Strategic sourcing is a procurement and supply chain approach that formalizes information-gathering processes to ensure continuous improvement through a periodic re-evaluation of the purchasing activities within an organization. The concept involves a constant cycle of activities to align efforts that ensure an organization can leverage its consolidated purchasing power to maximize value. Strategic sourcing can provide insight into spend management, training support needed to implement new technologies, and aid managers in developing operational guidelines.
The benefits of strategic sourcing are numerous. For hospital systems and wholesale distributors, they include improved supply management, reduced consumption volume and cost per unit, reduced importation and storage costs, and improved operating efficiency. These all contribute to increased savings. A strategic sourcing partnership benefits suppliers because it aids in negotiating long-term agreements with their distributors and enterprise buyers, driving repeat purchasing and financial stability. By engaging with enterprises on strategic sourcing, suppliers can facilitate decision-making by sharing valuable insight early in the process. Primarily, organizations want insight into product quality, financial risks, and the availability of tracking and support from the suppliers. A strategic sourcing framework on the supplier-side would help in cost reduction, on-time payments, and improved logistics.
“Benefits of strategic sourcing include improved supply management, reduced consumption volume and cost per unit, reduced importation and storage costs, and improved operating efficiency.”
Today we know that IoT technology enables more intelligent and efficient procurement decision-making in real-time. Such innovations, while impactful, still require efficient sourcing operations, such as that provided by strategic sourcing. The year 2020 saw an abrupt increase in demand for personal protective equipment (PPE), testing kits, and disinfectant products due to the COVID-19 pandemic. Healthcare procurement departments across the United States were stretched to their limits to keep up with the emergent problems brought about by COVID-19. The surge in demand for these medical products made prior strategic sourcing relationships crucial to ensure that healthcare organizations got priority access to supplies at their hour of greatest need. In the years to come, supply chain stakeholders will need to embrace strategic sourcing to secure their supply, maximize their savings and manage future purchasing risk in the event of a global health issue.
New operating relationships, including hundreds of mergers and acquisitions, have led to more complex organizational structures between affiliated hospital systems, hospitals, and medical practices. Before these complex alliances, each organization sourced medical products independently. Now, streamlined sourcing operations among multiple affiliated healthcare organizations have led to enhanced market positions while increasing sourcing leverage and purchasing power. There has also been an increase in the number of group purchasing organizations (GPOs) that further facilitate these relationships.
The healthcare industry continues to evolve at a rapid pace. The easing of regulations amid a year-long pandemic has helped supplier organizations across the United States cope with increasing demands. However, the new market dynamics could mean fewer opportunities for hospitals and other enterprise end-users to identify savings opportunities. To stay competitive in the new business environment, strategic sourcing initiatives that incorporate the needs of affiliated organizations may be necessary.
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