If anything has tested the ingenuity and resolve of procurement managers nation-wide, it’s been the task of procuring nitrile gloves in a global pandemic.
Hampered by raw material shortages, limited by production capability, unsteady supply chains have forced price increases. For procurement managers seeking to deliver on cost metrics, this vital supply is undoubtedly the largest procurement headache of 2021.
While bulk buying directly from importers can provide unit-cost savings, these savings are reduced by the cost of last-mile logistics. Line-price analysis overlooks the ‘true cost’ of moving the product from central depots to glove dispensers mounted on the walls of your facilities.
Are you falling behind high-performing procurement managers by limiting your cost analysis to line price? Does your facility have higher labour costs in exchange for a lower line price?
Time costs seem small, but increasing operational efficiency and understanding service delivery costs is becoming even more important:
…it is an understanding of [service] delivery costs that will best prepare providers for changes implemented by the government. Providers will be under pressure to do more with the same or less resources, and efficient operations will become the name of the game.
PwC Healthcare
The Total Cost of Hygiene Consumables
This post is the seventh in our series on the cost of hygiene consumables. Our other posts focus on:
The case studies in these posts have been collected over our 20 years of work with the aged care industry. We’ve found that many costs hide under the line price of simple hygiene products. Our site audits show three main sources of hidden cost:
- Product
- Setup
- Practices
For today’s focus, we’ve selected a relevant audit to show the true picture of nitrile gloves’ cost.
Total Cost of Nitrile Gloves
For the last year, disposable gloves supply chains have been vulnerable and unpredictable.
We’ve been working with global suppliers to supply high quality nitrile gloves to aged care. Each facility must have access to enough nitrile gloves to survive an outbreak.
Nitrile gloves stocked up in a central store are not enough – care staff need them right at the hand hygiene stations in their facility.
And as all logistics companies know, the ‘last mile’ of delivery is the most expensive. Bulk-shipping glove suppliers are handing this responsibility off to aged care themselves. This means facility staff spend their valuable time following up freight forwarders, processing incoming goods and stocking shelves.
How much do these wasted wages cost?
A New Look at Nitrile Glove Costs
Our calculations use an unconventional, comprehensive view of procurement costing.
Traditional procurement limits cost to line price and freight to a central store.
Deloitte’s 2021 procurement report says:
Traditionally, high performance in procurement would revolve around return on investment (ROI), cost savings, operational efficiency, supply performance, and meeting of stakeholder objectives. In this year’s edition of the report, we included the following in our definition of “high performer” (i.e. top quartile): …Labor productivity (based on spend managed per full-time employee (FTE))
Deloitte 2021 Global Chief Procurement Officer Survey
Progressive procurement managers should look deeper to get the true picture of cost savings. They should include hidden costs such as:
- Delivery costs to site
- Wages for staff stocking shelves
Aged care facilities can miss these two costs when looking at cost effectiveness.
Cost Calculations
First, we’ll take the traditional view.
A simple price comparison between a carton of Nitrile Brand S and Veridia Nitriles.
(The price of Veridia Nitriles shown here is representative of the price found on a contract that includes direct to shelf delivery. Prices are for illustration only, and due to the fluctuating gloves market, prices may not reflect market value.)
| Price (ctn) | Freight | Ctn Qty | Price (per 1000) | |
| Nitrile Brand S | $149.00 | $15.00 | 1000 | $164.00 |
| Veridia Nitrile | $334.00 | $15.00 | 2000 | $174.50 |
On the surface, it seems that Nitrile Brand S has a price advantage.
But this table is missing several hidden costs.
First, the delivery costs.
Our case study aged care group has five sites, with an average of 27 kilometres from the central store at the head office to each of the sites. We’re using a TNT Road Express rate to calculate freight for one nitrile gloves carton to every facility.
Second, getting the gloves from the delivery site to several storage locations on-site takes staff time. And this means a cost of wages.
We’ve estimated that it takes an average of 20 minutes of staff time to distribute, based on our time costs case study. We’re assuming a wage per hour of $25.00.
Let’s calculate the total cost of this delivery.
| Locations | Freight cost/trip | Total freight cost | ||
| Nitrile Brand S | 5 | $16.52 | $82.60 | |
| Veridia | 5 | $0.00 | $0.00 | |
| Distribution time (h) | Wage per hour | Time cost | Total cost (per 1000) | |
| Nitrile Brand S | 0.33 | $25.00 | $41.25 | $287.85 |
| Veridia | 0.33 | $0.00 | $0.00 | $174.50 |
Staff also get back 1 hour 40 minutes to spend on improving quality of life for your customers.
Need more evidence? See our proofs*
The conclusions we can draw from this analysis are:
- Delivery from a central store to different sites is costly
- On-site distribution takes time and staff wages.
You may be ignoring the hidden costs associated with hygiene consumables. This will mean you don’t have a full picture of the impact of your decisions.
This series aims to give you clear, number-driven proofs to assist you in your fight against overspending.
Need to have your facility investigated by a team of experts? Ask for a site survey below.
*Proofs:
| Price (ctn) | Freight | Ctn Qty | Price (per 1000) | |
| Nitrile Brand S | a | c | d | (a + c)/(d/1000) = f |
| Veridia Nitrile | b | c | e | (b + c)/(e/1000) = g |
| Locations | Freight cost/trip | Total freight cost | ||
| Nitrile Brand S | h | i | h x i = k | |
| Veridia | h | j | h x j = l | |
| Distribution time (h) | Wage per hour | Time cost | Total cost (per 1000) | |
| Nitrile Brand S | m | n | h x m x n = p | f + k + p = s |
| Veridia | m | o | h x m x o = q | g + l + q = v |
