CAPITAL STRATEGY INSIGHTS: Reimagining the Process #018

October 9, 2023

#018 Benefits of Strategic Planning Capital Equipment Purchases  

In our last post we looked at reactive capital equipment purchasing and the negatives that occur. Since we looked at the negatives, let’s look at the positives of strategically planning capital equipment purchases.

We referred to the three main levers to achieve value in purchasing: timing, competition, and aggregation. Planning the purchase of capital assets activates these levers to provide the buyer with the best possible advantages in the purchasing process.

Remember the XYZ Unit from the last post? We used it until it broke down. Let’s not do that this time. Armed with useful life estimates, input from your biomedical service provider, and input from your end users, you have determined this unit is nearing the end of life. Key word is “nearing”, not at end of life. It is time to plan the replacement.

First, we’re going to avoid the surprise of failure, and the costs of the work-arounds due to failure. Then, we are going to use our three levers to obtain the best value for this purchase.

When it comes to competition, if you can’t put this purchase out to bid/proposal, you must create illusion of competition. I was with a buyer when a doctor walked in and informed her that he had decided on a specific unit from a vendor and had informed the vendor that would be the item purchased. Thousands of dollars just vanished at that moment. There was no longer a need for that vendor to offer their best price. You must have competition or the illusion of competition to keep everyone trying to earn your business.

Since you have planned you purchase, you should now have the opportunity to survey your organization to know if there are other similar devices that you can aggregate or bundle into this buy. Aggregated volume enables the buyer to bring a bigger opportunity to the vendor and allows the vendor to get more aggressive with pricing. I was talking to a buyer at a large health system who lamented the fact that they bought two identical major pieces of equipment just weeks apart because they weren’t aware that there were two units in need of replacement. Again, thousands of dollars lost.

Another aggregation benefit that occurs from planning is group buys with your GPO. Better to know what you have planned to replace when the group buy calendar comes out so that you can maximize that opportunity.

Like the old west gunslinger, we’re going to put the proverbial “sun at our back” when dealing with the vendor when it comes to terms, conditions, pricing, value adds, etc. Because you have planned this purchase you can pick the time of purchase, such as when it is optimal for your funding, or when your vendor is more incentivized to negotiate. I was sitting on a sales call with a manufacturer when the price on a big-ticket purchase was reduced by a large amount to get the deal done, because there were sales goals to hit. Be in tune with the seller’s calendar, being ready and able to walk from a deal, and you can put time on your side. 

Proper timing also includes some other benefits. You are now able to maximize the liquidation process with the planned decommissioning of the unit. What is the best value for my organization – trade in? Sell to a third party? Also, keep in mind that planned and scheduled deinstallation and new unit installation coordination is smoother and less costly.

Planning allows you to create leverage through timing, competition, and aggregation. Each lever contributes to your purchasing power and cost reduction. A well thought out strategy will lower your capital spend. Thanks for reading this post – I hope it was valuable. As always, be well and feel free to comment at