CEO and CFO satisfaction with their materials management departments, while still relatively high, has started to slip, and CFOs are much more critical of their materials managers than are CEOs. This unfavorable view of materials management was a finding of the 1997 "Survey of CEO/CFO Satisfaction with and Expectations for Materials Management." The survey also showed deep CEO and CFO concern regarding materials management's supply expense reduction efforts - an unsurprising result given the intense focus many healthcare organizations have placed on cost-effectiveness in response to

increased competition, managed care, and government payment reductions.

Materials Management Functional Performance

Exhibit 1 shows CEO and CFO satisfaction with materials management functions over time. Overall satisfaction with materials management performance, while relatively high for both CEOs and CFOs, at 85 and 83 percent, respectively, has taken a downturn since 1994. CEOs were most critical of operating room inventory management, patient transportation, and courier services. CFO ratings of the performance of most individual systems or services within materials management's responsibilities also went down. Notable in CFO responses is virtually no improvement in overall satisfaction with supply expense reduction efforts and a slight decline in approval of institutionwide inventory management. CFOs also are more critical of patient transportation operations.

Exhibit 2 shows CEO and CFO satisfaction with individual facets of materials management performance. Oddly, CFOs indicate that they are both most and least satisfied with supply expense management and feel it is the area that needs the most improvement. Likewise, CEOs are most satisfied with materials managers' supply expense management performance, but also felt it was the area that needed the most improvement.

What is the significance of these apparently contradictory results? Clearly, CFOs strongly identify materials management with supply expense reduction; by emphasizing supply expense reduction in several questions related to materials management functional performance - even when answers to these questions contradict each other - CFOs may be attempting to communicate just how much effort they feel materials managers should concentrate in this area.

CFOs' concerns are understandable. Supply expense represents a healthcare organization's second largest expense component (cost of labor is the largest), but also one of the most manageable, particularly when linked with good inventory management. For example, if "just-incase" inventories are building up in user locations or elsewhere in the supply chain, healthcare organizations are spending more on supplies than they need to. Correspondingly, healthcare organizations can defer purchases of additional supplies by using up these excess on-hand inventories, thus substantially reducing supply expenses over the short term without sacrificing the quality of care they deliver.