Andersen quantifies future potential of
eCommerce in the healthcare supply chain
Dallas, TX, June 27, 2001 - A study on the
future value of eCommerce in the healthcare
industry published today found that in a
fully mature environment, eCommerce could bring 2 to 10 percent
total benefit, or up to $6 billion in value, to participants
across the supply chain in the areas studied.
The study, conducted by Andersen's
pharmaceutical, biomedical and health services (PBH) supply
chain practice, measures both the tangible and intangible
values of eCommerce in the healthcare supply chain of the
future.
The study examined areas including product
procurement, order management, operational efficiency, invoice
processing, systems integration and contract management. The
potential 2 to10 percent total benefit is reached by combining
a potential 1 to 2 percent benefit for providers, and a 1
percent to 8 percent benefit for suppliers.
The major potential benefit through
eCommerce for providers involves eliminating overpayments and
reducing rework and manual processes. The benefit for suppliers
involves freeing sales representatives from spending their time
on administrative tasks, enabling them more time to sell,
providing access to real-time sales information allowing for
better management of fill-rates and operational processes, and
reducing the level of effort for labor intensive administrative
processes including contracts, rebates and eligibility.
The study combines an activity-based
costing method and interview process to estimate future benefit
potential. On-site analyses were conducted at multiple supply
chain sites, including providers, direct and indirect
manufacturers, distributors and pharmacy wholesalers. Key
findings of the study include:
• In medical and surgical supplies,
providers overpay suppliers from 2 percent to 7 percent
based on the available contract price;
• Different facilities on the same
health system pay a different price 40 percent of the time,
while price differentials are, on average,
in the 1 percent to 2 percent range;
• Of the eligible provider
transactions that are or could be conducted through eCommerce,
31
percent are actually conducted through
eCommerce;
• For manufacturers, sales
representatives spend an estimated 25 to 49 percent of their
time on administrative issues that detract from actual selling
efforts. Only 14 percent of
medical surgical distributors' sales rep
time is spent selling products or educating customers;
• Among hospitals, an estimated 40
percent of a purchaser's time and 68 percent of an accounts
payable worker's time is spent on manual processing and
re-work. And, 52 percent of all re-work could be eliminated
through eCommerce;
• Real-time visibility of sales
transactions would allow suppliers to better fill orders and
manage operations.
"This study quantifies the future
state of the healthcare industry through eCommerce," said
Ramona Lacy, partner with Andersen's PBH supply chain practice
in the southwest region of the U.S. "It will be a roadmap
for all parties involved in the supply chain."
Andersen's PBH supply chain practice helps
organizations maximize their healthcare operations through
eCommerce by assessing potential costs and benefits, analyzing
options available on the market, and implementing solutions.
Andersen helps organizations reduce costs through traditional
supply chain optimization including activity-based costing,
supply chain operational improvement, Enterprise Resource
Planning (ERP) systems, and strategic sourcing and consumption
reduction.
The study, which began in November 2000,
was sponsored by Novation, LLC and Neoforma.com, Inc. The
methodology and study findings were independently reviewed by
Charles T. Horngren from Stanford University and V.G. Narayanan
with Harvard University.
Andersen believes that in order for the
value of e-commerce to be achieved the healthcare supply chain
as a whole must accept e-commerce on a mass scale and new
technology must be deployed. Andersen does not endorse any
specific solution or eCommerce product.
For a copy of The Value of eCommerce study,
go to www.andersen.com/ValueReport.
About Andersen
Andersen is a global leader in professional
services. It provides integrated solutions that draw on diverse
and deep competencies in consulting, assurance, tax, corporate
finance, and in some countries, legal services. Andersen
employs 85,000 people in 84 countries. Andersen is frequently
rated among the best places to work by leading publications
around the world. It is also consistently ranked first in
client satisfaction in independent surveys. Andersen has
enjoyed uninterrupted growth since its founding in 1913. Its
2000 revenues totaled US$8.4 billion. Andersen refers to the
brand identity adopted by member firms of the Andersen global
client service network. Learn more at www.andersen.com.
Contact:
Laura Nell Fry
214.231.5219
laura.n.fry@us.andersen.com
