Brent Johnson
Retired - Vice President, Supply Chain
Intermountain Healthcare

Supply Chain Review – Healthcare Industry

We all work in the healthcare supply chain industry. Each of us touches a part of it whether we be providers (IDNs), GPOs, suppliers or distributors.  Supply Chain has become more visible and understood after the pandemic.  Now is a great time to make progress. 

I especially challenge supplier reps to understand supply chain management so they can have productive conversations and can bring supply chain solutions to their customers

Now is a good time for a review of the basics of supply chain.  We all might be working with just a part of this “elephant” and don’t see the big picture. 

What is supply chain management? What is its value? How do we improve it?

What is supply chain?

  • It’s the management of everything that goes towards making a product.
  • Supply chain management is managing all the non-labor spend of a company.
  • It is a disciplined, systematic process of analyzing corporate expenditures and developing strategies to reduce the total costs of externally purchased materials and services.
  • It’s the backbone of business operations.
  • It’s what we buy, who we buy from, how we buy, what we inventory, how we use the products and services and how we can make them better.

What’s the value in improving supply chain?

  • Supply chain expenses (more than med-surg) are non-labor expenses of a company and make up 40% of the typical costs of a healthcare provider.
  • 10-20% total cost benefits are possible with rigorous supply chain applications.
  • Comparing common metrics for supply chain expenses and variations of 35-40% exist between the best and worst healthcare providers. 

How is supply chain in healthcare unique?

  • Clinical products provide challenges.
  • There are so many different commodities – products and services.
  • There are many buyers & sellers – more than traditional industries.
    • There are 6,000 hospitals, 100,000 clinics.
    • Traditionally, no supplier has more than 5% of any customer’s business.
  • Healthcare supply chain’s dependence upon GPOs is both good and challenging.
  • Healthcare is BIG. It’s the biggest industry in the country - $1.5 trillion revenue.
  • Only in recent years has supply chain been recognized as strategic and critical to operations.
  • Investment in healthcare supply chain is behind other industries as to technology, strategies, labor and expertise.

Supply chain management improvement – Baby Steps

  1. Know where you spend money.
  2. Understand total cost – value beyond price.
  3. Organize yourselves – act as one.
  4. Know who makes supplier decisions.
  5. Do a better job of negotiations.
  6. Take time to manage the biggest suppliers.
  7. Simplify your processes.
  8. Give attention to logistics efficiency.


Healthcare applications of supply chain management are needed more than ever.  If there was ever a time to know supply chain, now is the time.  To expect different results, a new roadmap may be needed that includes supply chain strategies that deliver real value.