“People think we got big by putting big stores in small towns. Really, we got big by replacing inventory with information.” Sam Walton
Does the word healthcare have to be a “qualifier” – our go-to reason why our supply chain can’t be more demand-driven? We’ve all heard the example of Walmart as the global leader in supply chain management. But what are some of the things that make them great at this? There's a long list of attributes, all of which focus on identifying what a product is, where it's located, when it's been "consumed," at what price, and how many of that item need to be replenished. When your inventory is accurate, you can be very cost efficient.
Let's look at a partial list of what Walmart does to maintain the world's most demand-driven supply chain -
- Maintain fewer links in supply chain
- Leverage vendor managed inventory
- Manage strategic vendor partnerships
- Consistent information sharing with partners – demand signals flow up and down the supply chain seamlessly
- 100% product identification with UPC barcodes
Walmart’s headquarters in Bentonville, AR is basically a data warehouse. They continuously analyze trends, cyclical demand, holidays, regional requirements (every Walmart store has sporting goods for local football teams) even cultural and religious considerations.
Sam Walton’s quote rings even more true as Walmart continues to grow and expand into new market areas. They use their analytics to examine what businesses they should be growing. Again, a lesson for healthcare to learn.
Can we get there? Of course we can… better data will create transparency, which will allow demand signals based on standardized data to flow across IDNs, GPOs, distributors. If, like Walmart, we treat data as an intelligence center, we can move our supply chain to a demand-driven environment
This shift is easily be described as moving from a push to a pull supply chain system:
Push System: Loads the system in anticipation of demand that may or may not materialize; Order takes place when inventory reaches a certain level
Pull System: Pulls inventory through the system; Ordering takes place based on actual demand
With a demand-driven supply chain model, we can make the entire healthcare industry better, more efficient and more predictable. Our next blog will provide 10 steps you can take in your OR today to become more demand driven.