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From the Basement to the Boardroom: Top Attributes of Leading-Practice Supply Chain Operations

02/18/19

Every hospital and health system has a different set of goals, yet their objective is the same: to deliver high-quality, affordable care. As organizations work to be successful in a highly competitive and complex health care environment, meeting that objective is what keeps hospital executives up at night. Once viewed only as the department responsible for ensuring adequate supplies were on hand, the supply chain is now seen by those executives as vitally important to their organization’s success.

The hospital supply chain, by its very nature, is a convoluted structure. That complexity has been exacerbated in recent years by factors such as health system acquisitions and mergers and an increase in affiliated outpatient surgery centers. These challenges emphasize the need for a centralized supply chain operations structure that supports integrated decision-making and clearly defined roles and responsibilities.

“Transforming your supply chain into a strategic and successful operation calls for a holistic approach that considers all of the key attributes found across leading-practice organizations,” said Sindi Kelly, senior consulting director, supply chain operations for Vizient. “It requires supply chain leaders to not only focus on activities that help lower supply costs and improve operational performance, but also increase collaboration with clinicians to integrate clinical outcomes into their strategic operational plans.”

Leadership should start with an end-to-end analysis of the supply chain, across all facilities, to identify operational gaps and technology utilization as well as savings opportunities. “All elements need to be considered in order to create a clear roadmap with actionable steps to reach a single, efficient and sustainable supply chain operation across all facilities in the organization,” said Kelly.

Kelly noted that the center of a successful supply chain transformation is a consistent and continuous systemwide focus on people, process, technology and performance management. Following are her thoughts on the top attributes found in a successful supply chain operation.

Improve collaboration with clinical leadership and the C-suite

As health systems have evolved, so has the way supply chain must interact with clinical stakeholders. Historically, supply chain drove savings based on product cost. In a clinically integrated supply chain, clinical and supply chain leaders work together to make product choices utilizing peer-reviewed literature as well as supply, clinical and operational data. The combination of this data allows a hospital to optimize the contract value, manage utilization and reduce variation.

The C-suite must also sustain an active presence within the supply chain transformation on an ongoing basis. Supply chain leaders should consistently engage the executive team by reporting trends, accomplishments, performance dashboards and scorecards.

Develop an ideal supplier relationship management program

Building and maintaining a strong supplier relationship management program includes the use of leading-practice service levels and performance metrics. While your GPO negotiates terms and conditions with strong customer service requirements in the contracts, conducting monthly and/or quarterly supplier reviews provides an opportunity to govern your service level expectations as well as evaluate price changes, consider product alternatives and confirm that quality and safety are being upheld.

“Supplier relationship management should include a consistent set of guidelines with expectations around quality, patient outcomes, service levels and commitments for your suppliers,” Kelly said. “Request spend profiles, along with quality, delivery and inventory reports to evaluate the service your vendors are providing.”

Establish systemwide process flows and value stream maps

Supply chain leaders should establish defined and documented processes using Lean methodologies – such as value stream mapping – across their entire supply chain continuum. This provides a detailed illustration of all critical steps in the work process necessary to deliver value, from start to finish.

When looking at managing inventory within a supply chain operation, supply chain leaders can create robust process flows that improve an organization’s inventory and reduce waste streams.

“From a Lean perspective, you will want to eliminate all of the inefficiencies you have within your value stream maps,” Kelly said. “Baseline metrics should be put in place so process improvements can be tracked and trended to ensure sustainability.”

Possess end-to-end technology

The implementation of robust analytics is crucial to improve and sustain leading-practice operations. Of particular importance is conducting an analysis of the utilization of technology, as many health systems have purchased software that may not be utilized to its fullest potential. The appropriate utilization of technology will drive operational efficiencies and the ability to track and trend variations in process.

Because the most effective supply chain operations focus on utilizing technology to its fullest extent, it is incumbent upon supply chain leaders to ensure their data systems are interfaced and that data quality is maintained across their systems.

For example, if a supply chain operation has three systems, i.e. materials management information, enterprise resource planning and electronic data interchange, all three systems must interface and produce consistent data. “If your item master or your contracting data is incomplete or erroneous, then everything downstream will error out or have exceptions, which will increase administrative and financial burdens due to operational inefficiencies,” Kelly said.

Measure and manage performance  

In order to sustain new levels of performance, hospitals must be able to track and measure key performance indicators (KPIs) in their new processes. Supply chain leaders should use historical data and measure success from that point forward. Hospitals that manage performance have achieved savings of 8 to 10 percent across the supply and service expense base.

The following are some suggested KPIs for consideration:

  • The percentage of purchase orders (POs) submitted electronically: By looking at the percentage of POs that are sent electronically, managers are able to see how efficient their operations are running and reduce the risk of errors that often occur when submitting POs by phone or other non-electronic means. Furthermore, managers can better align their operations externally with vendors and internally with their accounting systems by going the electronic route when submitting POs.
  • Inventory turns: Supply chain managers should have the right products within their inventory and the right amount of products at the right time to eliminate any expiration of supplies within their stock.
  • Contract compliance: Those who oversee supply chain operations should consider contract compliance as a KPI to ensure that their contracts are carried out in accordance with their GPO agreements as well as those they have negotiated with local vendors.

The continuing evolution of the delivery of health care is changing the way supply chain provides value and measures success. By transforming your supply chain operation into a vital, collaborative and strategic function, you will not only help control escalating costs but also boost efficiency and help optimize clinical outcomes.

Want more information? Read how you can transform your supply chain operations to achieve high performance objectives and financial targets.

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