Hospital c-suite executives are hungry for supply chain solutions


Tony Vahedian

Chief Product Officer, naviHealth, a Cardinal Health company

Cardinal Health recently released the findings from our national survey of 150 hospital supply chain leaders. The purpose of the survey was to understand how hospital c-suite executives and supply chain leaders view the value of their supply chain.

The survey revealed important information: The perceived potential value of the hospital supply chain is high. Two-thirds of those surveyed “strongly agree” that improving the effectiveness of their supply chain will reduce overall costs, increase revenue and lead to better quality of care.1

And what’s even better is that when those numbers are broken down by audience, the hospital c-suite executives have a similar view to supply chain leaders of how important more effective management of the supply chain is, as you can see from the chart below.

    Supply chain  leaders Hospital
c-suite executives
Better supply chain management leads to improved patient safety Strongly agree  56%  60%
Better supply chain management increases revenue Strongly agree  75%  60%
Better supply chain management leads to better quality of care Strongly agree  66%  60%

This signals that the importance of effectively managing the supply chain in health care is more prominent than ever among hospital c-suite executives. And, according to the survey results, supply chain cost is one of the biggest issues on executives’ minds, second only to reimbursement – corresponding to the fact that supplies are the second largest operating expense for most hospitals.1,2

The hospital is devoted to investing in better supply chain management. In fact, 85 percent of survey respondents indicated that their hospitals are either planning or currently working to identify and implement new solutions that reduce supply chain waste and related costs.1

Despite the expressed importance of an efficient supply chain, only one third of supply chain leaders rate their hospital’s overall supply chain management as “very effective.”1 This finding presents opportunity for supply chain leaders to elevate their role and turn the supply chain into a strategic asset.

The survey already shows that hospital c-suite executives value the supply chain. So let’s look at two specific areas that contribute highly to the survey results regarding an ineffective healthcare supply chain management.

Lack of visibility into supplies

Cardinal Health Supply Chain Survey Findings

Monitoring inventory levels is one of the top priorities for supply chain managers. Every year, more than $5 billion is wasted on expired, lost or uncaptured medical device and implantable charges.3 One way to reduce that cost is to better control overstocking and understocking, which leads to expired supplies and excess fees, respectively. According to our survey, 60 percent of hospital c-suite executives incurred unnecessary transportation fees because they didn’t have enough of the right products on hand at the right time.1

Overstocking and understocking is the result of a much larger issue. Having a lack of visibility into supplies, which leads to having the incorrect amount of product on hand, is a result of the lack of real-time data available to a hospital system - the very root of the problem. For hospitals, this is where technology already has the answer. Data and analytics through automated solutions allow a hospital to transform its supply chain into a strategic business asset but the solutions need to connect technology to everyday processes and capture this data.

For example, take a look at BJC HealthCare. As Marcia Howes, BJC HealthCare’s chief supply chain executive, said in a recent The Wall Street Journal article, technology helped reduce the amount of stock the health system had to keep on hand by 23 percent in tests.4 They accomplished this by moving to a cloud-based platform solution enabled by RFID. This technology connects into a central database that tracks when supplies are used or when they expire. New orders are automated, and hospitals can lend supplies to each other, creating another avenue for cost-saving and efficiency.

This is real-time data allowing for better decision-making. BJC HealthCare expects a return on its investment in RFID within 18 months and estimates that it will save $68M over the next ten years with this high-tech inventory control program.5

And that’s the key – improving supply chain performance creates value now, and a sustainable return on investment in the long run. In fact, all survey respondents agreed that improving supply chain performance is crucial to reducing costs.

But perhaps the most interesting survey finding is the level of c-suite interest in the benefits of RFID technology. The survey revealed that 81 percent of hospital c-suite executives are likely to invest in RFID technology.1 That’s compared to a slightly lower 64 percent of supply chain leaders.1 This data underscores the interest in harnessing the power of RFID technology across hospital system leadership.

Workflow inefficiency

Did you know that hospital employees spend two-thirds of their errand time searching for equipment?6 For a nurse, that equates to multiple hours per shift.6 That is an astonishing amount of productivity loss spent on unnecessary work.

This happens because there is not enough visibility into the supply chain or consideration for the clinical workflows needed within a hospital. Technology, again, is already available to help improve workflow efficiency. Automated technology has the potential to eliminate those wasted hours by allowing every hospital employee to know exactly where a product is at any given time. This kind of efficiency allows clinical staff to focus on clinical work – treating and caring for patients. On top of this, knowing where a product is at any given time leads to better management of exception-handling processes, ease of implementation, loss prevention and improved ordering.

Nearly all of those surveyed agree that better supply chain management leads to better quality of care.1 While 99 percent of both hospital c-suite executives and supply chain leaders agree, supply chain leaders were more likely to “strongly agree” (66 percent vs. 60 percent, respectively).1 This sheds light on the fact that hospital c-suite executives aren’t as urgently invested in the idea of using the supply chain as a strategic asset to improve the quality of care. In short, there is an opportunity to elevate the supply chain’s role in improving the quality of care.

We’re all moving ahead

Hospital c-suite executives have acknowledged the progress being made in the supply chain, yet there’s still room for improvement. As supply costs rise, smart and efficient solutions that enable data capture and analytics are more important than ever.

The solutions exist.  Automated technology is one of many that are positioned have a profound impact. Analytics for evidence-based decision making and workflow efficiency are just two areas poised for immediate change

How is your hospital working to improve the supply chain?