7 Habits of Highly Effective Hospital Supply Chains

I came across a quote that Stephen Covey notes in his book, The 7 Habits of Highly Effective People that struck a chord with me, “It is not the problems that we have that stop us, but it is the process used to solve them”. It sounds like Covey had the hospital supply chain on his brain when writing this.

And, talking about brains, Albert Einstein definitely hit home on his definition of insanity: “[It’s about] Doing the same tasks over and over again, expecting different results”. I think Einstein was on to something…

So, I’ve merged these two concepts together, to unravel the insanity of hospital supply chains. You’ll see how all of these points essentially intertwine and are interdependent:

1. Apply agile strategies

Developing a supply chain strategy may seem like a no-brainer, but many hospitals still don’t practice this basic fundamental. Sure, executives define their budgets and objectives but that doesn’t carve out a roadmap from point A to point D. Instead, supply chains often chase flavors of the month: one month it’s about cost savings and few months later, fulfillment efficiencies.  Sounds more like having a boat without a paddle. You’re just going with the flow.

Top supply chains design strategies take a look at the cost/benefit trade-offs across the entire spectrum of the supply chain. Not only that, they’re tailored to customer needs, actively managed and regularly updated to meet the changing needs of internal and external stakeholders. I always found that strategies can be adjusted whenever needed; but make sure it’s always aligned with the overarching business strategy.

     2. Zone in on total cost of ownership [TOC], not just price.

If you ever want a solid-gold supply chain, make a shift in strategic sourcing from just looking at purchase price to the total cost of ownership. The outdated practice of just choosing a supplier based on price just needs to be kicked to the curb.

Procurement teams in ‘forward-looking’ hospitals are highly aware that this practice doesn’t cut the mustard when it comes to prioritizing value over price. It’s about taking a good look at the entire process, soup to nuts, from procurement to consuming of a product or service. There are other factors to consider like quality, charge capture, reimbursements, warehousing and transportation costs, and maintenance expenses.

So, it makes sense to set up a TOC mindset in the organization and make sure that not only your team is on board, but also the hospitals exec’s are as well.

     3. Get technology to work for you

Technology is not about trying to hammer a square peg into a round whole.  Don’t think the software you’ve chosen will help your supply chain become more effective. A lot of teams redesign their workflows and processes around the software, gritting their teeth to make “it fit”. But it really should be the other way around. First, figure out what you need to improve in your process and then look for the technology that will meet those needs.

In the end, best in class hospitals really understand that the systems are there to better manage their supply chains. Technology is an enabler. What they do is use the technology in a way to extract beneficial information that works for them, rather than pulling teeth with “work-arounds” to find and view data. Getting real-time information on pricing, product availability, contract compliance and usage can lead to better decision-making and staying steps-ahead of the competition.

     4. Use fact-based, data driven decision making

When it comes to optimizing your demand-driven supply chain, it’s critical to take a look at the overall picture. But sometimes it’s not always so obvious. For example, you’ve got everyone on board to make a purchasing decision about a product that doesn’t necessarily make money in the short term; it could drive down total care costs through better performance. These are the kinds of insights and information you need to make the right decisions for your hospital.

Hospitals looking to stay ahead of the game will start looking how to use Big Data, the new buzzword in town. This is where technology comes in, when it can unite silo’ed data or extract the right information from an incredible amount of sources, so that decision makers will benefit in making the right choices, at the right time. This can all lead to quick cost savings but also help build strategies that can greatly affect supply chain decisions.

     5. Collaboration

By collaboration, I mean getting both internal and external stakeholders involved with your supply chain to reap the full benefit. It’s another way to drive your hospitals’ performance to the next level. Effective supply chains at top hospitals understand that collaboration actually will make the difference.

With internal “customers” like physicians and other caregivers, get them involved in the decision making process. They’ll be happy to offer their feedback, perspectives and knowledge “in the field”, because your supply chain strategy depends on it. Not only will it make sure that the supplies are readily available but also lower total care cost, simplify processes and even improve responsiveness to their changing needs.

Top rated hospitals and suppliers who value collaboration usually design sophisticated cost/benefit/sharing models with carefully chosen partners who actually want a true relationship. The golden nugget is that the two parties form a team. They value a long-term perspective that changes the process by dedicating from resources [from both ends], involving senior leadership, jointly managing performance and measuring impact through a commonly held ground.

     6. Build an eclectic team

This could be something overlooked but, if you look at a senior-level supply chain exec at a best in class hospital, you’ll most likely find someone who has had a very diverse background and can bring a broad range of skills to the table.  Such talent will build the supply chain team, derived not only from healthcare experiences and knowledge but from other industries as well. These leaders understand and have the eye to recognize those with quantitative and qualitative skills needed to stay on top and ahead. Most importantly, an eclectic team can also have a great impact on innovation, not to mention, building the next generation of supply chain leaders through mentorship.

     7. Become innovation-minded

Einstein once said, also “Life is like a bicycle – in order to keep your balance, you must keep moving.” This can also be applied to the supply chain, as I see it. What innovative organizations do to keep moving forward is focus on balancing real relationships with channel partners [manufacturers, distributors and GPO’s] and engaging medical staff to be a part of decision-making. Getting buy-in and feedback can bring great value to the table by creating an effective supply chain.

But most of all, innovations come by looking what goes on “outside of the box” – in other industries.  Ernst & Young states that both consumer products and the hi-tech industries seem to be the closest to healthcare, in terms of the challenges that are faced. Innovations come when traditional roles become blurred when suppliers and providers are synchronized in order to lower the total cost between the two. Also, joint supply chain programs between hospitals could also spur innovations and savings in a time when cost reduction is critical. But this can also lead to shared services between providers, by setting up centralized operations for an entire organization’s enterprise supply chain.

Maybe it’s time to think over the supply chain again.  What other habits do you find at your hospital that could be added to this list?


Lillian Kovalenko is Synthium Health’s marketer | articulator | brandsmith who loves to discover new technologies and innovations that improve healthcare and positively impact society at large.

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