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Healthcare Business Solutions
October 4th, 2017

From Dave’s desk: The ever-changing healthcare supply chain

In recognition of National Healthcare Supply Chain Week 2017, I thought it would be helpful to present a historical perspective on where we came from, where we are now, where we need to be, and how we can get there.

 When we look up the healthcare supply chain mountain, the challenges that must be overcome sometimes seem insurmountable—there is so much to do that it can almost be paralyzing. But while climbing the mountain, remember to pause and look down every once in a while to see how far you have come.

I started my career in healthcare 40 years ago, working in the interventional radiology department of a hospital. In those days, we thought of the supply chain as materials management. When I asked where to find the department, I was told to go down to the basement and look near the morgue because that’s where they had their offices. In those early days, if someone within the healthcare system needed something, it was the materials manager’s job to get it—no questions asked. They were seen as a necessary cog in the workings of healthcare.

Then over the next 20 years, as the C-suite recognized that supplies and purchased services were a significant area of spending (behind only labor), materials management began moving out of the basement and into the carpeted areas of healthcare systems. While materials management was still under the oversight of finance and administration, the role was changing and it was gaining influence. Responsibility shifted from managing materials to purchasing them—at the lowest possible price in order to help the healthcare system become more fiscally responsible.

In the past 10-12 years, there has been a major shift in the profession as healthcare systems increasingly recognize the supply chain as a strategic imperative to the success of their organizations. The movement from volume-based to value-based care, and the supply chain’s critical contributions to value-analysis teams, have been key drivers in this shift.

The healthcare supply chain has become a much more sophisticated, data driven process, and healthcare systems rely on supply chain experts to keep costs and inventory levels down while providing exceptional levels of service to clinicians and their patients. As a result, supply chain professionals are becoming part of healthcare systems’ executive teams, reporting to the CEO and/or CFO, and gaining a seat at the C-suite table. That’s in pretty stark contrast to when they were relegated to a basement office next to the morgue.

The healthcare supply chain has come a long way, but we still have a long way to go. Economic factors are driving us to accelerate the rate of change, so we are expected to achieve the magnitude of transformation that happened over the past 40 years in just 4-5 years. Thankfully, we are not the first industry that has had to achieve a high level of supply chain sophistication. We can look to and learn from other sectors—think about the Amazons and Walmarts of the world and how they effectively manage commerce.

But as we adopt and adapt supply chain processes and technologies from other industries, we need to do so in a way that makes sense for our industry. While there are similarities, healthcare is unique. We are dealing with human lives. That’s why I believe that the healthcare supply chain in tomorrow’s world must be a balance of individuals who are historically rooted in our industry—those current executives who stem back to the materials management days—and a new generation of supply chain professionals who have used best practices and enabling tools in other industries and can help us think differently and see what is possible.

I believe that coupling the next generation of supply chain leaders with the current generation, and accelerating that pace of learning and doing, will enable healthcare to keep up as we move into the future.

Let me know what you think on Twitter and LinkedIn.

Dave Reed is currently Vice President of Healthcare Solutions for Cook Medical. With over 35 years of life science industry expertise, Dave holds an MBA from California Miramar University and serves on the board of the Strategic Marketplace Initiative (SMI), is a past member of the Indiana University Kelly School of Business Supply Chain Academy Advisory Board and is a professional member of the Association of Healthcare Resource & Materials Management (AHRMM).