Healthcare Purchasing News asked logistics executives to share any success stories of cost effectiveness by customers managing their freight and shipping operations well.
“One of our customers consolidated their total outbound transportation delivery network into a single, well-planned fleet, and they now have drivers that arrive at hospitals or clinics and provide up to 25 transportation services in a single visit. When these services were planned at the departmental level that would have meant there were an additional 24 drivers on the road, one for each service. As you can imagine that is a very significant reduction in cost.
“Instead of 25 [drivers], they have one, and one truck coming to the clinic and performing 25 services. This is obviously an oversimplification since the dwell time at the stop means that one driver takes a lot longer to service the clinic but the savings are still very significant. We have performed ROI analysis on a health system’s network and the savings are often in the 60+ percent range if the health system takes on all the transportation to a centralized plan. Usually we see a 30 percent type of savings over their transportation budget since the efficiencies come slowly and change has to be gradual.”
Bill Denbigh, Director, Business Development and Marketing, TECSYS
“Several of MedSpeed’s customers have taken a creative approach to managing non-acute freight spend. Leveraging the fully integrated MedSpeed intra-company logistics networks we have built for each of them, these customers connected MedSpeed with their distributors and encourage collaboration. The result: Instead of costly freight shipping of supplies to each non-acute facility, the distributors drop ship all supplies to the MedSpeed hub. The MedSpeed team then sorts the items and sends them out on routes that are already visiting each facility to pick up lab specimens, drop of pharmaceuticals and more. By integrating the distributor supply movements with these deliveries, the customer is saving significant time and expense.”
Jake Crampton, Founder and CEO, MedSpeed LLC
“As a healthcare solutions company that provides a freight management solution, TRIOSE helps our healthcare partners look at their total freight spend whether it is impactable by our program or not. For one of our largest customers we uncovered more than just savings on what they shipped with us but we also evaluated all their Suppliers that would not participate in a freight management program. Armed with this information the Supply Chain group was able to educate the buying and contracting teams on the importance of considering shipping cost when negotiating agreements. A buyer might save a few dollars on an item but give up more by agreeing to restrictive shipping terms. Ultimately when freight is hidden and included it always costs more. We work with our customers to make sure they understand the total landed cost at the time they contract for the goods.”
Gerry Romanelli, Chief Commercial Officer, TRIOSE Inc.
“VPL is in the process of converting one of the largest health systems in the country from a fully managed freight program to a self-management program using our new cloud based self-management technology platform, “VPL Surpass.” After completing this transition, this health system will realize a first-year incremental savings exceeding $3 million.
“Our first customer is one of the largest health systems in the country and has been utilizing a legacy full-service company for just over eight years. The customer has been mostly pleased with its freight management company, although it had been quite some time since it had seen year-over-year growth in incremental savings. This system takes a rather sophisticated approach to supply chain optimization and because of this is always looking for new ways to fund its various initiatives. With several upcoming projects directly related to supply chain logistics, they began to review all of their freight spending looking for ways to repurpose some of those dollars. As part of this exercise, they wanted to calculate what their legacy freight management company was charging for their services — no easy task since the management fees are hidden in the company’s margins.
“After looking at millions of shipping records and conducting extensive research on carrier pricing patterns, they could calculate a number… $3.39. Their freight management company was making a profit of $3.39 on every shipment they managed for this customer. Now that number doesn’t sound like all that much by itself but this health system had 850,000 managed shipments that year alone. That equates to $2.8 million paid in management fees. The customer wanted to repurpose most of these funds, so a decision was made to transition to a self-managed program.
“Soon they began to realize that was easier said than done. Almost a full year later they were no closer to setting up their self-managed program than the day they made the decision. They quickly realized the complexities involved with managing thousands of vendors, shipping thousands of shipments each week into hospitals located all over the country. They also discovered they had no way to process an average of 16,000 carrier shipping charges each week. They first looked for a comprehensive solution. There wasn’t one. Then they looked for a way to cobble a few disparate solutions together into a cohesive system. That wouldn’t work with their ERP and accounting systems. They considered building something from scratch but didn’t have the right experience. They were quickly running out of options.
“Shortly after we began development on VPL Surpass, we met with this customer to hear more about its requirements. They had parts of a solution but nothing that would function together as a system. Once we properly understood their requirements, we were confident VPL Surpass would be a perfect solution for them. In the nine months since then, and after many more meetings with their various functional areas, it was agreed that they would be the very first customer for VPL Surpass. The experiences of this customer are hardly unique. There are a growing number of health systems seeking a solution for self-management of freight.
“The inbound freight management model has matured to the point where health systems are now looking for ways to effectively eliminate the need to utilize a third-party freight program. These systems would prefer to transition their freight savings initiatives to an in-house, self-managed model that they have complete control over. The challenge facing these health systems is acquiring the subject matter expertise required to design, implement, staff and manage such a program.”
Don Carroll, Vice President, Business Development, Vantage Point Logistics Inc.
Rick Dana Barlow | Senior Editor
Rick Dana Barlow is Senior Editor for Healthcare Purchasing News, an Endeavor Business Media publication. He can be reached at [email protected].
