EP 37 – Eric O'Daffer on 3 True Norths for AI Investment, Indirect Spend, & Benchmarking

Most health systems report supply chain spend in the high teens while industry data confirms it's actually 35-40% of operating expenses, a measurement gap that systematically undermines investment cases to the C-suite. Eric O'Daffer, Executive Producer for Smarter Sourcing: Healthcare Edition, shares why he's convinced the answer to indirect spend isn't another platform but sustained center of excellence expertise: the average $3 billion health system has 2-3 people managing purchase services at a 1:$250 million ratio across 800 categories, and when they get good at sourcing, they get promoted out.

His three true north focus areas reveal where the biggest gaps remain: doubling AI and analytics investment, solving the governance and knowledge retention problem in indirect (which represents roughly 30% of total spend), and creating benchmarking with "unfettered access to data" that counts supply chain the same way. Rather than exhausting failed experiments, Eric argues organizations should lean into entrepreneurial entrants putting focused effort into supply chain. There simply aren't enough companies doing it, and the industry hasn't made it easy for them.

Topics discussed:

• Measuring supply chain spend accurately by including fully loaded costs instead of GPO-submitted data that undercounts actual expenses

• Solving indirect spend management through sustained center of excellence expertise rather than platform-only solutions

• Addressing the 1:$250 million staffing ratio problem where 2-3 people manage purchase services across hundreds of spending categories

• Implementing "stick-to-itiveness" principle by keeping leaders in roles 5-10 years instead of promoting every 18-24 months

• Doubling investment in AI and analytics technology while recognizing supply chain is understaffed in wrong areas, not overstaffed

• Developing definitive benchmarking systems with unfettered access to data that counts supply chain consistently across organizations

• Leaning into entrepreneurial companies focused on supply chain instead of continuing failed experiments

• Shifting evaluation from pure sourcing lens to integrated clinical alignment, procurement, logistics, and analytics in equal footing