To understand this best practice one must understand how the healthcare supply function has evolved. The concept of materials management started in industry. In the 1940s and 1950s industry discovered that putting several heretofore independent functions under one umbrella led to increased efficiencies and reduced cost. These functions often included purchasing, production control, warehousing, inventory management and transportation. By the 1970s the materials management concept had been adopted by most progressive companies. It had proved its value.

As late as the early 1980s most healthcare supply functions were fragmented and limited in scope with purchasing, warehousing, and distribution all reporting to different managers. But through the 1980s healthcare began to introduce materials management.

Early adopters often did little more than change the name of the purchasing manager to materials manager and add receiving and the general storeroom to his or her list of responsibilities. These newly appointed materials managers rarely had any real understanding of the logistics side of the business. Further, their scope of responsibility usually only included those supplies that flowed through the storeroom. Department managers continued to do much of their own purchasing and inventory control. Ever so slowly the scope of materials managers expanded along with their expertise. But still it was clear that the potential reached by materials management in industry was not being realized in healthcare.

By the early 1990s several thought leaders recognized that materials management as a concept was never going to gain the traction and respect needed to have a significant effect within healthcare. By the mid-1990s popular expense management consultant Bill McFaul started to promote the concept of resource management. According to McFaul, practitioners needed to look beyond the management of materials and begin concentrating on the management of expenses, materials and resources. It wasn’t just the boxes of supplies that were important. Resource managers needed to be concerned with all the dollars spent on non-labor supplies, equipment and services as well as all the labor used in materials related processes. Compared to materials management, resource management was a different mindset as seen in the following table.

While healthcare was trying to catch up with the materials management concept (tentatively renamed resource management) industry was forging ahead. They realized that just looking at internal processes limited the advancements that might be made. They realized that there is a chain of events from acquisition of raw materials to payment for goods purchased and that collaboration among business partners throughout this chain could help everyone’s costs and efficiencies. This has developed into supply chain management that is now the norm in industry. Managing the supply chain has become a strategic focus of virtually any business that is materials intensive.

By the late 1990s, industry’s success with supply chain management was becoming too prevalent for healthcare to ignore. Further, the results of the Efficient Healthcare Consumer Response (EHCR) pointed out the many inefficiencies in healthcare materials operations – inefficiencies that supply chain management would greatly improve.

Leaders in the healthcare materials world began to adopt a true supply chain view. They kept and expanded on the concepts of resource management. They added a more holistic approach, began collaborating with business partners, expanded their scope to cover all those areas that traditionally bypassed materials, and began to impress the importance of supply chain to senior management. Some even became senior management.

Implementing this best practice is not a quick or easy transition. But the results should be very rewarding to your organization and to you personally. A good way to start is with a self assessment of your current operation. Then start to strategize on what needs to change and how quickly those changes can occur.

A great place to start is with many of the other best practices – most of which are very supply chain-oriented. Practices like strategic planning, strategic sourcing, key supply chain policies, organization level supply chain metrics, and partnering with suppliers are all components of a supply chain mentality. Then combine moving towards these best practices with a concerted and continuous internal sales process to convince organization leaders of the importance of a strong supply chain program. It will be a long road but one well worth the journey.