by Caleb Tiam-Lee

Effective spend management is a tough journey to achieve in every medical organization. Whether you are a buyer from a hospital, laboratory or clinic or a medical supplier trying to cope up with the ongoing economic inflation to keep your business alive, most likely you want to improve how you manage your expenditures.  

Proper management of funds allows for the maximum value to be attained while purchasing for medical goods. In order to achieve the goal of decreasing costs, mitigating financial risk and improving supplier relationships should maintain its balance at the same time. As the procurement process plays an integral role in ensuring the supply of key medical products, understanding how to properly manage costs would lower potential losses, while also improving patient outcomes as well. 

Spend Management
Savings versus Quality healthcare

Current Situation 

Due to certain mistakes and errors in the procurement process, money that could have been used to improve other aspects of an organization is wasted on the mishaps that occurred earlier on. Until 2003, no procurement law is the Philippines was put into place, leading to millions of pesos being lost due to rampant corruption. 

Despite the changes that have occurred since then, the procurement process has still so far from optimal, with many changes needed to take place to help improve the supply chain of these important medical products, goods, and services. 

Spend Management Process 

The spend management process involves an examination of all expenses and costs that are related to the company. Though tedious and overwhelming, this often leads to the best outcomes for organizations. To greatly simplify things, the procedure often looks into three main ideas: Identification, Analysis, and Strategizing; all of which play an important role.  

In identification – we look into the sources of expenditure, which include employee salaries, rent, utilities, licenses, advertising and marketing, and insurance to name a few. By using these information, organizations are able to centralize all this data into a repository, aimed at allowing for people to analyze spending throughout a certain period of time. 

As a result, this leads to the analysis of the data, which involves the verification and categorization of data to be used in spending. Depending on the organization’s objectives and operations, calculating Return of Investment (ROI) helps businesses benchmark certain employee or outsourcing costs. 

And with this information, strategizing and forecasting events in the future becomes more accurate as well. Hence, this leads to better spending practices for the benefit of the organization. 

Key Performance Indicators 

To be able to properly analyze the effectiveness of spending in the procurement process, metrics and statistics are utilized to be able to provide proper feedback. As a result, groups nowadays utilize five different indicators in finding ways to procurement, namely: Cost savings, Spend under management, Supplier performance, Operational KPIs, Employee related KPIs.  

In visualizing these indicators throughout the procurement process, it allows for a more detailed and complete picture of the money that is moving through a certain organization. As a result, this leads to better informed decisions due to the deep dive taken into looking at one’s sourcing activities. 

Benefits & Advantages 

Through this, organizations are able to identify savings opportunities, manage supplier risk, and streamline procurement activities. Because of this new found data, greater transparency into overall expenses and costs is seen, allowing for better visibility and actionable spend intelligence. 

In addition to this, this allows for proper evaluation in which evaluation into risks and supplier performance can take place- improving partnerships and preventing supply chain disruptions in procurement as well. 

All in all, the presence of these metrics and indicators in spending management will create better strategic planning for organizations, leading to a significant reduction in cycle time for creating reports and ad-hoc analyses, which reduces labor costs or frees up time for other work. 

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