Procurement helps American Red Cross survive

10 May 2012

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10 May 2012 | Rebecca Ellinor in Baltimore, US

Centralising procurement at the American Red Cross helped the non-profit organisation save more than $40 million (£25 million) in two years, its CEO has said.

Gail McGovern, the organisation’s president and CEO, was one of the keynote speakers at the Institute for Supply Management's 97th annual conference in Baltimore in the US. Describing the situation three years ago, she said the organisation was faced with a $209 million (£129 million) operating deficit and slowing donations. “It wasn’t just about transformation, it was about survival,” she said.

The American Red Cross is relied upon for collecting and delivering about 40 per cent of the nation’s blood supply, carries out services for the armed forces, conducts life-saving training and responds to around 70,000 US and international disasters every year.

In late 2009, it set about a transformation designed around three principles, simplicity, synergy and savings. Centralising procurement was a major part of that change and it has led to significant improvements to purchasing for both the organisation’s biomedical and disaster relief efforts. Paying tribute to the organisation’s “fabulous” CPO, Jill Bossi, McGovern, said: “Before 2009 there was no centrally-led supply chain organisation, now there is and Jill leads it. Centralised procurement has made a big difference, it’s even resulted in a modest surplus in the past two fiscal years and I expect it to this year as well.”

Restructuring the supply chain, analysing where it holds critical stock (according to the likelihood of a disaster in that area), a single inventory management system, using more US-made products, consolidation and a reduction in the different types of products held, all helped reduce costs and make the organisation more efficient.

McGovern said all these changes happened at a time when its resources were severely tested, responding to disasters affecting 46 US states and territories in 2011 alone. She said her organisation was working hard to spend money wisely and 91 per cent of donations is spent on the services it provides.

McGovern stressed the importance of preparedness plans and highlighted examples where knowing what to do when disaster struck had saved people’s lives. She said the American Red Cross’ free ‘Ready Rating’ (readyrating.org) tool had been updated and could be used by businesses to carry out a self-assessment and get feedback on what they needed to put in place.

The non-profit organisation picked up the Institute for Supply Management (ISM) and Michigan State University’s Award for Excellence in Supply Management in the ‘structure' category for its work.

 

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