The Healthcare Supply Chain: 2017 and Beyond

By Sophie Rutherford

2017 might be the tipping point for healthcare supply chain leaders to prepare for the next decade - the years 2020 and beyond. With the financial support of HITECH for Electronic  Health Record technology ending, I believe we’ll see renewed focus on the areas where healthcare technology still lacks. There is a greater need to integrate systems to the EHR, as well as  a requirement to invest in technologies for other areas, specifically supply chain.

Although healthcare supply chain has made major steps in the past 10 years - especially toward greater maturity and strategic alignment with financial and strategic goals - there remains significant opportunity to improve supply chain technologies. When we compare healthcare to supply chain advancements in other industries, we are still 10-15 years behind the curve. I see this gap closing, but there is still a need for healthcare to invest in supply chain to keep pace.

There are 4 main areas I believe will be addressed in 2017 with supply chain investments:

  1. Supply Chain Technology, or lack thereof, is a major gap between healthcare and other industries. Today in most industries, the inventory replenishment process is fully automated, touchless and items can be tracked from origin to consumption (chain of custody) electronically. Many industries have adopted lean inventory management methods that eliminate the need to “count” or “trigger” replenishment. Often in healthcare, the nurse is required to scan or make some type of entry to deplete an item and create the replenishment request.  The other option is  to have inventory techs going to PAR locations daily to “count” items to create the replenishment request. Either way, the use of resources is costly and inefficient.  Few hospitals are truly running lean operations - for example, utilizing a 2Bin/Kanban system for inventory management to eliminate the need to “count” or “trigger” replenishment.

  2. Data Analytics – The strategic use of clinical pathway utilization will provide a roadmap to product consumption opportunities and physician preference standardization. When you can truly compare cost by physician, procedure, manufacturer, GPO contract, etc., hospitals will have a clear path to outcomes-based decision support, requiring more effective  supply chain technology in place, and the ability to integrate this information to the EHR. Beyond outcomes, once data is synchronized across technologies, we will be one step closer to CQO alignment (Cost, Quality and Outcomes).

  3. Lean Methodology (2Bin/Kanban) – Once the data is aligned, a hospital can begin to optimize inventory management processes with a clear picture of utilization, waste and redundancies. The move to lean inventory management is more of an operational investment (change management, reorganization of supply areas and training) versus equipment, shelving/bins, increase of inventory or capital investment. The need to increase inventory on hand is one of the big myths of 2Bin/Kanban. The opposite is more likely to occur -  inventory reduction, with a clear ROI  on the technology investment.

  4. Succession planning – This area will affect supply chain in a big way over the next 10 years. There is a large portion of supply chain leadership today made up of “Baby Boomer” generation (largest of the 5 generations today). This generation is typically hard-working optimists who are big on teamwork, but potentially light on technology adoption, which may be causing some of the technology gap that exists today. Right behind those Baby Boomers are the “Generation X” leaders. The Gen-Xers are a very entrepreneurial generation and have a desire to learn, explore and make a contribution.  Hopefully, the Gen-Xers are doing their homework and are ready to take charge of bringing healthcare into the next decade of technology innovation. The only potential downfall as the Gen-xers move into leadership roles is that they are very committed to career, but  perhaps less to an organization, so we may not see the longevity at an organization as we experienced with the Baby Boomers. (Gen-xers average 7 careers in a lifetime.) Is that a bad thing? Possibly not, it could be good to shake things up. Finally, we have the up and coming Millennials (aka Generation Y). They bring strong digital literacy,  having grown up in a digital environment; they’ve never known a world without computers and get all their information and most of their socialization from the Internet. This will be the generation that takes healthcare technology to the next level! So succession planning becomes critical over the next 10 years, and choosing the right millennial to lead your organization will be paramount. It’s important to choose the candidates now who possess strong assessment skills, are focused on building relationships and are excellent collaborators and communicators. The better prepared we are for our next generation(s) of leaders, the more successful we will be in preparing for 2017 (or Infinity) and beyond!