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INSIDE THE CURRENT ISSUE |
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Supply chain leaders build bridges to C-Suite
by Rick Dana Barlow R ough riding through a bumpy economy isn’t the primary motivation for the C-Suite’s renewed, if not reinvigorated interest in supply chain operations.When the economy was soaring, projected healthcare reform aftershocks lit the fuse, for example. Still, many other healthcare organization C-Suites simply seek and strive to manage expenses more effectively and efficiently. And logically, with supply chain accounting for up to half of a facility’s expense stream depending on the survey statistics you follow, the key executives that comprise the C-Suite know where to turn for results. Yet how have supply chain leaders responded, particularly if they’re not the ones who carried the torch for the department and initiated the relationships? By and large, supply chain acceptance by and influence on C-Suite executives hinges more on the charisma and personality of the supply chain managers who exude leadership qualities and the C-Suite executives who encourage and aren’t threatened by that. Depending on the facility, such relationships emerge at varying times. For some, it’s already ingrained and in place when he or she arrives. For others, it starts when he or she does. And still for others it develops in reaction to or in preparation for an actual or anticipated financial or operational crisis. Planting the seeds
Harold E. Richards Jr., director of materials management, Edward Hospital, Naperville, IL, knew the game plan from the get-go. "Our C-Suite and supply chain relationship began during the interview process," Richards told Healthcare Purchasing News. "After discussing the organization’s goals and objectives, it became obvious that executive support was an important element for success. Our CFO is very progressive and sets very aggressive fiscal targets." Richards indicated that he favors supply chain’s reporting to the CFO, which has been the case for him in several previous positions, because it "gives you the open door to the C-Suite." Sharing financial reports on a day-to-day basis gives supply chain the opportunity to find "hidden gems" and increase savings opportunities that solidify supply chain’s reputation and place it in demand, according to Richards. "On Day 1 this was supply chain management’s task," he added. "It’s the way you’re going to be successful with the C-Suite."
Dan Humphrey "The supply chain at MHHS 10 years ago was an abject failure in processes, and there had been no real leadership for many years," Humphrey recalled. "As a result, the individual facilities took it upon themselves to create their own mini-supply chains. During my initial 6 months at MHHS, I had to produce a strategic plan for creating a world-class supply chain. Once this was approved by senior leadership, my team and I then had to ‘sell’ the plan to all the C-Suites at our various operating units. This process took two years to completely sell, even with many early successes." Florence, SC-based McLeod Health also embarked on a supply chain reform project with a new leader at the department’s helm.
With a storied background in real estate and theme park development as well as expertise in horticulture, Locklair reached into the food distribution industry to recruit Carmen Winfield as procurement director. "One of her clients was Kmart so she knew how to work with small margins, fast turnovers and perishable items. She brought to the table expertise and insights that were invaluable," he noted. "Our backgrounds formed the basis for implementing disciplines used in the business world in healthcare," Locklair continued. "We looked at all the tools at our disposal, including the [materials management information systems], point-of-use systems and item master-chargemaster integration. We also looked at our internal processes. We brought in members of the supply chain team and mapped out every single process with diagrams. Then we observed all of those processes we diagrammed to see what was actually taking place. "Our goal was to improve service to the customer, which is the patient, by improving the service we provide to those who care for those patients directly – the clinicians," Locklair said. "They don’t want to be burdened with the unnecessary tasks of looking for products so we had to find ways to free up time for them to do what they really want to do and that is to provide patient care. So Locklair, Winfield and the supply chain team implemented lean processes. "That helped us strengthen the supply chain and draw focus on the value it brings to the clinicians and to the strategic relationship with the C-Suite," he said. "We merely leveraged what we did on what others were doing for the patient. By giving nurses more time to provide care to the patient you’re improving care, which improves patient satisfaction and clinician satisfaction, too. That formed the strategic fit that the supply chain developed with the organization in aligning with the mission and vision of the organization. This perspective distinguishes the supply chain executive or leader with the supply chain manager, Locklair added. "The manager has to keep the trains running every day; the executive has to mess with the trains so that they can run smoothly. I give the managers credit because they have a hard job. They have to satisfy customers while someone is tinkering with what they do all the time," he added.
"My relationship with the C-Suite has been a long-standing one," McFarland said. "It is rooted in our CEO’s focus on non-salary expenses and processes in order to maximize the resources and personal efficiency of staff in order to provide the best possible patient care. Recently, it has been evolving into issues surrounding the transparency Accountable Care Organizations will need to demonstrate in the future." Cambridge’s CEO previously served as COO to whom McFarland originally reported until supply chain management started reporting to the CFO about four years ago, he added. At Scottsdale Healthcare, a consultant evaluating supply chain operations at the behest of the CEO sought to "elevate the importance, visibility and impact of the supply chain," by creating a new executive position that would be part of the top management team, according to Mike Hildebrandt, associate vice president of supply chain, and the person who filled that role.
"All organization’s supply chain departments struggle to be engaged with the Os," said Dee Donatelli, vice president, Performance Services, VHA Inc. "Those who have been successful in having an executive sponsor that sits in the [C-]suite are clearly leaders in the industry. That hallway networking is the first step in relationship building. If that is not a reality or possibility the next best approach to the [C-Suite] is to have them sponsor value analysis teams. The leading practice organizations have both an executive steering oversight team for supply chain value analysis as well as individual Os that sponsor teams or supply chain initiatives. Another key to this success is to have executive sponsors on teams they are not operationally attached to. This accomplishes a much deeper organizational cross training around supply chain." Sowing success An influential supply chain department has banked a number of key wins evident to the C-Suite. "In the very beginning our first project was to bring in a point-of-use system to the hospital to replace the stickers," Locklair said. "We identified the need for an automated system and how to replace stickers. As part of that project we recruited the senior leadership from nursing, information services and a variety of other areas. It was a true team effort that the C-Suite championed. Each area focused on one aspect of the project. For example, nursing developed superusers who could use the system and report on progress. "Sure, we had barriers to overcome and faced difficulties," he continued. "I’d be lying to you if I said we didn’t or didn’t say we had them. But we had the teamwork to make it happen with the C-Suite behind us to motivate us and promote success."
Richards credited his facility’s non-salary expense reduction team, in concert with their group purchasing organization [Premier], in generating more than $3 million in savings during the current fiscal year. As chairman of the committee, Richards presents bi-weekly updates to executive leadership that discuss identified savings, strategies and executions, he indicated. One prominent example centered on implants. "We were able to recruit the C-Suite to help us engage the surgeons to work together," Richards noted. "We met with the orthopods and showed them the basic data – incumbent vendors and existing market share, along with what we were paying and the average costs per procedure. We asked if they’d be willing to sign letters of commitment showing a willingness to move market share and switch vendors to save money. "When they were brought into the process like this they were willing to work with us," Richards continued. "It demonstrated that the hospital and surgeons were working together and prevented the opportunity of the vendor working with the surgeons against the hospital. The vendors saw this and recognized that market share was on the line. With senior leadership’s help the surgeons were able to see how they factor into the financial health of the organization and what they could contribute. Those suppliers who told us they already gave us the lowest prices now realized that they had to do better to keep the business. We saved $800,000 in Phase 1 of that project. It helped us gain more influence with surgeons because they felt we were doing it the right way and willing to work together." Humphrey consolidated all purchasing at the corporate office, with nine buyers, one manager and one director from 51 purchasing personnel, he noted. Some of those full-time equivalent staff reductions then occupied a new project management office with dedicated professional project managers and a finance office with a director, manager and a number of analysts. McFarland focused on the fundamentals. "We have successfully developed tools to help monitor supply usage and utilization in a number of areas," he said. "My staff and I meet regularly with the major user departments to discuss trends in usage, major contracts and benchmarks relating to price and utilization. These tools help feed our value analysis process, setting annual targets or areas to work on. The tools are gaining acceptance by staff and clinicians as an accurate portrayal of the institution’s expenses. It is especially helpful that we have several years of internal data to compare against some external benchmarks." Veering off-track To offset out those key success stories that wow the C-Suite, supply chain also can misfire a few. For McFarland, data were the culprit. "We have faced some challenges in benchmarking our department versus others," he said. "There is no national database that helps me compare the number of staff, the productivity of my employees and the efficiency of my supply chain with other healthcare organizations. Also problematic was the rapid pace every materials management department has to maintain with limited or reduced resources, as well as the fear that sharing this information is not acceptable." Product conversions plagued others. "One of the few failures that we encountered was our inability to get some key surgeons to agree to evaluate and convert to endomechanical products from a different vendor," Hildebrandt recalled. "Endomechanical products are a highly sensitive physician preference item, and we were unable to get physician support for this cost savings opportunity. We are hopeful that this opportunity can be reevaluated in the near future." At Richards’ hospital, the challenge involved urological catheter trials that meant moving to silicone from latex to reap the best savings opportunity, he recalled. "Our C-Suite supported the initiative after reviewing the financial impact," he said. "However, urologists kept experiencing complications, so we discontinued the trial. Although the project was not successful, we were successful with engaging leadership." Thankfully, because Richards engaged the surgeons up front supply chain’s credibility wasn’t compromised. "Surgeons knew we were working with them," he noted. "Senior leadership went to them to show what we were trying to do. This opened the door for them." While the goal to save $130,000 may have been fiscally sound, Richards blamed more of the process for the project’s failure. They should have phased in the product conversion to a silicone catheter with another latex catheter first, he argued. "We didn’t do it well enough that time," he lamented. "We invited input but already had made the decision to save money. Still, the surgeons came back saying they liked the fact that we got them involved. Whether you like it or not, you’ll move forward. We were able to demonstrate our willingness to work with them. They want to know that someone is willing to listen and not just save a dollar." Humphrey recalled their attempt to set up a consolidated central sterile processing operation. "Even though we had an excellent third-party partner to [launch and manage] this platform, we could never completely sell such a change to our C-Suites and surgeons," he said. But cooperation can take time and effort, according to Locklair. "Years ago we initially struggled with relating to the OR, but the vice president of surgical services had the tremendous foresight to recognize the critical role supply chain can play in helping them improve their bottom line performance," he said. "We had to develop trust first and then credibility, starting with small successes over time. Since then we’ve been willing partners working toward accomplishing common goals."
Working with C-Suite executives can be arduous and demanding, especially if supply chain leaders fail to use a strategic game plan to manage the relationship. "[The] C-Suite can be a very demanding group with an enormous amount of appetite for information," McFarland admitted. "Due to this appetite, many managers will seek to feed the beast. Fortunately, my CEO is always interested in listening to what people have to say and what they have learned from the information that they are feeding to the C-Suite. "Performance is key for anyone working regularly with the C-Suite," he advised. "You need to develop consistency and a good work ethic, which should include a desire to do your best, follow through on issues, admit when something does not go right and show up every day committed to the work." Hildebrandt agreed that the basics must be in place. "When working with the C-Suite, it is critical that supply chain leadership be prepared with a strategic plan, goals and objectives that are consistent and supportive of the overall health system goals and targets," he noted. "The supply chain targets and benchmarks need to be specific, measurable and accountable both in results and timeframes. Supply chain also needs to report and update the C-Suite on progress and activities on a routine and consistent basis." Richards called for comprehensiveness and tenacity to keep pace with C-Suite objectives. "The C-Suite should be very instrumental in establishing annual operations improvement teams," he advised. "Trying to create teams at a departmental level reduces the accountability of its members. Everyone needs to be accountable." Richards dismissed those who complain about their lack of influence and charged them to stop reacting. "Do you wait for them to see the light? That light may never come," he noted. "You can’t be afraid to do your job. If they shoot something down you have to bounce back and figure out how to use the resources you have to get around roadblocks. Once the C-Suite sees you doing your homework they’re less likely to pick up the telephone to call the next consultant in who will do the same thing. You have to speak up – not just save some money here and there and hope somebody invites you to the table. You can’t just wait." Organizations may need a fundamental cultural shift akin to the one at McLeod, according to Locklair. "We aren’t afraid to fail," he said. "We have a no shame-no blame philosophy and culture here. We believe we learn from our mistakes. I’m part of the leadership team here but I’m not a senior vice president. Still, I’m not afraid to point out when and where we fail and freely do so. That open dialogue is welcomed. Organizations that don’t have that kind of leadership have to plod through a lot of issues without ever addressing the real issue. "More often than not, it’s the process and not the people that are at the root of failure," Locklair continued. "First, the C-Suite has to recognize that people have to not be afraid to talk about failures and mistakes. You can’t go to the C-Suite and try to bluff your way through anything. You have to be open and transparent. Honesty is crucial. That’s not to say we aren’t accountable. We work through any failures, making the necessary corrections along the way. Our goal is perfection with the understanding that we’ll never achieve it. You must never be satisfied where you are." Humphrey seemingly approaches the relationship like a strategic game of chess where checkmate isn’t the goal – managing piece movement is. "Obviously, you have to always manage expectations – promise light,
deliver heavy," he said. "You also have to be able to control the
conversation. In all meetings with C-Suites, I attempt to imagine all
possible questions or concerns and then answer them in my presentation. That
allows me to control the meetings and the conversation."
Editor’s Note: For more details on what these C-Suite-focused supply chain leaders have achieved with their senior executives and clinicians go to www.hpnonline.com/inside/2011-07/1107-SCMachieve.html. 
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Senior executives are taking these operations very seriously
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Always know what your people in supply chain management are involved
in and how those activities and potential outcomes affect others in
the organization. Be able to speak intelligently with other leaders in
organization. Get out of the office and observe situations. Understand
your customers’ needs and how your department is supporting them.
•
Understand the total cost of ownership for products purchased and used
in patient care, and not just the purchase price. How much does it
cost to source the product, to order it, to pay for it, to deliver it
to where and when it is needed? What is the product’s impact on the
quality of care, e.g., on reducing hospital-acquired infections, that
will play an increasing important role in how your organization is
reimbursed. Have this data available when you meet with business and
clinical leaders.
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Look for opportunities to participate in cost-reduction initiatives
that may not involve suppliers (such as services) but where you can
add supply chain knowledge and experience for a successful outcome.
•
Invite representatives from your C-Suite to become administrative
champions on your supply chain/value analysis teams to experience
firsthand the challenges your teams are facing, and then elicit their
guidance to overcome any and all obstacles to your supply chain
success.