Improving Supply Chain Processes in 2016

By Cheryl Flury

Jump Technologies recently interviewed several healthcare system supply chain leaders to gain deeper insights into their plans for driving change and improving results in 2016. There were definitely similarities – for example, each business leader noted ways in which they’re engaged in driving greater automation of their supply chain processes to capture more cost reductions – there were also unique views on how to drive more savings, improve supply chain strategies, leverage technology, and expand supply chain responsibilities and oversight. Check out these insights for some new ways you might improve supply chain strategy in your organization.

Just a Bit of Background
Cost pressure on hospitals is soaring while business leaders continue to work on ways to reduce costs and help their organizations survive. In 2013, the Center of Medicare and Medicaid Services reported 27 percent of hospitals were at negative margins, with an expectation for that number to reach 30 percent by 2019. They predict by 2040, over half the hospitals in the U.S. will be losing money. As the ACA increases pressure on hospitals, and reimbursements decline even further, the need grows for more significant cost reductions. With labor and supply chain as the first and second largest operating expenses in hospitals, drastic cuts to meet financial pressures are inevitable and could be difficult to achieve without impacting patient care. There’s an expectation that supply chain will be a key driver of required cost reductions, given the impact on both labor costs and supplies.

A Snapshot of the Discussion (Download the Industry Report for the entire Q & A)

Question 1: With even greater supply chain savings expected in the future, we asked hospital business leaders where new savings will be achieved? Some of the overarching comments focused on the reduction of variation, both in the way care is delivered to the way business is conducted.  It was generally agreed that significant savings are available by reducing variation whenever possible, and making exceptions when warranted based on the needs of the patient or needs of the business. Some additional observations included converting more manual processes to automated, moving more inventory areas to 2Bin, and more supply chain oversight of inventory in the OR.

Question 2: Is your supply chain team being asked to take on responsibility for new areas of the hospital? For the last several decades, hospital supply chain leaders have worked to drive change in their supply chain processes, to create more efficiency and automation, and most notably, to reduce costs. Most agree they’ve already achieved price reductions on supplies working with their vendors. A more recent change observed is that supply chain leadership is being asked to take responsibility for operations in other areas, such as the Operating Room and Pharmacy, bringing new expertise, more efficient business processes and savings to these key areas, which represent significant supply chain expense.

Question 3: What current technology must be extended or augmented to capture the savings and efficiencies you’re targeting?  A few of the answers included more incorporation of multi-use handhelds (iOS and Android smart devices), more consistent barcode scanning for greater automation of data capture, expansion of RFID in areas with a strong business case based on cost, and support of effective 2Bin systems for supply management where high velocity, low cost supplies are in use.

Question 4: What additional changes in supply chain management strategy are coming? With healthcare leaders pointing to supply chain as a key strategic area for future business improvement, the group noted their strategies are changing, with specific operational improvements as the focus. Supply chain leaders agreed they have seen more executive-level support of supply chain initiatives with an increase in strategic focus, an ever-increasing focus on cost reductions, movement to demand-driven inventory versus push systems, greater adoption of global data standards (especially for product identification), and more standardization of processes and products.
Hospital supply chain teams have made great progress in the last few years. It’s clear: supply chain is becoming a key strategic component inside healthcare systems, and leading the development and implementation of new ideas. When you have a few minutes, download the paper for additional comments.