When it comes to elevating the role of the supply chain in hospitals, we may be our own worst enemy. That was one of the takeaways from the most recent national executive survey on supply chain management presented at the 2011 AHRMM Conference in Boston. Recently, I had a chance to sit down with Jamie Kowalski, who has been researching perspectives about the healthcare supply chain for AHRMM – The American Hospital Association’s membership organization for supply chain professionals - for nearly 30 years.
This year’s study, conducted in partnership with Marquette University, compares and contrasts how hospital executives and supply chain leaders view the strategic value and performance of the supply chain in their organizations. Generally, both parties agreed, the supply chain can have a positive impact on clinical and organizational performance. While the average scores were not bad, 3.6 to 3.8 out of a possible 5, respectively, Kowalski expressed disappointment that the overall scores were not higher. More importantly, the scores from supply chain leaders were not substantially higher than the executives. As Kowalski stated, and I would agree, if those closest to the supply chain do not recognize the strategic role their function plays, how can we convince those leading today’s healthcare organizations to give it the attention it deserves?
What may be of greater concern is the unwillingness of C-level executives to support the supply chain beyond words. Despite saying they consider the supply chain important (3.7 to 3.85 on a scale of 1 to 5), their willingness to invest in the supply chain was significantly lower (below 3 for CEOs and COOs with no direct supply chain involvement, only slightly higher for those with some connection). As for supply chain priorities, the biggest difference of opinion between the C-suite and supply chain leaders was related to “supply chain organizational competence” and “enhancing supply chain IT,” with executives ranking it lower, supply chain leaders higher.
I am hopeful the rankings for investment in supply chain IT get a boost from studies such as the one Oracle Healthcare Insights published last year, stating that “hospitals that invest in back office automation, and process improvements enjoy operating cost ratios that are 2 to 4 percent better than those of their peers.” Specifically, the study called on providers to increase investments in tools to enable electronic order exchange with suppliers (including the use of order acknowledgements and advanced ship notices) and automate processes around procurement, invoicing and catalog price updates.
The executives’ relatively low prioritization of supply chain competence, meanwhile, is not only out of sync with how high they ranked the supply chain’s importance, but also with their satisfaction (or lack thereof) with supply chain performance, which the CEOs and COO – both with and without supply chain involvement, ranked below 3. As a good friend of mine, Vance Moore, who is now vice president of operations for Sisters of Mercy Health System in St. Louis, often asks – if the supply chain represents 30 to 50 percent of a hospital’s operating budget, why aren’t we investing a proportionate amount in professional development. He attributes some of that to the lack of focus on the supply chain by professional associations. The study actually explores that topic, asking respondents why, as an example, the American College of Healthcare Executives (ACHE) devotes so little attention to the supply chain. A common response: the supply chain just isn’t sexy enough. Here’s what C-suite and supply chain leaders had to say when responding to an open-ended question about impediments to supply chain being on the ACHE Congress Agenda:
In our conversation, Kowalski and I both noted that a number of leading healthcare delivery organizations are beginning to elevate the stature of the supply chain, but they are apparently still in the minority. One group of folks who do seem to “get” the value of the supply chain are nurses working in areas such as the OR, CATH Lab and ICU. A couple of years ago, Kowalski asked critical care nurses what they thought of the role of the supply chain in improving patient care and safety. The response- more than 8.5 on a scale of 1 to 10, with 10 the highest. If supply chain leaders need a champion – and I would argue many do – I would suggest looking at how to align forces with the nurses.