05/12/16

Having been involved in supplier diversity in health care for nearly 10 years, I am used to helping others overcome the hurdles within our industry. I was talking recently with a colleague who transitioned to a supplier diversity role in health care after a successful career in a similar capacity at a consumer products company. Throughout our chat he lamented “no one told me it would be this hard.”

While increasing supplier diversity in a hospital’s supply chain isn’t easy, it is incredibly important in two key ways. First, hospitals are often an economic engine for their local communities both as an employer and as a contractor for local goods and services. Contracting within the community when possible supports the local economy and often these small and diverse suppliers are more responsive than their larger competitors. Related, supporting those local businesses increases the likelihood that patients needing care will be covered by insurance.

The second big benefit is the structure of the federal grant award process, which many hospitals depend on to fund their research missions. Grants place a premium on substantive supplier diversity programs. Being able to demonstrate a high level of diversity can result in additional or higher levels of awards for the hospital. 

As I explained to my colleague, increasing diversity within the health care supply chain is challenging, but not impossible. Understanding the common hurdles for diverse suppliers is a first step toward improvement. These hurdles include:

• Capital investment requirements
• Regulatory environment
• Need for scale
• Proven strategies to navigate among the various providers, group purchasing organizations (GPOs) and distributors

Though the challenge to increasing diversity in our industry is complex, you can boil down the formula for success to three critical components: awareness, opportunity and development. Here is the formula for success I shared with my colleague:

Awareness – This is easiest hurdle to clear, yet if you visit the website of the average hospital, there is no reference to supply chain opportunities. Create awareness by giving suppliers easy access to information on how to do business with your organization and what specific opportunities are available. Those procurement opportunities managed directly by the hospital should be posted on the hospital’s public website along with the appropriate point of contact.

For opportunities managed by the hospital’s GPO, there should be a hyperlink to their bid calendar. Social media, Twitter in particular, is a great way to spread the word about procurement opportunities. It doesn’t require content creation; you just provide a link for additional information and it only requires a few minutes each week. LinkedIn is a great tool for sharing success stories, best practices and instructional guides; and provides another avenue to engage potential suppliers.

Opportunity – Creating opportunities begins by reviewing supply chain processes to mitigate unintentional barriers, such as reviewing a request for proposal’s (RFP’s) minimum requirements with the end user to make sure that they are absolutely beneficial and validating the weights and criteria upon which an RFP will be judged. Hospitals should also consistently encourage their large suppliers to provide partnering opportunities for diverse suppliers (known as Tier II) and un-bundle contract opportunities where appropriate and cost effective. For example, delivery and setup of a particular line of equipment may be bid separately from the purchase of the equipment. Additionally, hospitals should pay special attention on categories were there is typically both depth and breadth of diverse supplier options such as construction, IT, staffing and other purchased services.

Development – Supply chain professionals often lament that there are no diverse suppliers that manufacture or provide a certain product or service. If we don’t focus on supplier development, when those same procurement opportunities reoccur, that void is still present. While the development of diverse suppliers in areas where there is a void requires resources such as time, subject matter expertise, content delivery vehicles, and funding, the good news is that those resources may be available through a coalition of like-minded entities. GPOs, distributors, large suppliers, advocacy groups, government agencies and non-profits have aligned to support this critical initiative.

For example, in 2014 Novation partnered with the Tuck Business School at Dartmouth, Novant Health and the Healthcare Supplier Diversity Alliance for a week-long course designed to help owners and senior executives of minority-owned companies to take a critical look at their business. From evaluating strategy and analyzing financial statements to developing an effective marketing strategy, participants learn the skills they need to compete and thrive in the highly regulated and constantly changing health care industry.

To identify diverse suppliers beyond the GPOs, reach out to the regional and local affiliates of advocacy groups such as:

National Minority Supplier Development Council (NMSDC)
Women’s Business Enterprise National Council (WBENC)
U.S. Hispanic Chamber of Commerce (USHCC)
U.S. Pan Asian American Chamber of Commerce (USPAACC)
National Association of Veteran-Owned Businesses (NaVOBA)
National Gay & Lesbian Chamber of Commerce (NGLCC)

To identify small businesses, use online tools such as the SBA’s Dynamic Small Business Search or the federal government’s System for Award Management (SAM).

Diversity advocacy groups outside of the health care supply chain realm often demand revolutionary change, but the reality is that change will occur on an incremental basis. The ability to successfully navigate the world of GPOs, distribution, non-profit providers, for-profit providers, academic medical centers and government regulations is an acquired skill. Even large, long-established suppliers have had to adjust to the realities of the new marketplace. We’re making continuous progress and many organizations in the health care arena have openly embraced a leadership role in this critical initiative. By providing the necessary knowledge, competencies and resources, diverse suppliers can survive and thrive within the health care supply chain.

About the author. As a respected expert in health care supplier diversity, Mark Cartwright is often sought out for his insight on supplier diversity processes, practices and strategic importance. He has presented at several regional and national conferences, serves on the Board of the Healthcare Supplier Diversity Alliance, and sits on the Healthcare Industry Group Subcommittee of the National Minority Supplier Development Council.