If you’re focused on the healthcare supply chain you will be hard pressed to find an industry conference, trade association, research organization, or publication that has NOT addressed the need for greater collaboration and trading partner alignment. That was not the case as recently as two years ago.
When Johnson and Johnson Health Care Systems and Sisters of Mercy ROi joined Gartner Healthcare (formerly AMR) analyst Hussain Mooraj on stage at the 2009 GHX Supply Chain Summit to discuss their collaboration success story around vendor-managed inventory (VMI), Mooraj noted their experience was more the exception than the rule. Mooraj recalled how ROi had spoken to a group of suppliers at an AMR conference the year before and welcomed any of them to contact ROi about exploring collaborative opportunities. At the time, J&J was the only one to respond to that request.
Today, thanks in part to the success of these two organizations, conversations around collaboration are increasing and yielding results. The key is to identify a good partner and start exploring opportunities for collaboration that can generate mutual benefit. Sisters of Mercy ROi and Johnson & Johnson chose VMI, but that may not be an appropriate path for your organization. Not all of your trading partners will make good partners for these kinds of efforts either. To evaluate partnerships, you might want to check out the Strategic Marketplace Initiative’s free tool to the industry: Measuring Effective Relationships.
Last year, while helping plan the GHX Supply Chain Summit, two of our Summit Advisory Board members – a provider and supplier – decided to take the first step, with an agreement that the process would not include any discussions about price. They started by sharing information from GHX that identified an opportunity to consolidate the number of electronic orders sent through the exchange, creating savings for both parties. They are now working to map out the entire supply chain process across their two organizations to detect additional areas for improvement.
Here are other examples of effective collaboration in the healthcare supply chain:
· New York City Health & Hospitals Corporation (HHC) had to make a $7 million investment in new beds. Without the necessary capital, HHC called in both of its bed vendors. The supplier that not only offered a price 37 percent lower than the group purchasing organization (GPO) price, but also brought financing to the table, won HHC’s business for the next 10 years.
· BJC HealthCare conducted a project with its primary distributor and a cardiac stent vendor to follow the product from the manufacturer to the point of use. Together, they identified several improvements that could be made, including changes to product packaging to reduce breakage. As a result, the cardiac stent vendor saved a quarter of a million dollars and passed on $78,000 in shared savings to BJC.
Collaboration is well documented as a critical component of supply chain optimization in other industries. McKinsey and Company correlated the performance of 40 leading packaged goods companies to various supply chain attributes and found that supply chain collaboration was a leading success factor. Still, there are some in healthcare who believe we cannot learn from other industries. North Carolina State University Professor of Supply Chain Management Rob Handfield recently wrote in his blog that “many of the problems associated with rising healthcare costs can be addressed through simple supply chain concepts that have been around for years,” but he adds, many healthcare providers disagree, arguing that healthcare is ‘different because you’re dealing with patient care,’ to which the distinguished professor responds, ’Phooey!’” I could not have said it better myself. Is your organization working to create more collaborative working relationships with your trading partners? What kinds of initiatives are you undertaking? Where have you had successes and where have you encountered challenges? We’d love to hear and learn from your experiences