How Culture Can Drive Warehouse Labor Cost Savings

By Peter SaviolaYour Bottom LineLeave a Comment

labor cost

The healthcare landscape is changing and doing so fast. In an effort to be more competitive and drive greater cost savings and control over supply chain, more IDNs and hospitals are considering self-distribution. We’ve coached and counseled healthcare systems across the country on this approach and have provided straight talk on the pros, cons and realities of this unique and massive undertaking.

This very topic was discussed in a recent panel I sat on for AHRMM. Whenever this subject comes up with customers or within the industry, it typically generates the following questions:

  • Do I have the volume to do this?
  • How do I select a site?
  • How do I handle purchasing and contracting?

This panel was no different. What did surprise me though was the next big topic to emerge: labor. We’re not talking about, “How do I find a person to run the warehouse?” but deeper questions that revolved around culture, empowerment and engagement.

For as much as we in supply chain keep our eye on cost, labor is a consistent wild card. 

This is especially true today. With more and more IDNs and facilities exploring  the self-distribution route, and as cost savings opportunities are becoming fewer and fewer, teams have to look deeper and harder for areas to save money. Employee turnover is expensive. Consider the cost of recruiting and training, and also that newer employees are not nearly as efficient as experienced ones. These considerations make labor management the next bucket of cost savings.

Culture Counts

When it comes to culture, it’s always easier to introduce, nurture and strengthen when you can do so among your peers and colleagues. But in a self-distribution setting, it can be a bit trickier. Here’s why.

Supply chain techs in a hospital setting have a career path or other career opportunities, like going into the lab, operating room, and becoming more clinical rather than material related. But if all of a sudden you have this team of 30 or so people at an offsite warehouse, there is a limited scope of what they see. They don’t wear scrubs, don’t move from a receiving dock to a nursing unit, don’t interact with patients or work with clinicians. They’re in an industrial setting and have a different background. They bring different skillsets and are on a different career path.

The only way to help minimize turnover, ease the reliance on temps and still have those same employees feel like they’re part of the culture and team is by knowing how to manage people. Culture must fit, no matter the setting.

If you don’t have the right people in the right path, that’s a critical failure point.

Creating a culture that promotes employee retention is a key consideration. Empowering employees to have a say in how their job is performed, with an understanding of how their role impacts their customer’s supply chain, is another important aspect to align for success. This type of approach can be very beneficial to employees, especially if it can be tied into performance-based incentive programs.  When properly implemented, performance-based incentive programs create a culture that engages employees, gives them a sense of empowerment and improves retention.

The financial analysis of one’s ability to self-distribute is all-encompassing. Today’s complex healthcare landscape is forcing new thinking and approaches to more than just volume, space and purchasing. Labor management is another big piece that’s moving into that analysis bucket. The personnel challenges, daily logistics, transportation – those are evolving every day and could change every day. That’s the dynamic piece IDNs and hospitals need to be able to understand: How do I manage the people doing the work and keep them engaged for long-term success?

How does culture fit into your labor cost saving plans?



About the Author
Peter Saviola

Peter Saviola

Peter Saviola serves as the vice president of sales operations for acute care sales at Medline, where he heads up the customer logistics team, providing consultative and logistical support to prime vendor distribution customers. Saviola holds a BS in Finance from the State University of New York at Buffalo and a Master’s from Darden School of Management.

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