‘5 Rs’ will boldly transform future operations

It seems that virtually every "new" and "revolutionary" idea that comes along can be traced to someone else in times long past. Leonardo Da Vinci invented both the tank and the helicopter hundreds of years before the technology was present to put them into production.

So it is with the healthcare supply chain. While innovations in technical capabilities have taken place over the years due to the development of faster and better computers, the basics of supply chain management have remained largely unchanged since Charles E. Housley published "Hospital Materiel Management" in 1978. The basics remain the basics. Often as not it’s still about getting the right stuff to the right place in the right container and the right quantity at the right time. Inventories are to be turned frequently, invoices are to be paid only after a three-way match has been attained, and patients are to be charged for the items used in their care in a timely fashion.

But, to turn another old phrase, the more things remain the same, the more they change. The healthcare environment of 2009 is vastly different than that of 1976. And while it is important to continue doing the same old things well, there are new and grave demands which require that things be done differently.

Since 1984 the prospective reimbursement model has caused healthcare organizations to monitor their operations to control cost while producing desired patient outcomes. This has led to an evolution of sorts for the Supply Chain Leader in the industry. Whereas in 1976 all a Director of Materials Management (the hot term then) had to do was know how to bend arms and shave a few dollars off the purchase price, today’s Supply Chain Leader must be knowledgeable (or at least conversant) in topics such as:

• Value Analysis

• Universal Product Numbers

• Enterprise Resource Planning systems

• RFID (Radio Frequency Identification)

• Third-Party Logistics

• Evidence-Based Decision Making

• Value-Based Purchasing

• Technology Planning

• Demand Matching Protocols, and many, many more

Consequently, the nature of educational preparation for Supply Chain Leader positions has greatly changed. While it is still not uncommon to see someone make his or her way from the storeroom to the big office in the best part of the basement, it is far more common to see the letters MBA after the name of the Supply Chain Leader on his or her business card. It is clear that as we monitor the technical evolution of the healthcare supply chain we must also monitor and recognize the evolution of the Supply Chain Leader. The inherent pressures to both add and demonstrate new core competencies are now the norm not the exception.

Today’s healthcare environment is witnessing a situation that is requiring more leadership skills from the Supply Chain Leader, as opposed to the managerial skills demanded in earlier times. Managerial skills address operational complexity. Managers deal with complex operational issues — management of business practices, policies, etc. Leaders cope with change — shaping the thoughts of their work force, developing strategies and new approaches to address evolving issues.

The changing demands placed on the Supply Chain Leader are accompanied by a need for a transformation in how the supply chain itself operates within the healthcare delivery system. New demands require the development of new paradigms, and the paradigm that best fits the Transformational Supply Chain can best be characterized by the "Five Rs." They are:

• Relevance: Both in the old world and the new

• Rigor: The employment of business discipline to all aspects of the operation. "Is the necessary discipline in place?"

• Rhythm: Continuity of action, thought and deed — the way you live life in the workplace. "Is this repeatable/replicable?"

• Responsibility: Professional commitment to doing the right thing the right way all of the time. "Is ownership and accountability clear?"

• Relationship: Behaving in a culture of professional community among folks with shared incentives, goals and commitments. "Are relationships in place to succeed?"

The nature of the interaction among the "Rs" can be viewed in two ways as diagrams 1 and 2 show.

In both instances, it becomes clear that "Relevance" is the bedrock upon which the rest of the model is built. Relevance is defined as pertaining to "both the old world and the new." This means that decisions made and directions chosen must pass the test of "getting the job done" effectively in those areas that have been and continue to be important in the old scheme of things (order fulfillment, inventory management, contract negotiating, etc.) as well as preparing a path forward in the fast-evolving needs of the day (how well are we impacting the health of our patients while balancing the needs of the organization).

I liken Relevance to the late Jack Palance’s character Curly Washburn in the 1991 film "City Slickers" when he instructs Billy Crystal’s character about the "secret of life" with this quote: "One thing. Just one thing. You stick to that and the rest don’t mean @#$%." Bottom line: If you get that right, everything else follows. The trick is figuring out the one thing (enter Billy Crystal). For providers, the one thing is the patient. If we can’t define how whatever it is that we are doing benefits the patient (in non-healthcare industry terms, that’s the customer), then we should question doing it. After all, isn’t each of the questions below simply different perspectives on the One Thing? Aren’t healthcare organizations formed to do ultimately one thing – deliver care to patients? I fear that we lose our point by offering multiple perspectives on the One Thing.

Every situation and prospective decision the Supply Chain Leader faces must pass the test of relevance as it pertains to seven issues: The overall goals of the organization, how those goals must be supported by the supply chain, how well the core competencies of the existing supply chain elements can be applied to the needs of the situation, what other options are available, what is the ROI of each option, what is the ROQ (return on quality) and how do I as an organizational leader champion the decision?

A new operational methodology is evolving. Evidence-Based Leadership is entering the workplace. Understanding that every decision has an impact on the totality of the workplace, the Transformational Supply Chain Leader of the future will understand the importance of gathering and processing information before decisions are made. The days of U.S.S. Enterprise Capt. James T. Kirk sitting in his white command chair, listening to the impassioned pleas of Dr. Leonard "Bones" McCoy on one side and the empirical logic of Mr. Spock on the other, waiting a few seconds, then arriving at the epiphany that produced the correct decision are gone (even though they have yet to arrive).

Continuing the "Star Trek" analogy, in today’s supply chain, Captain Kirk is giving way to next-generation successor Capt. Jean-Luc Picard. Alternatives are discussed, impacts evaluated, scenarios reviewed and relevance identified in advance. They must be, or organizations will fail.

Thus, the first question the Supply Chain Leader must ask every time is this: Is this (name the prospective decision/direction here) relevant to:

• The overall mission of my parent organization (today and in the future)

• The lives and health of the patients the organization serves

• The role and mission of the supply chain

• The resources the supply chain possesses

These four are followed by how engaged am I? Am I fully prepared and equipped to deliver the leadership necessary as an organizational "Champion of Change."

In the past, healthcare has been characterized as a "siloed" industry — where individual domains worked without knowledge or concern for the overall mission of the organization. In that context many costly and ineffective decisions were made — decisions that must be addressed and corrected.

In the future, the model will be the integrated model, in which the relationships among the elements are intertwined. To make that transition (from independent to integrated), a new breed of cooperative and broad-thinking leaders will be required. The Transitional Supply Chain represents the bridge from the past to the future — from the swaggering James T. Kirk box-kickers and arm-breakers, to the ephemeral Jean-Luc Picard channelers of change.