Transforming the Perception on the Importance of the Healthcare Supply Chain


By Brent Johnson, President and CEO, Intalere

The healthcare supply chain is complex and very costly. And cost pressures on healthcare coming in the future create a “burning platform” or big need for supply chain to demonstrate their value. The low hanging fruit, or value, of supply chain is still easier to obtain than laying nurses off at bedsides or cutting clinical care. We have a great opportunity to help the industry navigate the future with success.

But the healthcare supply chain faces perception problems that are not inherent in other industries.

For example:

  • The most expensive and high risk items often have the least control.
  • Personal preference drives many product decisions.
  • Healthcare outsources less than most other industries.
  • Purchasing and Accounts Payable are often disconnected.
  • The healthcare industry has the lowest level of trust between buyers and suppliers (of any industry surveyed).
  • Supply chain is still in the basement of many hospitals (literally) – even though non-labor expenses are approaching 50% of total cost structure.
  • Logistics costs in healthcare are more than 10X the costs of the retail industry.

Changing the perception and understanding the strategic importance of the supply chain is incredibly vital to the continued sustainability of healthcare providers. A contract portfolio is only part of a full supply chain solution. Most facilities and their group purchasing organizations (GPOs) leverage volume aggregation in an attempt to primarily solve for one business line, in one vertical, in one expense category. Volume aggregation in the current GPO industry tends to focus on those areas of mid to high category spend and low complexity.

But it’s not sufficient for healthcare to focus solely on cost reduction strategies. Supply chain services include procurement, logistics and effectively helping clinicians to manage standardization and utilization. Providers need infrastructure – people, processes, technology and governance. The scope of the supply chain extends across every healthcare vertical, across every business line and through all expense categories.

Providers need end-to-end supply chain solutions that give them the ability to optimize the people, processes and technology within their systems to deliver the greatest value. Their strategy must include aspects of:

  • Inform and teach me (assessment and education).
  • Do it for me (managed services).
  • Show me (transformation services).

The focus must be on helping to develop transformational solutions and providing information recognizing the importance of the healthcare supply chain in improving efficiency, maximizing financial value and enhancing providers’ ability to offer the highest quality of patient care. Providers must join the revolution to make supply chain excellence a core competency within their organizations and achieve their high-level strategic goals through supply chain initiatives.

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