Executive Insights

At the IDN Summit in Phoenix last month, we assembled 30-40 IDN supply chain executives, as is customary at the conference, during Wednesday’s Senior Executives Forum. These Forums are immensely valuable in sharing ideas and learning from each other.

In this Forum we had a visit from Dr. Randy Bradley, a professor of Supply Chain Management at Belmont University. He brought together a panel of experts from outside industries to share their ideas of best practices of supply chain management outside of healthcare. It was a healthy discussion.

The panel highlighted that other industries invest more in supply chain – both talent and technology. Other industries also invest more in supplier partnerships, logistics, strategic planning, and performance management.

Are Supply Chain Management principles different within healthcare than in other industries? That’s a good question. We can learn from other industries, but the healthcare industry offers specific challenges that other industries don’t have.

I came from outside the industry. I spent 21 years in the electric utility industry and three years in the lab industry – all in supply chain leadership positions. I was hired by Intermountain Healthcare because of my background.

What are some of the unique characteristics of healthcare that keep it from investing more into best practices of supply chain. Here are some:

Supply chain is very complex – many suppliers, many products and diverse logistics
Healthcare has the lowest level of trust between buyers and suppliers
There are many buyers & sellers – 6,000 hospitals and 100,000 clinics
Emphasis on clinical and less on business – decision makers are often clinicians
Healthcare supply chain’s dependence on GPOs is both good and challenging

Here’s a list of basic building blocks of supply chain strategy that all industries utilize and healthcare should pursue with more aggressiveness:

Know where you spend money – spend analysis
Understand total cost – it’s more than price
Organize yourselves – act as one
Know who makes supplier decisions in your company
Do a better job of negotiations
Take time to manage the biggest suppliers
Simplify your processes
Look at your warehouse and distribution costs

I’ve always liked the following guidelines that could also benefit healthcare:

A penny saved is a penny invested somewhere else in healthcare
Non-profit should not mean not-as-efficient
When we allow personal preference to guide our decisions we pay more
Product variation is not clinical excellence
Quality does not mean “spare no expense”

Healthcare is a noble industry. Its mission is to reduce costs, improve patient outcomes and to save lives. It’s also the largest industry in the world. We should take great pride to work within this industry. At the same time, we should do our very best to learn from other industries and improve our supply chain.