News

Survey: Hospital execs troubled with supply chain performance

by Curt Werner

Hospital executives appear to be somewhat disconnected or at best less than satisfied with the work of materials managers at improving supply chain performance, according to the results of a new survey on the subject. Jamie Kowalski, president of Milwaukee-based Kowalski-Dickow Associates Inc. and its parent ARAMARKServiceMaster Facility Services, said the survey, called the 2003 Supply Chain Management CEO/CFO Survey, yielded disappointing results. “The survey takes a pulse,” he said, “and the results show there is a big gap between materials managers and their CEOs, though maybe not such a large gap separating their CFOs.” Kowalski has conducted similar surveys for more than 20 years.

The survey drew responses from 75 hospital administrators in 30 states in all regions of the country, a vast majority of which (84 percent) are in not-for-profit facilities representing 25 to 745 beds. Approximately one-third (31 percent) are part of an integrated delivery network and reach across the domain of all national group purchasing organizations.

Kowalski said the results prove that there is much work to be done to convince hospital executives that there is value in cutting costs through supply chain improvement. He also urged supply chain leaders to quicken the pace of their work. “We think the responses are revealing and send the message that senior executives have high expectations for supply chain management performance and its leaders, while being only moderately satisfied with what they are experiencing. For supply chain management leaders, it should be clear that they need to take steps to enhance performance without delay. Hopefully, they will heed this call.”

Kowalski also allowed that the survey indicates that some facilities are benefiting from dogged supply chain tightening. “There is a considerable amount of work to do, but there are some supply chain leaders who really get things done.” Specifically, the survey found that nearly three-quarters of respondents (71.2 percent) say that agree or strongly agree that supply chain management is a “top three strategy” at their institutions. In addition, 80.6 percent say that the supply chain performance at their hospital is “better than it was two years ago.” Just 25 percent say they are considering outsourcing their supply chain work.

Those relatively optimistic numbers appear to belie an underlying dissatisfaction with current supply chain operation. When asked for their satisfaction levels of specific supply chain functions, a far more significant number indicated that more progress was needed. The survey found that only 68.1 percent were satisfied with their facility’s supply expense management; 69.4 percent were happy with their hospital’s purchasing process; and 65.2 percent were satisfied with storeroom inventory management. Fewer still (58.5 percent) said they were happy with the performance of pharmacy inventory management at their facilities.

In the most startling indicators, only 41.8 percent of hospital executives say they are satisfied with the OR inventory management at their institutions, while just 48.5 percent reported satisfaction with patient care inventory management.

The discontent appears to point in the direction of the supply chain leaders themselves. While a full 79.2 percent said they were satisfied with the knowledge level of their supply chain managers, the executives handed far lower grades to their managers in more specific categories. Just 55.7 percent were satisfied with their manager’s information technology knowledge; 56.7 percent were happy with their e-commerce use; 65.2 percent were satisfied with clinician/physician relations; 62.9 percent were satisfied with their manager’s communications skills and 63.9 percent were satisfied with their managers’ leadership abilities.

The arrow dipped further when the questions came to planning, change management and quantitative analysis. Just 52.1 percent said that the change management skills of their supply chain leaders were satisfactory and only 51.4 percent were happy with planning skills. Worse yet, only 44.3 percent of responding executives said they were satisfied with the quantitative analysis abilities of their supply chain manager.

Choosy executives perhaps, said Kowalski, but he nonetheless said the fact that there were “a whole lot of low- to mid-60s scores is unacceptable and supply chain leaders must educate their CEOs about why they should or should not be satisfied with their performance. Those numbers should be in the mid-80s.”

Kowalski, who has been consulting on materials management and supply chain matters for better than two decades, called for “radical thinking” among materials managers. “Maybe the volume has been turned down,” he said. “But materials managers have to do more and especially do more to communicate the message about the value of better supply chain performance.”

Kowalski also said that despite the number of strong materials and supply chain managers at work today, “there are not enough educated, talented people in this business.” He said that while more universities have supply chain curriculums, few of those schools offer education in the healthcare supply chain. Perhaps for those reasons only 37.1 percent of respondents said that their supply chain managers have vice president status at their facilities.
The group purchasing organization system also received mixed reactions from survey respondents. Only 39.4 percent of hospital administrators said that their GPO brings the same value as it did ten years ago and 57.6 percent said they believed that IDN prices are lower than GPO contract prices. What’s more, 29.7 percent said their facility would evaluate its GPO relationships within the next 12 months.


Depending on the way it is viewed, that number could serve as a shot across the bow of GPOs or a vindication that 71.3 percent have opted not to re-examine their GPO ties. To Kowalski, that message is clear. “People are questioning their GPO relationships,” he said, adding that hospitals are “starting to look at return on investment and finding that the [GPO] value isn’t there.” 

HPN

October
2003