- Develop partnerships with the local business community
- Leverage long-term contracts with distributors, aggregators, and contractors to achieve procurement goals
Develop partnerships with the local business community
Many of the strategies already described here hinge on partnerships with the local business community. Understanding the capacity of local vendors and connecting to local, diverse firms necessarily involves engaging with local stakeholders. It is important to build relationships with stakeholders and involve them in the design process of a local, diverse purchasing initiative. Every health system interviewed for this toolkit referenced partnerships with organizations in the local business community as central features of their success.
A particularly important subset of organizations are local chapters of supplier diversity organizations, such as the National Minority Supplier Diversity Council, The Women’s Business Enterprise National Council, or their regional, state, and county equivalents. These organizations can also help inform vendors about available certifications and their requirements. Often, these organizations are willing to share their vendor databases and can connect supply chain managers to qualified firms.
Local chambers of commerce, business development associations, and county or city government can also be important partners. One strategy to encourage relationship building is to have the person managing the program participate on the board of one or more of these organizations. This allows them to communicate supply chain needs, connect directly with potential vendors, and build trust with the local business community.1Todd Gray, interview by David Zuckerman and Katie Parker, January 25, 2016; Marian Nimon, interview by David Zuckerman and Katie Parker, February 11, 2016; Ken Grant, interview by David Zuckerman and Katie Parker, Baltimore, MD, February 5, 2016; Indria Hollingsworth-Thomas, interview by David Zuckerman and Katie Parker, January 21, 2016.
Leverage long-term contracts with distributors, aggregators, and contractors to achieve procurement goals
Supply chain integrators and GPOs are often seen as barriers to local procurement, as they typically serve to consolidate purchasing. However, these organizations depend on hospital contracts and can be held accountable to institutional goals. Steve Standley described this philosophy and how it plays out at University Hospitals in Cleveland, Ohio: “We say at the onset with all vendors, ‘we really want a different kind of relationship with you. We want a true vendor partnership, and, to us, that’s defined in this way. We want you to create jobs in our community. We’re going to commit to you long-term if you do that.’”2Steve Standley, interview by Ted Howard, October 2, 2016.
It is in the interest of these organizations, as well as large vendors who subcontract, to secure long-term business with health systems. Leveraging the promise of contract extensions and continuation can be a key lever for encouraging local and diverse purchasing.
This strategy has been especially effective with distribution companies. Duke University Medical Center, in Durham, North Carolina, negotiated with their distributor, Georgia Pacific: “They didn’t have any minority distributors in the southeast, so we told them if they wanted to keep doing business with us, they would have to. So we helped get [the minority-owned distribution] company set up. This vendor was doing printing materials, but had trucks and a distribution center,” explained Duke’s director of procurement programs, Mary Crawford.3Mary Crawford, interview by David Zuckerman and Katie Parker, January 21, 2016.
Johns Hopkins Hospital and Health System, in Baltimore, Maryland, also used this strategy several years ago requesting that their paper company go through a local distributor: “We said to them: ‘we want that paper to come through this local company.’ They said no. We said again, ‘We want this paper to come through this company.’ After the third no, we switched paper companies.” Johns Hopkins then built the local distributor into the next contracting process.4Kenneth Grant, interview by David Zuckerman and Katie Parker, Baltimore, MD, February 5, 2016.
Other institutions have engaged in these negotiations with their GPOs. Calvin Wright, the former chief resource officer at Mercy Health, of Cincinnati, Ohio, described how their GPO, Premier, agreed to direct more purchasing to local and regional vendors. “I said, I don’t want to hear about what you’re doing in other countries, but in our neighborhood,” he explained, and established that Mercy’s priority was not in sourcing products from overseas, but building that capacity locally. “GPOs have a lot of leverage,” Wright explained.
This strategy also works for existing large vendors. “If you’re under contract, then launch a wave of engaging current vendors to commit to open up jobs and facilities in their market, in return for extended long-term contracts,” stressed Standley. Given that most contracts are three-to-five years, this gives the health system added leverage, since businesses like to plan beyond that time frame. It is important to note that contracts can ultimately be renegotiated at any time, and it is possible to implement some of these changes before a contract is up.
Core elements of localizing your spend
- Shift from lowest price to best value
- Establish local/diverse spending goals
- Embed goals into RFPs & contracting processes
- Conduct outreach & education ...
Best practices for establishing a buy-local initiative
- Focus on “moveable spend”
- Leverage upcoming projects
- Align with other initiatives
- Unbundle contracts
- Create a full-time coor...
|↑1||Todd Gray, interview by David Zuckerman and Katie Parker, January 25, 2016; Marian Nimon, interview by David Zuckerman and Katie Parker, February 11, 2016; Ken Grant, interview by David Zuckerman and Katie Parker, Baltimore, MD, February 5, 2016; Indria Hollingsworth-Thomas, interview by David Zuckerman and Katie Parker, January 21, 2016.|
|↑2||Steve Standley, interview by Ted Howard, October 2, 2016.|
|↑3||Mary Crawford, interview by David Zuckerman and Katie Parker, January 21, 2016.|
|↑4||Kenneth Grant, interview by David Zuckerman and Katie Parker, Baltimore, MD, February 5, 2016.|