Become the ultimate customer — 5 key points on how freight management can drive down costs

With healthcare undergoing tremendous transformations, ASCs are constantly seeking ways to drive down costs.

In a webinar hosted by Cardinal Health, Brad Wilson, national vice president of sales and service for Cardinal Health OptiFreight® Logistics, discussed how ASCs can yield significant savings utilizing a freight management program.

Specializing in cost savings and logistics optimization in healthcare, OptiFreight® Logistics serves more than 2,0001 ASCs around the country and has saved customers $200 million1 each year on freight-related expenses.

"The healthcare market is changing. Care is moving outside of hospitals into an acute setting, which drives procedures to the lowest cost of service," Mr. Wilson said. "The surgery center market has grown quite aggressively over the last few years."

With great growth comes great competition and surgery centers may need to implement certain cost savings measures to continue thriving in the healthcare market. A key way for centers to cut supply costs without compromising patient care is through a freight management program.

"ASCs are looking for ways to find savings," said Mr. Wilson. "Freight management allows the centers to find real cost savings without altering patient care and allowing the ASC operating team to focus on their core strengths."

How it works
A typical supply chain entails an ASC relaying a purchase order to the supplier who then fills the order and dispatches the order to the carrier. The carrier then picks up the order and delivers the product to the ASC. Then, the supplier will invoice the center for the product and for a freight cost line item.

In a freight management program the base cycle is the same, except the suppler invoices for a product without freight. The third party freight management company receives an invoice from the carrier, who then validates the invoice and presents it to the ASC on a weekly basis.

OptiFreight® Logistics found that ASCs engaging in a freight management program yield between 30 percent to 50 percent1 savings on freight-related expenses. Freight management programs can save ASCs an average of $17 per package.1

Case study
In 2013, Lafayette (La.) Surgical implemented a freight management program with OptiFreight® Logistics. The multispecialty surgery center has eight operating rooms, two procedure rooms and performs approximately 8,000 cases annually. During the implementation period, Lafayette Surgical signed an agreement and provided OptiFreight® Logistics a list of supplier account numbers. The program took three weeks to implement. OptiFreight® Logistics then contacted all the vendors, began tracking shipments for compliance and provided the center monthly reports for tracking expenses and savings.

Nearly a year later, Lafayette Surgical saved an average of $17.15 per package, or $32,657 in one year of freight savings.2 The center was able to save thousands with no impact on delivery time.

Supplier & vendor response
Many of the suppliers and vendors ASCs do business with are on board with freight management programs. "Suppliers are very responsive in these types of programs," Mr. Wilson said. "Freight management companies are operating under your control and direction. The supplier needs to respond because ASCs are the ultimate customer. Suppliers are motivated to perform and will abide by the freight managers' direction."

OptiFreight® Logistics, for example, has enrolled more than 7,0001 healthcare vendors in their freight management program. If a vendor does not initially participate in the program, they may begin working with the freight management company after facing pressure from ASCs, as they are the "ultimate customer."

The number of suppliers operating in a market influences how much savings a freight management company can provide. "The supplier pool is vital to success," said Mr. Wilson. "The speed at which a freight management company can implement a program is dependent on the supplier community." Essentially, more suppliers yield more savings opportunities. An ASC can also experience immediate savings if it rapidly implements a freight management program.

Big savings, little effort
The freight management program can save ASCs a large sum of money while requiring little participation on an ASC's end. Mr. Wilson referred to freight management as "a non-traumatic cost reduction that drives savings without cumbersome effort required by an ASC."

OptiFreight® Logistics will also provide reports detailing insights and benchmarks. If a vendor is charging a center a hefty fee for transporting a product overnight, the management company can monitor this pattern in the report, thus yielding more savings for the center. Best freight management programs also remind suppliers to use freight management, help with outbound shipments and large freight, as well as align with vendors on prices.

"Freight management can bring meaningful savings," Mr. Wilson said. "It is proven in the healthcare marketplace, in particular with surgery centers, that these programs work with limited exposure and limited resources required from the surgery center."

1 Based on shipments through OptiFreight® Logistics from January 1 through December 31, 2014. Individual savings may vary.
2 Based on shipments sent directly from suppliers—through OptiFreight® Logistics—to Lafayette Surgical Specialty Hospital from November 1, 2013 to October 31, 2014.

Listen to the webinar recording here or access the webinar slides here.

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