Fairmarkit helps drive more competitive supply chain bids to Blue Cross Blue Shield of Kansas City and helps out during PPE shortage.
Technology is being utilized to better exploit supply chains in healthcare at a time when the challenges of navigating supply chains has never been more stressed.
At Blue Cross Blue Shield Kansas City (Blue KC), technology that optimizes tail spend—generally defined as the amount of money that an organization spends on purchases that make up approximately 80% of transactions, but only 20% of total spend volume—saw a return on its original investment in less than three months and average savings of about $2,000 per RFQ (request for quotation). All without hiring any additional employees.
The supply chain platform provided by Fairmarkit draws upon Fairmarkit's data set of supplier catalogs to automate supply change sourcing and to also help organizations such as Blue KC achieve greater use of diverse suppliers, such as minority-owned businesses, helping the organization with diversity compliance requirements, as well as risk mitigation through diversification of suppliers.
"Companies just don't throw resource and technology at tail spend, because it's not a leading tip of the spear," says Greg Tennyson, senior vice president of strategy and procurement at Fairmarkit. "What Blue KC recognized right away is there's an opportunity to drive value out of that 20% of the spend, to de-risk it, enhance supplier diversity, to scale their operations."
The Fairmarkit platform uses machine learning to interpret freeform text about suppliers and data drawn from its own customers to help purchasers obtain more competitive bids on tail spend, while diversifying their mix of suppliers, Tennyson says.
"We're still leaving the decision with the human element to decide how they want to eventually award the business," Tennyson says. "They're only deciding how to award the business based on criteria. But we are partnering with customers to create additional work streams, weighting criteria."
"In 2020, we issued 89 RFQs via the platform," says Jason Buck, Blue KC's director of strategic sourcing, procurement, and vendor management. "This volume was approximately $3.5 million in spend. Of that spend, Blue KC garnered 7.54% savings. Blue KC ended the 2020 year with the Fairmarkit platform ROI of over 500%."
This high ROI has allowed Blue KC's procurement team to scale, while continuing to bring cost savings, Buck adds.
"During the early stages of the pandemic, in March and April of 2020, we leveraged Fairmarkit to identify PPE [personal protective equipment]," Buck says. "Fairmarkit’s solution allowed us to quickly scan and source items that were of high demand—all while ensuring that we were obtaining market parity pricing."
Later in 2020, Blue KC also leveraged Fairmarkit to source required materials as the organization planned for re-entry back into its headquarters. Finding items such as hand sanitizer and disinfectant wipes were another high-demand product.
Jason Buck, Blue KC's director of strategic sourcing, procurement, and vendor management
Improving supplier diversity
So far, Fairmarkit's platform has impacted about $2 million in annual Blue KC spend. The platform is also being integrated this year into Blue KC's Workday procure-to-pay system to drive these results and reduce the amount of manual rekeying requirement by the procurement team, Buck says.
As for supplier diversity, "Blue KC is in the process of maturing its supplier diversity program and was intentional about improving Blue KC’s diversity in the tail spend category," Buck says. "Fairmarkit has enabled Blue KC to quickly enrich our Blue KC’s supplier profile data, as well as other prospective suppliers in their marketplace. Fairmarkit has also implemented features to assist Blue KC in including a diverse supplier in RFQs. The focus and features that Fairmarkit is implementing enable Blue KC to improve its supplier diversity program and ongoing oversight/reporting."
Now, Blue KC is investigating expanding use of the Fairmarkit platform beyond its core use procuring IT software, hardware, and subscription-related expenses outside of SG&A (selling, general and administrative) expenses, Buck adds.
Fairmarkit has proven its platform in a variety of non-healthcare industries, with customers such as British Petroleum in the U.K., as well as telecom and high-tech companies, Tennyson says.
Fairmarkit currently has no direct competition, filling a niche not currently filled by large enterprise resource planning (ERP) suppliers such as Coupa, SAP, and Oracle, Tennyson says.
Over time, Tennyson adds, the Fairmarkit platform is approaching the ability to perform fully autonomous sourcing, which will further optimize the savings and flexibility of the platform.
Editor's note: This story was updated on November 17, 2021.
“In 2020, we issued 89 RFQs via the platform. This volume was approximately $3.5 million in spend. Of that spend, Blue KC garnered 7.54% savings. Blue KC ended the 2020 year with the Fairmarkit platform ROI of over 500%.”
Jason Buck, director of strategic sourcing, procurement, and vendor management, Blue Cross Blue Shield of Kansas City
Scott Mace is a contributing writer for HealthLeaders.
Main savings involved procurement of IT software, hardware, and subscriptions.
Platform yielded an ROI of over 500% for Blue KC during 2020.
Manual rekeying of procurement documents is being eliminated by year's end through further integration.