Three Areas to Drive Supply Chain Value


Strategic and proactive thinking are vital in providing supply chain leaders with an opportunity to shift their focus to a more holistic, value-centered approach.

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Dan Hurry

There is one certainty about health care supply chain in 2024: smart executives will challenge the status quo and think differently about strategy. Fraught with a perfect storm of challenges in recent years—including the highest number of drug shortages in nearly a decade—success going forward will be defined by a laser-focused approach to overcoming logistical challenges and lowering costs to alleviate quality and financial performance pressures.

A shift to more strategic, proactive thinking will be central to this outlook, providing supply chain leaders ample opportunity to level up their focus from day-to-day blocking and tackling to a more holistic, value-centered approach. There are three key areas where leaders can derive more value from their supply chain operations to drive financial and operational success in 2024.

1. Evolve from Line Item to a Value Driver

Healthcare leaders are used to seeing and measuring supply chain’s success based on the numbers on their financial sheet. After all, estimates find that supply chain represents as much as 40% of a hospital’s total operating costs. But instead of defining the supply chain solely by expense containment and admin fees, supply chain leaders can look at ways to drive value while also improving the supply chain’s impact.

Variability in the supply chain can be a large driver of incremental cost and waste. Leveraging industry-standard tools such as the SMI Critical Product Attributes Framework, supply chain professionals can identify products that are less critical to organizational operations and can be streamlined or eliminated. Applying this “Costco model” of offering the highest quality supplies while decreasing variability not only improves the procurement process, but also ensures cost-effective operations and increases quality and consistency in patient care.

2. Embrace a Consumer Mindset with your GPO

Most organizations have fallen into an unsustainable model of renegotiating with their GPO on a cyclical basis. This cycle is tactical in nature with very little supply chain strategy applied. Major GPOs tend to point toward an admin fee to distract providers from missed value opportunities across service lines, while simultaneously handcuffing the same organization into exclusivity.

If you think about it from a consumer mindset, it doesn’t make sense. A consumer wouldn’t limit themselves to shop at just one store. The natural behavior of consumers is to go where value is attained—whether that be Target, Trader Joes, Home Goods, or Sephora.

Traditional GPOs limit where you shop. There’s a focus on show price and admin fees, while the quality of service and products falls to wayside. We don’t allow exclusivity to get in our way as consumers, so why do we allow it to happen at our individual organizations?

A secondary GPO model not only enables you to improve negotiations and pricing on supplies and services not covered by your primary GPO, but also can help you break from the traditional negotiation “hamster wheel.” Finding GPO partners committed to creating long-term, value-driven relationships with your organization and proven vendors can improve performance.

This requires a deep understanding of the dynamic, ever-changing nature of today’s health system supply chain. Strong GPO partners work in the trenches and are accountable for helping you achieve strategic KPIs and prioritize contracts that create long-term value, not just short-term cost savings.

3. Keep Patients and Providers Front and Center

Improving outcomes and experiences for patients and providers will always be the number one priority in health care, and supply chain is no different. Focusing on these audiences can also enhance value and create more standardized, data-backed care.

Supply chain leaders may hesitate to diminish available supply options that might eliminate a provider’s preferred product. This hesitation is understandable, given that physician satisfaction is critical to recruitment and retention. But, foundationally, a high-performing supply chain ensures organizational success at all levels. Bringing physicians into the process early can appeal to their desire to make meaningful changes that align to their priorities for quality care and stewardship of resources.

In 2024 and beyond, clinician-led supply chains will become critical to reducing variability and improving overall quality. Identifying the product needs of clinicians across the organization (e.g., “We need this tube to bend like this,” or “The edge of this mesh to look like this”), leaders can work with their supply chain teams to identify just two or three options that fit the bill. Providers will see the value in a clinically proven option that meets their specified needs while lowering the total cost of ownership while maintaining or improving outcomes.

Meanwhile, patients rightfully expect reliable, high-quality care at a manageable cost. Offering many product options puts pressure on staff to be knowledgeable about multiple products. Optimizing product types to just a few greatly reduces room for error, improving outcomes while lowering overall costs.

Level Up Your Supply Chain Operations

This year, supply chain leaders will intensify their focus on developing highly proactive supply chain processes and operations. Focusing on these three priority areas can help your organization level up to a more successful, value-centric supply chain.

About the Author

Dan Hurry is president, Advantus Health Partners, and chief supply chain officer, Bon Secours Mercy Health.

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