Assignment #1: Spend Analysis
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You are new to the purchasing department at Riverbend General Hospital (RGH). In your previous organization, you conducted a thorough review of spending by category and by supplier every year, looking for opportunities to aggregate spend, standardize products and reduce pricing. This process is new to RGH and you are keen to dig into the spend data to look for opportunities.
Using the charts in Module 2, describe:
1. How you would approach an analysis based on the information available in the charts
Focus on the largest spend categories
Analyse these large spend categories to achieve goals of aggregate spend, standardize product and reduce price. This will achieve the largest cost savings.
Analysing the large spend categories will allow you to discover opportunities to reduce costs or improve value
Must consider internal and external sourcing initiatives
Follow your basic steps to spend analysis: understand, refine, analyse, identify opportunity which will lead you to execute contracts, standardize product, and reduce price ultimately guiding to the largest cost savings.
2. Which areas you would address first to look for opportunities. Why?
Product Consolidation: Figure 1 and 2: analyse the high spend categories in med surg, professional services, and utilities.
Contract Consolidation: Figure 4: increase contract spend to standardize and reduce cost. Cost should decrease as you aggregate. This will also provide more ability to manage suppliers.
80/20 Spend: reduce cost by volume spend
Maverick Spending: Figure 3 and 4: identify what is being purchased within those high spend amount categories (0-10K) and also why there is so much being purchased off contract. Identify the products to reduce maverick spending, consolidate