In this guest post, procurement expert Justin Sulley, explains how aged care providers can improve financial sustainability without compromising care by adopting strategic procurement practices. Key approaches include supplier consolidation, contract renegotiation, product standardisation, competitive tendering, demand management, reducing off-contract spending, and regular spend reviews, enabling cost savings that can be reinvested into care, compliance and workforce capability.
Australian aged care providers face a difficult balancing act, managing increasing operating costs, maintaining regulatory compliance, meeting resident expectations, and delivering high-quality care, all while working within a low-margin industry. One of the most effective ways to improve financial sustainability is to reduce supplier costs. Many providers hesitate to pursue this option due to a lack of internal capacity, capability or because they fear it may compromise service quality or operational performance.
The good news is that supplier cost reduction does not have to mean cutting corners. When approached strategically, aged care providers can lower supplier spend while maintaining or even improving supplier performance. The key is focusing on fundamental procurement strategies such as supplier consolidation, removing inefficiencies & aligning with suppliers with the right capabilities rather than looking for the cheapest options.
Below are details on several cost reduction strategies that are effective at reducing supplier costs while simultaneously maintaining operational performance.
Supplier consolidation
Many aged care providers accumulate suppliers over time, especially after acquisitions, site growth, or decentralised purchasing practices. This often leads to inconsistent pricing, duplicate vendors, and unnecessary administration.
By consolidating spend with fewer high-performing suppliers, providers can often secure:
- Better pricing through higher volumes
- Simplified ordering processes
- Improved service consistency
- Reduced invoice processing workload
- Stronger supplier accountability
Supplier consolidation should be selective. The objective is not to reduce choice unnecessarily, but to focus spending with the best-value partners.
Renegotiate existing contracts
Long-term supplier relationships can be valuable, but contracts are often left untouched for years. During that time, pricing structures may become uncompetitive.
A supplier contract review can uncover opportunities such as:
- Negotiate improved pricing
- Identify overcharging
- Improve commercial terms such as payment terms, fixed pricing, etc
- Review supplier performance
Many suppliers would prefer to retain a customer through revised commercial terms rather than risk losing the account in a tender process.
Standardise products & specifications across sites
Multi-site providers often discover that each site purchases slightly different versions of the same product or have differing specifications. This creates fragmented volumes, higher prices, and unnecessary complexity.
Examples include:
- Gloves from multiple brands
- Different cleaning chemicals
- Varied stationery items
- Multiple continence product ranges
- Non-standard kitchen consumables
Standardising approved products where clinically and operationally appropriate can lower costs while improving stock control and training efficiency.
Run regular tender processes
Market testing key categories at least every 3 years can help benchmark current supplier operational & commercial performance, while identifying market pricing & potential alternative supply options.
“Some supplier categories remain untouched simply because that’s who we’ve always used.”
Common categories suited to tendering include:
- Food supply
- Waste management
- Laundry services
- Cleaning contracts
- Maintenance services
- Utilities procurement
- Telecommunications
Conducting a tender does not automatically mean that the supplier must change; a well-run tender process does more than reduce cost. It also clarifies expectations, service levels, reporting requirements, and performance metrics, while also comparing current performance against organisational requirements.
Improve demand management
Reducing supplier costs is not only about price—it is also about usage. Many providers overspend because products are over-ordered, wasted, or used inconsistently.
Examples of demand management include:
- Better inventory controls
- Reduced stock expiry and spoilage
- Monitoring high-usage consumables
- Ordering to forecast demand
- Preventing unnecessary urgent deliveries
- Educating teams on approved purchasing processes
Lowering unnecessary consumption often delivers savings without changing suppliers at all.
Reduce maverick spending
Maverick spending occurs when employees purchase outside approved contracts or procurement processes. This is common in decentralised environments where urgent needs arise.
The result is often:
- Higher spot pricing
- Duplicate purchases
- Poor visibility of spend
- Increased administrative effort
- Loss of negotiated savings
Simple controls such as approved supplier lists, purchase order processes, and spend reporting can significantly reduce leakage.
Conduct a regular spend review
Many savings opportunities remain hidden because organisations do not regularly analyse supplier expenditure. A structured spend review can identify:
- Price inconsistencies
- Duplicate suppliers
- Off-contract buying
- High-growth categories
- Contract expiry risks
- Quick-win savings opportunities
Quarterly or annual reviews help providers stay proactive rather than reactive.
Important principle: Protect frontline outcomes
Any cost reduction program in aged care must preserve resident care, safety, nutrition, and experience. Procurement decisions should involve relevant stakeholders such as clinical teams, catering managers, facility leaders, and finance.
The most successful cost reduction programs seek to understand organisational requirements & align procurement decisions with those requirements by assessing strategic fit, supplier capability, supply risk, as well as commercial competitiveness.
Aged care providers can reduce supplier costs without impacting performance when they focus on smarter procurement decisions rather than blunt cost-cutting. Consolidating suppliers, renegotiating contracts, standardising products, improving demand management, and actively managing supplier contracts can all generate meaningful savings that are durable & sustainable.
In a sector facing ongoing cost pressure, every dollar saved through better supplier management is a dollar that can be reinvested into workforce capability, resident experience, compliance, and future growth.
