Getting It Right
Utilization Management: The Devil is in the Details The Major Contributor to Cost is in Your In-Use (or Consumption) Cost!
If you think you have nailed down all of your supply chain expenses with your GPO and local contracts and that now you can lay back and enjoy the view from your window, you have forgotten that price only represents a very small percentage of the Total Lifecycle Cost of the commodities you buy in the real world of supply chain management. The major contributor to your Total Lifecycle Cost is in your inuse (or consumption) cost!
The Law of Diminishing Returns Worse yet, the more time and energy you and your staff spend chasing after price savings, the higher your labor cost will be to achieve the same or lower return on investment as prior periods. In the end, it becomes cost prohibitive to continue to chase after this small return on your investment. On the other hand, if you and your staff invest the same time and energy to manage and control your in-use cost, you can save 7% to 15% on your total supply budget by removing waste and inefficiencies from your supply streams.
Volume 7/Issue 2
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