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         Clinical intelligence for supply chain leadership

 
 
 

INSIDE THE CURRENT ISSUE

October 2012

People & Opinions

Worth Repeating

"Purchasing a display that is proven to be compatible with various medical imaging devices is critical, since many imaging devices do not follow video standards and often use proprietary video formats. Purchasing a display that can quickly and easily be disinfected is important to ensure quick OR turn-around times. OR cost is rated in dollars per minute — at home you have all day to clean your display."

Andy Larg, director of marketing,
NDS Surgical Imaging (NDSsi)

"Hand hygiene is widely accepted as the most critical infection-prevention intervention in modern medicine. Yet, compliance with hand-hygiene protocol remains an issue."

Hudson Garrett, Jr., PhD, MSN, MPH, FNP-BC, CSRN, VA-BC, senior director, clinical affairs, PDI Inc.

"I really believe CEOs, CFOs and COOs see value analysis as not much more than a modern approach to supply chain management, and not a concept or process to maximize efficiency and eliminate waste. That’s why I always supported the ‘Resource Management’ label as opposed to Supply Chain."

John Mateka, FAHRMM, executive director of supply chain operations,
Greenville (SC) Health System

"In the past, we relied only on visual inspection, which is very subjective. We now have many tools that we can use to verify that our automatic washers are working properly and that we have done a good job of cleaning the items before they go into the sterilizer."

Rose Seavey, MBA, BS, RN, CNOR, CRCST, CSPDT, president and CEO, Seavey Healthcare Consulting LLC

"2-D and 3-D bar coding does what it’s good at very well, but it’s not designed to address the growing need for real-time, dynamic tracking, monitoring, documenting and reporting. However, for those hospitals that want to continue using bar coding, it can work in conjunction with RTLS to help hospitals improve workflow."

Matt Perkins, Chief Technology Officer and senior vice president, Engineering, Awarepoint Corp.

 
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Today’s supply chain mantra: Change before you have to

by Joseph M. Dudas

Once the reform machine starts healthcare may never look the same. And, as [Former General Electric Chairman and CEO] Jack Welch may have said it best, "Change before you have to."

To truly change, we are going to need to master the essential skills to lead this change. In the past, one or two "change agents" might have muscled their way through. However, that is not going to cut it.

The change we are facing will not be isolated to our own internal organizations (in other words, this is much bigger). This is why the Mayo Clinic Category Management Team recently ranked talent management as our highest priority (and right behind that supplier relationship management). It is our people that are and will be the foundation of our Supply Chain of the future.

Category Management is new for us and what better place to start as we learn and adopt this strategic philosophy in healthcare. At Mayo we have identified six core competencies and 30 of the most important skills that we believe are needed to be successful. Following is a summary:

• Analytics – Spend Analysis, Financial Analysis, Price Decomposition, Benchmarking, Strategic Tools

• Purchasing – Project Management, Negotiations, Risk Analysis, Legal, Cross Functional Teamwork

• Supplier Relations – Supplier Management, Performance Measurement, Relationship Management, Continuous Improvement, Value Creation

• Personal Effectiveness – Collaboration, Communications, Facilitation, Adaptation, Time Management

• Sourcing – Methodology, Strategy Development, Breakthrough Thinking, Stakeholder Management, Supply Market Expertise

• Technical – Requirements Development, Information Technology, RFx, Auctions/Group Buys, P2P

We then defined five behavior scenarios that align with each skill (ranging from "learner" to "expert"). For example, a learner in the area of "spend analysis" might be someone who may benefit from but not be involved in the creation of the analysis. An expert would someone who could coach others on both the creation of the analysis and its use.

We then completed a formal skills assessment with everyone in the organization including both a self-assessment and interview led by an outside consultant. What we found is that we have a very strong foundation in Supply Chain skills, such as "Purchasing Essentials," but we have opportunities to grow in the other areas.

This is quite normal for any organization going through this type of change and generally what we expected. In other words, we are very good at managing the process to create supply agreements, but we lack some of the skills needed to fully leverage a supplier relationship. In order to think and act strategically, we need to develop strategic planning skills as well as master the tools needed to stimulate breakthrough thinking and innovation. By no means is this meant to be overly critical towards our staff as I believe we have some of the most talented employees in the industry. The issue at hand is that we (our organization) can and will get better. We have to. As a result, our next step will be to develop and execute plans to close these gaps.

Now, I know what you are thinking. What good is it to develop the type of skills necessitated by category management if the suppliers continue to operate the way they always have? This brings us to one of the key differences between "Strategic Sourcing" and "Category Management." It is Supplier Relationship Management. In parallel to our Talent Management Program, we have also recently launched a "Supplier Program." It encompasses the "Supplier Management" concepts of the past (with a few twists) but also a new "Supplier Relationship" component.

Supplier Management is a basic program that is built on establishing key performance indicators, a scorecard and a business review. Most would agree with this definition and that execution of such a program with your primary suppliers would be a best practice, and we would agree.

The following process may give you a better idea of what we have in mind (for Supplier Management):

1. Establish a few, 5-10, key performance indicators.

2. Create a scorecard for each supplier for a given category.

3. Meet with each supplier and share the results with them.

4. Establish a plan to improve.

5. Put the plan into action.

What we will do differently this time around is measure only those things that are critically important and instead of measuring one supplier at a time we plan on reviewing all the suppliers in a single category at the same time. These changes will give us the focus and scale needed to be successful.

However, "Supplier Management" is a program modeled after our current organizational skills and while there is always room for improvement this is the way we do business today (capitalizing on a few basic levers such as market share and price optimization). That brings us to the concept of "Supplier Relationship Management". We have decided to also augment our category management process with a formal "Supplier Relationship Management" program and methodology. This is very different in that it is not a "management" process it is a "relationship" process.

We will be adopting a strategic business planning process with formal objectives, research efforts, strategy development and an implementation plan. Our primary goal is to break free of our current time based contracting cycle so that we can fully focus our attention to those areas that will have the best overall business return. Our objective is to master the skills mentioned earlier and to engage a few "partners" in our strategic planning process. I think you would agree that this is quite different from "Supplier Management" and how buyers and sellers work today in our industry. We believe this is the type of program that will fully leverage our supplier’s full capability.

The following process may give you a better idea of what we have in mind (for Supplier Relationship Management):

1. Complete business intelligence review including surveying experts, market analysis, research papers, review of financials, etc.

2. Complete a strengths, weaknesses, opportunities and threats (SWOT) assessment for the category.

3. Create a Mission, Vision and Objectives for the category that aligns with the Mayo Clinic strategic plan.

4. Establish a 3 year plan with emphasis on the next 12 months based on the biggest opportunities to provide an impact and create breakthroughs.

5. Align resources to the plan.

The key to this type of effort is to first obtain the skills needed for strategic planning and second to think differently on how a "partner" can assist in this process.

In the retail industry, Category Managers have what they call "Category Captains." Category Captains (a supplier organization not an individual) assist the Category Manager with product selection, pricing, promotion and merchandising strategies.

In healthcare, we don’t sell products so will need to take a step back to adapt the philosophy rather than the mechanics. That is, we need to involve our suppliers in the "strategy" part of our process. I believe this can be effectively done but it is going to take a willing and able supplier. What is in it for us is a supplier-based viewpoint, and what is in it for them is just the opposite (first hand insights from a provider). What is going to be tricky is to not lose what has made us successful to date, a very competitive market place. For that reason, we are going to pilot with two categories this year.

We hope these thoughts help you and your organization and we look forward to your insights on this important topic (Category Management).

With the recent decision by the United States Supreme Court to uphold the Patient Protection and Affordable Care Act, we need to re-emphasize our need to change. It is important to recognize that healthcare organizations face many challenges. Beyond healthcare reform, we are facing a declining commercial reimbursement, aging population, changes in demand, increased regulations, soaring costs of new technologies and ongoing economic uncertainty. These challenges have forced Mayo Clinic to institute efforts to significantly reduce our operating expenses. Our plan is to function effectively at Medicare reimbursement rates.

Some of our suppliers have already stepped up and proactively brought price decreases as well as innovative ideas on driving cost out of the supply chain. To be successful we will have to work together and be open to new ways of thinking. Unfortunately, I think we need to revise Jack Welch’s quote for healthcare to "Change because you have to."

Joseph M. Dudas serves as vice chair of category management at the Mayo Clinic where he is responsible for all strategic sourcing, contract administration and informatics. To read all of his articles, visit HPNOnline and search for his byline.