, outsourcing, and collaborations for improved products.

Supply base management

  • Restructuring and managing supplier relationships to ensure longer-term partnerships and greater negotiation power.
  • Expanding the supplier base to establish more sourcing alternatives during crisis periods.

Re-evaluating total cost savings

  • Optimising total supply chain costs in healthcare and reducing total lifecycle ownership costs.
  • Decreasing transactional costs by minimising leakages and optimising vendor management.

Centralised e-procurement

  • Ensuring shorter purchasing cycles and improving inventory control and visibility.
  • Keeping all stakeholders in the loop by establishing a transparent supply chain. 

Other saving opportunities in procurement

  • Using artificial intelligence (AI) to analyse supply chain disruptions and being more proactive.
  • Establishing long-term strategic alliances to ensure continuous value creation through strategic sourcing.
  • Using automation, predictive data analytics, and data management to reduce costs and minimise the possibility of errors or inaccuracies.

Smart procurement and savings

A hospital saved roughly $900,000 by reducing service contracts for diagnostic imaging and other clinical equipment (category management) while training their in-house bio-med department to perform original equipment manufacturing services.

Smart procurement, without a doubt, can play a vital role in improving healthcare supply chains. From an organisation’s perspective, a strategic mandate with a skilled procurement team can help generate additional cost savings that can be invested in growth.


Infosys BPM Procurement Services

Combining our industry experience, expertise, and technology, Infosys BPM helps propel its healthcare clients towards their procurement transformation vision by developing effective procurement strategies, designing innovative operating models, and handholding them during this transition.

Our comprehensive range of healthcare procurement consulting services include:

  • Procurement transformation and strategy development
  • Technology assessment and digital procurement strategy creation
  • Healthcare spend analytics
  • Opportunity assessment and diagnostics
  • Capability assessment, consulting, and training

Navigate your next with Infosys BPM - the leader in healthcare procurement consulting solutions. Learn more about our dedicated sourcing and procurement outsourcing services today.