Chief Supply Chain Officers: It’s Time for a Seat in the C-suite - Christopher J O’Connor
By Christopher J. O’Connor, Founding Partner, The Bayard Group, Inc.
When vital provisions that were difficult (if not impossible) to obtain through normal channels made global headlines during the COVID-19 outbreak, the strategic importance of the healthcare supply chain finally got the attention it had long deserved. Supply chain is hospitals’ second highest cost center, exceeded only by labor costs. This is worth repeating… It is the SECOND highest cost center! In order to achieve the innovations that are essential to putting successful recovery plans into action, the time has come for hospitals and health systems to recognize the necessity of establishing a Chief Supply Chain Officer role. The question remains: Will supply chain executives finally get a seat at the table?
According to scientific prognostications, the question is not whether a pandemic of this magnitude will happen again, but when it will happen. Therefore, health system and supply chain leaders must seize the moment to consider how they can apply the lessons learned over this last year to improving their operations. And there is no time to lose.
First, there must be more transparency about where goods are being manufactured in order to ensure geographic diversity of sourcing. And as important, you must have transparency down to the raw materials. That way, you can do predictive modeling on the back end if there is an issue on the front end. Then, if a supply source is unable to fulfill orders, an alternative source can be tapped. We also need to make sure that there is transparency about the different steps involved in the vendor sourcing process. Hospital supply chain leaders can even consider making this level of transparency a contractual obligation when negotiating with suppliers.
Second, more clinical integration is essential to better supply chain decision-making. This is a topic I have covered many times in the past. For instance, when the shortage of personal protective equipment, hand sanitizer, and other items required creative problem-solving, discussions with infection control experts provided invaluable feedback on the clinical effectiveness of newly sourced products. It would be prudent to ensure that effective channels for clinical feedback are in place, not just in preparation for the next crisis, but to facilitate ongoing sourcing and distribution initiatives as the use of product standardization and just-in-time inventory potentially become less common supply chain strategies.
Third — but perhaps most important — is the necessity to invest in advanced analytics and predictive modeling. When such patient data as diagnosis and length of stay can be integrated with supply data (e.g., number of available ventilators), healthcare professionals can better anticipate the demand for hospital beds and essential purchases. Heat maps can also help determine potential sourcing risks, such as weather and manufacturing delays, which may be due to a variety of external factors.
Over the past few years, hospitals and health systems have begun to engage supply chain leaders who have experience in other fields, such as the retail, IT, and automotive industries. These industries have been investing in supply chain innovation for some time, and that has been reflected at the highest level. For example, Tim Cook of Apple and Mary Barra of General Motors both rose from supply chain positions to CEOs of their respective companies. That’s because in many industries, supply chain is regarded as essential both to the brand and the customer experience, especially those in which timely delivery is a major driver of customer satisfaction.
But in healthcare, there is a perception problem: Though supplies are used to help physicians ensure the well-being of patients, they are mistakenly overlooked when it comes to “customer” (i.e., patient) satisfaction. As a result, the supply chain has been considered transactional and supply chain executives merely conduits for getting the right supplies to the right place at the right time. In reality, they should be recognized for their dexterity in navigating the inherent complexities — logistical and legal — that simply are not factors in many other industries.
In the aftermath of COVID-19, as recovery plans kick into gear, supply chain leaders must be careful not to regress into a pre-pandemic acceptance of the status quo. Instead, they must use this fleeting moment to share their perspective with C-suite executives about how to build a more modern, resilient, better-connected healthcare supply chain. And they should come equipped with strategic roadmaps for enhancing technology infrastructure, considerations for contingency plans, methods for bringing new skills and talent into the supply chain function, and process improvements that will have positive downstream impacts on care quality and financial reimbursement. In order to be elevated to a more strategic position, supply chain leaders must move beyond discussions about price and instead deliver creative solutions.
While savvy healthcare supply chain executives have been pondering these considerations for some time, COVID-19 has brought these issues to the attention of the C-suite and hospital boards. This new awareness provides an opportunity for supply chain professionals to make their voices heard and to campaign for capital investments in supply chain innovation that can help improve hospital operations, patient care, safety, and emergency preparedness. It’s an opportunity for the healthcare supply chain to finally catch up with other industries; it’s an opportunity to bring ideas to the table; it’s an opportunity to create a Chief Supply Chain Officer. Most important, it’s an opportunity not to be missed.
Christopher J. O’Connor is an experienced CEO and nationally recognized healthcare entrepreneur, innovator, and thought leader with more than three decades of global experience advising growth-oriented hospitals and health systems in strategic supply chain management.
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