Supply chain tip of the day: Reducing supply fee structures

Reducing fee structures associated with supply chain expenses is an often overlooked, yet effective strategy to lowering costs, according to Tom Fox, a managing director at healthcare consulting firm Nova Strategies.

"An average blended fee rate of 7 to 13 percent — when all product distribution and freight costs are considered — can be reduced to less than 3 percent using this method," he says.

Mr. Fox shared the following tip with Becker's Hospital Review.

"Examining each product group to determine the approach that will achieve the most favorable fee structure and then methodically working with vendors, distributors and users to negotiate can help accomplish these reductions. For instance, some distributed medical surgical products qualify for pharmaceutical distribution, which would enable supply chain managers to move them from a medical/surgical distributor fee structure of 0 to 3 percent into a pharmaceutical 'cost minus' environment to produce significant savings.

"Furthermore, distributed non-contract items can be reduced from an 8 to 12 percent fee to a 3 to 5 percent structure with effective vendor and distributor contract negotiations. Some medical surgical products can also be categorized as distributor-labeled products, reducing the fee from 3 percent to zero. Reducing these types of fees structures, along with others, can significantly lower supply chain costs."

If you would like to share a tip, please email Mackenzie Bean at

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