Supply chain tip of the day: Use precision benchmarking for purchased services

Product benchmarking can be based on simple ratios related to volume, price and geography. However, in purchased services, ratio benchmarks provide no insight into the quality of a service provided, according to Chris Gormley, CEO of Guilford, Conn.-based Medpricer.

He shared the following tip with Becker's Hospital Review.

"In purchased services, ratio benchmarking will give you directional information and help you chart a path to cost savings. But if you want to save real dollars, you need to use precision benchmarking to minimize risk and equip yourself with the information you need for negotiating the best possible price and value with your vendors.

Precision benchmarking should take into account the multiple variables and nuances associated with each category of purchased services spend. These include:

  • Geography
  • Service volume and frequency
  • Service levels
  • Unique category considerations
  • Vendor standardization potential
  • Actual competitive bidding results

If you are not taking all factors into account when benchmarking purchased services, you will leave money on the table. Can you afford to do that?"

If you would like to submit a supply chain tip, please email Mackenzie Bean at

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