Prime Vendor/Hospital Purchasing Relationships

Abstract

Sourcing research to date has concentrated on manufacturing, primarily in the form of just‐in‐time purchasing systems. This study examines sourcing in an important service industry – hospitals. Hospital materials management integrates purchasing, inventory control and distribution. A prime vendor relationship, an agreement between a multi‐line distributor and a hospital, streamlines the purchasing process by reducing the number of vendors and paperwork for the buyer. An examination of 22 general hospitals in Georgia, USA, yielded preliminary evidence the prime vendor relationship led to better materials management performance. This article explores the potential advantages and disadvantages for hospital buyers and vendors and the implications for performance.