Purchasing practices are a crucial component of an organization’s success, yet in the healthcare industry, practices are immature and often overlooked in a healthcare organization’s strategic vision (Nachtmann and Pohl, 2009). In 2014, total healthcare expenditures in the United States exceeded $3.0 trillion (Centers for Medicare & Medicaid Services, 2015) and since 1940, the annual increase in healthcare expenditures has remained at roughly 4% per year with no indication that the rate will decrease in the future (Gibson, 1980; Newhouse, 1993; Sampson et al., 2015). Many healthcare facilities do not employ proven purchasing practices used in other industries to increase efficiency while decreasing total expenditures (Schneller and Smeltzer, 2006). One aspect of purchasing is strategic sourcing, where buyers form relationships with suppliers that result in cost savings through logistical and purchasing efficiencies. Due in part to the large number of hospitals that outsource some or all of the purchasing function (Burns and Lee, 2008; Carey and Dor, 2007; Makowski and Clauß, ۲۰۱۱), there is a lack of research focusing on the role of strategic sourcing of commodities in healthcare. Very few studies examine the role of acquisition in a healthcare facility’s strategic vision or the use of strategic sourcing as a method to expand sustainable purchasing practices. Current healthcare literature explores sustainable practices as they relate to patient treatment, a healthcare facility’s primary function (Brandão et al., 2012; Russo, 2014). Sustainability studies of efforts in industries outside of healthcare examine the effects of sustainable practices, but do not propose strategies to effectively target suppliers that allow the organization to meet sustainability initiatives, either environmental or social.

The strategic sourcing process begins by analyzing historical spend. The spend analysis is a critical tool used to identify items appropriate for strategic purchasing or leveraged purchasing, and has been used to generate cost savings for organizations of up to 25% (Pandit and Marmanis, 2008). The process begins with collecting historical spend data, sometimes from multiple sources. The data is scrubbed, classi- fied, and analyzed to select items or services that are best suited to meet an organization’s strategic purchasing goals (Limberakis, 2012). A spend analysis allows the organization to classify the types of spending and prioritize sourcing initiatives; however, even when an organization is using a framework, oftentimes organizations will ignore spend analysis data and begin strategically sourcing items based on preference (Cox, 2015).

The spend analysis process was described in detail in an Aberdeen Group whitepaper in 2004 (Aberdeen Group, 2004). Early applications of strategic sourcing encouraged companies to use the spend analysis process to identify immediate opportunities, instances where a single supplier was utilized for multiple purchases, and the potential for purchase consolidation existed (Greenfield, 2005). Some spend analyses evolved to include a compliance metric to ensure purchases were made in accordance with existing organization purchasing edicts, such as using specified contracts or suppliers (Saha, 2007). Expanding on this concept, authors from IBM described how cluster analysis could be used to not only identify non-compliance within a purchasing department, but allow managers to identify which departments and purchasing categories would provide the greatest return on investment if total compliance was observed (Chowdhary et al., 2011). In 2012, Limberakis published a trade article that provided a slightly modified version of the process described by the Aberdeen Group (2004), adding a first and last step to define the scope of the analysis and a path forward using the results of the analysis. Providers of commercial spend analysis solutions have embraced the need to measure compliance, but generally have not changed the process of analyzing spend described by the Aberdeen Group in 2004 (Maurides, 2015; ProcurePort eSourcing OnDemand, 2014).