Senior supply chain leaders are skilled at positioning the supply function to influence the organization’s mission regarding safety, patient outcomes, and acceptance of new technologies. Making and managing insourcing and outsourcing decisions regarding supply functions are key aspects of these senior-level positions.

Progressive systems are also characterized by a group of clinical resource specialists or service line specialists who work with clinicians to assist in the selection and use of materials. These individuals, who frequently had very successful careers in nursing and pharmacy, are recruited on the basis of their ability to work with clinical staff.

Just as it is no longer sufficient for the CIO’s role to focus on keeping the company’s data centers up and running or the CFO to ensure the accurate recording of transactions, it is no longer good enough for the materials manager to sustain a uniquely transactional role.

Managing internal, external and executive networks

Managing the complexity of the hospital and hospital system supply function is related to the extensive number of internal and external network organizations and individuals that characterize the health sector value chain. While the following sections discuss these networks as though they are stable and identifiable, in reality it is sometimes difficult to distinguish between internal and external network issues. Community-based physician groups are external to the hospital in many ways. Yet when they have contracts that link their practice to the hospital or are employed by a hospital (for example, Mayo Clinic), they are truly part of an internal network. Supply partner relationships also are frequently structured to raise both internal and external network management issues. Distributor organizations that provide employees to carry out a full range of distribution functions within the hospital require management as part of a hospital’s internal and external networks.

External Network Issues. Managing the external network requires customer relationship management (CRM), supplier relationship management (SRM) and purchasing partner management (PPM). In even the most progressive systems participating in the ASU/CHMR study, these activities are hampered by the inability of information systems to provide timely and relevant data pertaining to internal and external purchasing partners.

The external network includes all of the players outside the organization with a directed interest in how the institution purchases, moves, uses, disposes of, and pays for materials. This includes (but is not limited to) GPOs, distributors, regulators, financial institutions, software providers, manufactures, third-party payers and patients. Although supply chain managers may not directly interact with each of these groups, they do have to be aware of and proactively manage each of these relationships. The degree of network management will depend on the facility’s strengths, assets, needs, goals, and nature of its association with the other players in its network. The role of the supply chain manager essentially becomes "engaging in network management (that) would neither be controlling, nor merely coping within, the network. Controlling and coping can be seen as extreme positions on a spectrum of (the) actor’s potential behavior within a network." Ideally, in dealing with external networks, the supply manager must assume a role that has the characteristics of both a business and strategic partner. This gives the supply chain manager great flexibility in choosing how to work with these partners and manage the relationships.

Internal Network Issues. In addition to elements outside the organization, the supply chain manager’s role increasingly demands skills that facilitate the management of internal networks. The rapid rise of spend for items other than labor has increased the supply chain manager’s span of influence.

Curiously, it is within the supply chain’s environment that the worlds of health care, management, and medicine meet. To communicate effectively, supply chain managers must be able to speak both clinical and business languages. To this end, they need to understand the complexities of the clinical, cultural, and political issues that span these internal networks. Perhaps it is best to think of the outcomes of internal supply management in terms of success in services provided to key end users and influencing organizational performance through innovation in supply chain practice and technology.

Executive and Clinical Network Issues. The executive officers and clinical leaders of an organization constitute a special internal network for supply chain management attention:

• Chief financial officer (CFO). Coordinating activities with this officer goes beyond simple evaluation of departmental budgets. In progressive systems, the CFO and supply chain manager work together to monitor and effectively manage facility expenditures through the development of performance metrics, such as spend per patient, spend per diagnosis-related group (DRG) or procedure, product transport costs, and contract and off-contract spend. These categories provide the groundwork for a facility’s budgeting decisions, strategic planning initiatives, and evaluation of purchasing options. The work of these executives is frequently hampered by the lack of standardized metrics and, as suggested by leading executives in the industry, the absence of clear return-on-investment information on supply chain management technology.

• Chief operations officer (COO). Closely working with this position will help ensure that high-quality and timely services are delivered to the patient as well as to clinical and non-clinical staff. For example, decisions about staffing levels and unit stocking schedules directly affect when an operating room or dialysis center will be able to receive patients. In addition, coordination between the positions proves essential for the introduction of new product lines, communication of informational technology systems, and restructuring of departments or job roles. Many clinicians tend to exhibit resistance to new technology; therefore, the supply chain manager needs to be able to bridge this gap between clinical and business operations in order to ensure successful integration.

• Chief executive officer (CEO). Communication with the CEO should be directed toward ensuring that the time and effort of projects are worth the investment of resources. In working with the CEO, the supply chain manager is also working to address the concerns of the board of trustees, to whom the CEO is accountable. In addition to financial concerns, there are issues of the public perception of decisions, the added value of an initiative, outsourcing decisions, and, if the information is available, the final return on investment. In this working relationship, the supply chain manager must be able to speak to the business side of issues as well as demonstrate the benefits to the facility. For example, in making recommendations for change, the supply chain manager must be able to justify changes by addressing the CEO’s clinical and operational concerns.

• Clinical leaders (chief medical officer, director of nursing). Clinical selection of materials is often seen as the biggest opportunity for savings in the health care supply chain. As discussed in Chapter Three, progressive systems have established value analysis teams to evaluate clinical material decisions. These groups are given the responsibility for assessing the multitude of products available for use, making recommendations for use guidelines, and purchasing contracts based on efficacy and patient outcome optimization. The goal of these groups is not just to reduce choice or simply cut costs; it is to help clinicians make informed logical choices based on data. In order to contribute to these deliberations, the supply chain manager must be able to gain the trust of clinicians to participate and communicate with members not just on the basis of costs or efficiencies but in terms of quality and use. HPN