Cost management in the Healthcare Supply Chain

The pressure on costs is increasing steadily, not only in the care centres, but also at the supplier side. In order to successfully launch effective cost-reducing initiatives in the healthcare sector, a profound knowledge of these cost factors and an in-depth overview of the cost structure are of paramount importance.

The goal of this research project is to map the total cost in the healthcare chain – the total supply chain cost (TSCC). It strives to make all parties in this chain aware of the importance of detailed cost knowledge. In the end, being familiar with your in-depth cost elements is a prerequisite for having a clear and unbiased overview of the profitability of customers, suppliers and products.

The results show that, overall, the healthcare sector’s knowledge of the total supply chain cost is rather limited. Distributors, logistic service providers and manufacturers focus primarily on the purchase, standard distribution and production price. Strikingly less attention is paid to costs related to customer service – the so-called cost to serve (CTS). The care centres, at the other end of the chain, focus practically solely on the purchasing price. In doing so, they attach very limited importance to the array of costs that arise internally after the purchase – their total cost of ownership (TCO).

The research results deal with the maturity of cost knowledge at 4 different stages in the healthcare supply chain: manufacturers, distributors, logistic service providers and care centres. Questions such as “which types of costs are known best in your organisation, and for which products?” and “is cost-minimising behaviour stimulated in your sales processes?” are among the items discussed.

Cost management in the Healthcare Supply Chain

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Equis Association of MBAs AACSB Financial Times Economist Intelligence Unit