As we get ready for a new year, it’s time for top ten lists and setting new goals. In hospital purchasing, those new goals are best tracked by key performance indicators (KPIs).
But unless you’re using the right KPIs, you won’t be setting your hospital up for success in the new year. Read on to learn the top ten KPIs you should be thinking about, and how to maximize their use.
1. Total Purchase Orders Processed
For anyone in purchasing, the number of purchase orders processed is an obvious measure of operational volume. However, to make total POs a valuable KPI, you need to look further than just the raw numbers. Total PO’s processed should also be measured as a percent of EDI, in order to see where you might be experiencing gaps in efficiency. There are also a few subsets you should include, such as rushed POs as a percent of total POs, and total orders where freight was allowed. Examining these numbers will allow you to see where you might be overspending and adjust accordingly for better savings.
2. Total Purchase Orders Processed Per Buyer
In addition to looking at purchase orders overall, POs should be broken down by buyer to determine individual productivity. Ideally, in a larger hospital you should analyze both individual and departmental averages. If these get posted for all team members to view, it’s recommend to show total POs processed by group, such as medical/surgical and capital - this allows for more accurate comparison of targets, such as turnaround time, which can differ greatly between groups.
3. Total Lines Processed Per Buyer
Purchase orders often vary greatly in size, so it’s important to look not just at PO’s processed but at total lines processed as well. This allows you to get a closer look at productivity. IT’s ideal to group these results, especially if they are posted.
4. Savings Achieved
You can’t celebrate savings unless you’re measuring them! To get an accurate picture of savings, you should use two specific KPIs: cost savings achieved, and cost avoidance achieved. The combination of these will allow you to create a multidimensional cost analysis, and can be useful in tracking progress over time, as well as identifying opportunities for additional savings.
5. Pipeline Opportunities Identified
Pipelines can streamline purchasing and are easy ways to achieve savings. Measuring savings opportunities identified are an obvious KPI, but another important indicator is the savings opportunities your facility did not pursue. Measuring these “missed opportunities” can provide roadmaps to future savings.
6. Purchasing Accuracy
Purchasing incorrect items leads to both time and money wasted. To identify and minimize costly mistakes, you should be tracking purchasing accuracy. This requires a system with the ability to track invoice discrepancies. If your facility isn’t yet set up with this capability, creating a system to assess invoice discrepancies should be a priority this year.
7. Orders Delivered On Time
An important role of purchasing departments is ensuring operational efficiency, which means delivering orders as they are needed in real time. Tracking orders delivered on time assumes that your system calculates a due date when requests or POs are placed. If you aren’t generating these due dates, this is another important adjustment to make in the new year.
8. Requisition Turnaround Time
Similar to tracking orders delivered on time, requisition turnaround time is an important measure of efficiency. Time from Requisition to PO to Receiving can help identify where bottlenecks occur and to identify areas to improve internal processes, and can also help identify vendors who might not be keeping up to speed. Collecting the data on turnaround time can also become a useful negotiating tool when working with vendors.
9. Contract Compliance
Contract compliance takes several different forms in purchasing. First, you should make sure your department is buying primarily from vendors that are under contract - an easy KPI is percent of POs from contracted vendors. You should also be making sure that vendors are following contracts with your facility. This can be more difficult to assess, especially if your department isn’t large enough to conduct an internal review. This is where outside consulting companies can often provide the best assistance.
10. Customer Satisfaction/End User Survey Scores
No purchasing department works in isolation, so surveying end users to another important way to assess your department. Ideally, all purchasing system users should be surveyed several times a year. This can demonstrate commitment to improvement in purchasing, but can also help to identify issues in your system that might otherwise go undetected.
George Malik, the CEO of Quality First Solutions, has been in the healthcare industry for the past 30 years and has saved millions for hospitals nationwide.
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