Combating economic downturn with tail spend management

According to a recent report from J.P. Morgan, the U.S. economy is likely to slow further this year. Healthcare leaders are preparing for what could be a worst financial year they have experienced in decades. They face the reality that healthcare is no longer immune to inflation. In a recent poll by the Deloitte Center for Health Solutions, 76% of our health system respondents said that inflation and affordability issues would significantly impact their 2023 strategy. Many healthcare organizations still feel the talent emergency of burnout and staff shortages, along with revenue shortfalls tied to the COVID-19 crisis, all while supply costs continue to rise due to inflation.

When the economy is experiencing a downturn and cost-cutting becomes a high priority, the best savings opportunities lie in non-contract spend, also known as tail spend. In procurement, 80% of total spend is made with only 20% of vendors. The remaining 20% of the spend – consisting of high-volume, low-value transactions – uses 80% of the vendors. That 80% represents a significant number of transactions by a large number of vendors and creates a long unmanageable tail that keeps growing. More purchases occur outside of the centralized procurement team or traditional supply chain channels. Visibility wanes and tracking purchases becomes even more challenging. To weather the coming economic storm, healthcare leaders must tame tail spend as part of their cost-optimization strategy.  

Adopting a closed-loop approach

To efficiently manage tail spend, healthcare organizations must adopt a closed-loop approach that combines two efforts: reactively controlling spend, and proactively analyzing and identifying spend patterns to uncover savings opportunities. Spend control and cost optimization focuses on gaining visibility into all spend and suppliers. Procurement leaders need to know what’s happening within the organization, in real-time. Leaders require ease and efficiency, without sacrificing control. They seek tools and insights to prioritize operations and source quickly on behalf of their organization.

Spend visibility is a key procurement benefit for Amazon Business Prime customers. It helps healthcare organizations gain procurement insights by department category and supplier to fine tune policies and manage future spend in an all-inclusive dashboard. Spend visibility also helps to plan goals and budgets – you can quickly see what your employees are buying and customize reports to meet your needs, even quantifying diversity or local supplier spend. Another benefit is improving your organization’s end-to-end experience, from your procurement staff to your ad-hoc buyers.

The power of wide selection and a digital storefront

Many disruptive events have exposed the weakness and pitfalls of the healthcare industry’s traditional supply chain structure. Back orders and limitations on necessities, including important medical supplies, became a daily problem.

The digital storefront alleviates these challenges. The ability to access an e-commerce site – with its ability to quickly look up and compare alternatives, see a real-time price and inventory, and review the quality rating based upon buyer feedback – is greatly appreciated in the healthcare industry. Amazon Business’ buying process is public and transparent – a stark contrast the time it takes to negotiate an RFP, locking yourself to one or two suppliers within the traditional supply chain process. With a digital storefront, supplier screening is much faster and easier. The wide selection provides options for cost reduction. With competitive pricing from hundreds of thousands of sellers at your fingertips, you can increase savings on larger quantities of select items, all without vendor contracts.

With Amazon Business Prime, buyers can receive FREE shipping on eligible items. By consolidating select items and receiving orders on a predictable schedule – or shipping orders to multiple locations with Personalized Delivery Options – you greatly increase your receiving team’s efficiency. Eligible products are available in Frustration-Free Packaging made with properly-fitting, recyclable materials, which reduces shipping damage, while also being easier to open.

Democratizing the buying process

Healthcare procurement is complex and time-consuming. For example, when nurses need to shop for a medical supply, they need to go into an ERP system to make a special request by listing all the details. Then, the procurement team goes into the ERP system, sees the request, looks it up (double work), authorizes it, and purchases the supply. The buying process is complex and burdensome on a workforce that's already understaffed. With a streamlined buying process, nurses and other highly-trained professionals can spend more of their time on what matters most: patient care.

Through Amazon Business, administrators can place predefined controls – including preferred products or suppliers and category restrictions – to save time for everyone. This digitally managed alternative takes the mystery out of shopping for work by answering the question, what am I allowed to buy?
In healthcare, control will always be paramount, as it is imperative to the health and safety of both employees and patients. With Amazon Business Prime, procurement leaders can implement Guided Buying policies to:

• Direct staff to preferred products or suppliers
• Identify categories from which employees should not purchase
• Add customized messaging to communicate why products are preferred or restricted, such as restricted and blocked products by UNISPEC code

Amazon Business for Healthcare aims to help healthcare leaders reshape their procurement with cost and time savings, greater productivity, and insightful purchasing analytics. With Smart Business Buying, we improve the way healthcare organizations source and purchase products, simplify contract administration, and make supply chains more efficient.