Three New Year’s Resolutions for Supply Chain Leaders
Three New Year’s Resolutions for Supply Chain Leaders
As Integrated Delivery Networks (IDNs) continue to acquire more hospitals and more post-acute care providers like nursing facilities and ambulatory care sites, it’s no secret that their supply chains are getting increasingly larger and more complex – leading to an exponential risk for waste and inefficiency. And these changes are happening just as IDNs are moving toward value-based models, which requires greater efficiency and more focus on reducing the total cost of care. Jean Claude Saghbini, Cardinal Health general manager of Inventory Management Solutions, talks about how supply chain leaders can address these challenges head-on in the New Year.
Q: As we kick off the New Year, what are three key priorities for supply chain leaders in 2016?
A: In a recent national study commissioned by Cardinal Health, hospital executives said that reimbursement is the biggest problem facing their health systems today, followed closely by the increasingly high cost of supplies. Additional financial concerns and organizational inefficiency also topped the list.
While two-thirds of hospital decision makers “strongly agreed” that improving the effectiveness of their supply chain would reduce overall costs, increase revenue and lead to better quality of care, only one-third rated the management of their hospital’s overall supply chain as “very effective.”1,2,3
I believe these statistics provide the perfect backdrop for supply chain leaders to challenge the status quo and make some bold New Year’s resolutions to start positioning their supply chains as strategic assets that can unlock untapped value. Making big changes can seem overwhelming, but by sticking to these three resolutions, supply chain leaders will be off to a great start.
New Year’s Resolution # 1: Identify the problems – and opportunities – in your supply chain.
New Year’s Resolution # 2: Develop a clear vision for a future without those supply chain problems – complete with objectives, budgetary needs and projected ROI.
New Year’s Resolution # 3: Explore methodologies to achieve your supply chain vision.
Q: So let’s start with the first resolution – and let’s make it actionable. How can a supply chain leader take the first step in identifying supply chain problems?
A: Reducing costs is an urgent goal as hospitals shift to value-based health care, especially because the supply chain (and the products it moves) comprises the second largest expense for most IDNs. At an aggregated level, there is an estimated $5 billion of annual waste in high-value medical devices alone.4 So it’s safe to say there’s value to be unlocked in every hospital’s supply chain. Here are some common questions that can help identify supply chain problems that create unnecessary costs for providers.
- Do you have sufficient visibility into your supply chain (across all facilities) to allow you to reduce or eliminate waste by minimizing unused, expired, recalled or obsolete products?
- Are you losing money by missing opportunities for charge capture?
- Do you have the business intelligence you need to optimize inventory levels at all times?
- Do you have too much inventory on hand for ‘just in case’ procedures, but not enough of the right products on hand when clinicians need them?
- Do your hospital information systems ‘speak’ to each other, to give you an accurate view of supply chain needs and opportunities, system wide?
- Are current processes resulting in workarounds or undesired and counterproductive behaviors from clinicians, nurses and materials management staff, potentially taking time away from patient care?
By exploring these questions, supply chain leaders should be able to identify the key opportunities to unlock value, support patient safety initiatives and reduce costs.
Q: Once key opportunities are identified, what are some steps supply chain leaders can take to articulate a vision for the future?
A: Outlining supply chain opportunities is usually the easier part. Articulating a vision for the future – and a plan for getting there – can be a much bigger challenge.
But the truth is, in an environment when multiple teams and departments are competing for the scarce resources of time, executive attention and budget dollars – the ability to clearly articulate a powerful vision of the future is critical to successfully challenging (and changing) the supply chain status quo.
The vision will likely look different for each IDN – but should paint a picture of what it would look like to eliminate waste, stock outs, and the need for clinicians to spend time tracking down products. It should also demonstrate the projected bottom-line benefits of ensuring charge capture and end-to-end visibility for every single product.
The vision should clearly articulate the return on investment the proposed changes will have not just for the IDN overall, but also for key stakeholders – including nurses, physicians, procedural leads, supply chain managers, finance and IT teams. Their support will be critical to implementing even the best laid plans.
If creating the compelling vision seems daunting – seek support and guidance from a partner who has experience in this type of transformation.
Q: What are some steps supply chain leaders can take to bring the vision to life?
My first piece of advice is don’t reinvent the wheel. Seek out proven-successful strategies that have worked at other IDNs and hospitals. Each IDN’s supply chain action plan may look different, but the most successful ones are likely to incorporate proven best practices that have worked at other facilities.
Second, immediately begin exploring connected technology solutions that can help bring your vision to life. Tomorrow’s supply chains require tools that enable automated data capture and advanced analytics that provide the kind of actionable insights that allow hospital leaders to make smarter, more informed decisions that can reduce the total cost of care.
Third, don’t go at it alone. Even the best, most experienced supply chain leaders have only 24 hours in a day. Trying to single-handedly juggle the day-to-day job responsibilities of managing an IDN supply chain while also trying to transform it? That usually proves to be an impossible task. Engage with experts who can guide the process and bring to bear the kind of proven best practices and effective technologies that move vision into reality, fast.
1 Data on File. Cardinal Health. 2015. Survey, page 6, question 5a.
2 Data on File. Cardinal Health. 2015. Survey, page 8, question 5g.
3 Data on File. Cardinal Health. 2015. Survey, page 8, question 5h.
4 PNC Healthcare; GHX quantitative research study (August 2011)