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Supply chain
of command hooks into C-suite
by Rick
Dana Barlow
As
hospitals and other healthcare facilities grapple with all sorts of fiscal
doomsday scenarios in advance of a complete rollout of President Obama’s
Affordable Care Act reform package in January, C-suite executives are
leaving no stone unturned for cost-cutting opportunities.
Amid looming reimbursement cuts and ongoing
financial penalties for errors, budget cuts and hiring freezes – if not
layoffs – may be rippling across the country by C-suite edict.
But huddling CEOs, CFOs, COOs, CMOs and
CNOs are turning to supply chain operations as the go-to group to wring cost
savings out of the expense stream.
Historically, supply chain operations
reported up the chain of command through either the COO or more typically
the CFO, leaving the CEO relatively insulated from the day-to-day issues
surrounding the second-largest operating expense in the organization.
Not so much anymore. In fact, more CEOs are
showing an interest – and aptitude – in supply chain matters. And a small
number of CEOs have supply chain experience in their background, further
reinforcing the profession’s importance to the health of a healthcare
organization.
To alleviate, if not eliminate, the
intimidation factor between the C-suite and supply chain operations, as well
as provide some concrete clarity in place of opaque ambiguity,
Healthcare Purchasing News began exploring nearly a decade ago how
supply chain professionals – notably leaders – are connecting to CEOs and
C-suites.
HPN has traced the
progression and recorded the trending through its annual S.U.R.E. (Support,
Understand, Recognize, Empower) Supply Chain-Focused CEOs award in January
to its annual C-Suite-Supply Chain Connections feature in the summer.
In short, if the professional relationships
historically have been frosty between Supply Chain and the C-suite for many
facilities, those barriers are thawing, if not downright melting. In fact, a
growing number of healthcare organizations understand, promote and now
expect Supply Chain either to occupy a seat in the C-suite (rare but true)
or to have open and unfettered access to the C-suite, ready to equip the Cs
with data, information and strategic direction (typical among top-tier
forward-thinking facilities).
Doers vs.
leaders
What differentiates the established seat
from open access and from "by invitation-only" to "use the proper chain of
command, please" may involve how administrators are viewed vs. leaders.
Definitions and delineations can be subjective and vary.
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Mike
Fegley |
"A supply chain leader is normally a highly
functioning multitask-oriented individual who can accomplish the day-to-day
tasks that are never-ending, while maintaining the ability to solve routine
emergencies associated with a busy hospital," said Mike Fegley, Director,
Materials Management, Crouse Hospital, Syracuse, NY. "A supply chain vice
president/director/manager is someone who has proven themselves proficient
as a supply chain leader who can also strategically lead their organization
to support the goals of the organization. Additionally, this person needs to
be able to bridge the gap between all departments to accomplish projects
across department borders, which are all too often separated by silos."
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Paul Kronenberg |
Paul Kronenberg, M.D., Crouse’s CEO and
2012 S.U.R.E. award recipient, agreed with Fegley’s "spot-on" answers. "The
leader should be able to promote and communicate the opportunities and
successes to the whole organization," he added.
When the CEO is so supportive of the Supply
Chain Leader certainly helps.
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Charles Sorenson |
"Much of Intermountain Healthcare’s success
in transforming the cost and processing of our supplies has been the ability
of an SCO leader to create a vision of a bold new future," said Charles
Sorenson, M.D., President and CEO, Intermountain Healthcare, Midvale,
UT. "Bringing great experience from industries other than our own, our
Supply Chain Vice President quickly focused on best practices, not limiting
his vision of ‘what could be’ to standard models in healthcare. That focus,
combined with an ability to work with Intermountain’s senior leadership
team, an infectious energy and willingness to ask hard questions, and an
ability to pick great members of his own team, have led to remarkable
improvement and sustainable cost savings for Intermountain. That’s the kind
of transformational leadership we need in all areas of healthcare today –
relentless pursuit of excellence, willingness to recognize opportunities for
improvement, and developing the relationships with key stakeholders whose
support is needed to make the needed changes."
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Brent Johnson |
Attitudes can delineate the two as well,
according to Brent Johnson, Intermountain’s Vice President, Supply Chain &
Support Services, and Sorenson’s colleague.
"A Manager’s/Vice President’s job is to
plan, organize and coordinate," Johnson noted. "They maintain the status
quo. A leader inspires and motivates and challenges the status quo. A leader
of supply chain in healthcare has a passion for best practices, inside and
outside the industry."
A Supply Chain Leader serves as the great
ambassador and promoter of the discipline, function and role, according to
Mike Passarelli, Director, Materials Management, Lawrence + Memorial
Hospital, New London, CT. L+M’s CEO earned a 2013 S.U.R.E. award earlier
this year.
"A Supply Chain Leader will involve the
entire organization in the continuum of Supply Chain Management," Passarelli
said. "He or she will educate every manager on the importance of the
manager’s role in supply chain management. A Supply Chain Leader will
involve every department in efforts to reduce costs and improve efficiencies
across that continuum. A Supply Chain Manager tends to keep the status quo
and does not look for improvements."
Fitting in completes Supply Chain’s C-
suite connection, according to Christopher Remark, President and CEO,
Aultman Hospital, Canton, OH. "The Supply Chain Leader of today must be
plugged in to the strategies of the organization and understand how the
Supply Chain fits into the strategic plan and can help achieve strategic
goals," he noted.
Christian Parrish, MBA, Vice President,
Supply Chain, Lab, & Pharmacy, Aultman Hospital, Canton, OH, echoed that
high-level assessment.
"A Supply Chain Leader needs to have the
strategic vision to think beyond the historical day-to-day purchasing and
distribution roles of supply chain," Parrish advised. "They need to be able
to coordinate all of the functions of supply chain to reach organizational
goals. A Supply Chain Leader must have an understanding of organizational
topics like clinically integrated networks, accountable care organizations,
transitions of care projects and needs to be able to figure out how supply
chain fits into those projects."
Larry Kennedy, CMRP, Director of Materials
Management, Jefferson Regional Medical Center, Pine Bluff, AR, cautioned
against stereotyping a Supply Chain Leader as someone only from the
department.
"A supply chain leader can be anyone within
an organization," Kennedy continued. "This person doesn’t necessarily have
to work in a supply chain role but can be a nurse manager or another person
who recognizes the value of managing supply chain cost. The supply chain
management team is responsible for developing, initiating and maintaining
programs and processes that will have a positive impact to the facilities’
bottom line. This may come in direct price savings or it may come as a
quality project that improves a process or patient outcome or eliminates
waste by improving utilization. The Supply Chain Leader helps to carry forth
those projects/initiatives.
C-level
interaction
From sensitivity to the sublime, Supply
Chain’s interaction with and influencing of the CEO and his or her C-suite
colleagues can straddle tenuous territory. Hence, discretion ranks nearly as
high as preparedness.
"Supply Chain Leaders need to be able to
entice their CEOs so they want to be involved with the cost-saving
initiatives and successes of their Value Analysis Teams and other
cost-saving initiatives," Fegley noted. "There are just so many things
pulling at the CEO, which forces you to compete for the CEO’s precious
time. Supply Chain Leaders need to know when to ask for help and know when
and how to communicate, such as e-mail, phone calls, drop ins, or hallway
huddles.
"The days of working in a vacuum are over,"
he added. "Everything is transparent. Be proactive rather than reactive and
always inform the CEO of what is going on before they ask."
Kronenberg concurred. "The [Supply Chain]
Leader should engage the CEO around the opportunities so that the CEO can
emphasize to the whole organization that this is everyone’s work to do."
Johnson noted that Supply Chain’s
interaction with the CEO may vary depending on the size of the organization,
whether it’s a hospital or an integrated delivery network.
"What will not vary is that all CEOs need
to realize the importance of managing supply chain strategically," Johnson
urged. "And that Supply Chain means all non-labor spend [and] not just med/surg. With
this understanding CEOs will support and invest resources into the Supply
Chain. Our dependence on GPOs and with 6,000 hospitals in relatively small
companies has inhibited the development of talent and strategies in the
healthcare supply chain."
Healthcare reform drives the need to
anticipate the future, Sorenson insisted. "We expect our Supply Chain Leader
to be assertive in presenting options that look into the future and get
Intermountain positioned where it needs to be," he said.
The Supply Chain Leader must be able to
educate and provide information when needed, according to Passarelli. "The
Supply Chain Leader needs to secure C-suite support and involvement in every
aspect of Supply Chain Management. A Supply Chain Leader will keep pace with
new forms of technology for benchmarking and information systems. He or she
will present a coherent case for the tools and support needed to be
successful," he said.
"The Supply Chain Leader should be
proactive in identifying cost savings initiatives," Kennedy said. "He or she
should be able to communicate opportunities, current status and provide
annual comprehensive business plans to the CEO. The plans should be
supported with solid market data from within the organization and outside
the organization. The CEO should be able to trust the data and the Supply
Chain Leader."
The Supply Chain Leader must be clued in to
count, according to Parrish.
"Expressing an understanding of
organizational initiatives is key to linking supply chain to the CEO,"
Parrish noted. "The CEO faces daunting challenges every day. Being concise
and clear to the CEO with needs and ideas for how supply chain affects
organization metrics is essential to having an impact at the C-level of the
organization."
Remark reiterated the need for Supply
Chain’s C-suite plug-in. "The Supply Chain Leader needs to be sure the CEO
understands how the Supply Chain connects to the organization’s strategy. As
a CEO, I like to see specific Supply Chain projects linked to our
organizational plan, as well as a common set of operational metrics to
measure the effectiveness of our Supply Chain.
Effective
skill sets
CEOs and other C-suite executives harbor
certain expectations of Supply Chain Leaders, whether they are actively part
of the senior-level brain trust or at arm’s length.
"An effective leader will find and execute
the opportunities, which requires establishing collaboration between
administrators, providers and supply chain," Kronenberg indicated.
"Communication to keep these efforts in front of the whole organization is
critical. In fact we have received good ideas from line staff by asking for
their engagement."
Johnson concurred. "An effective supply
chain leader will obtain expected results, provide meaningful metrics, while
respecting the physician and clinical culture of healthcare," he
said. "Supply Chain must have talent. This talent must be able to stand up
in front of physicians, hospital administrators and other key stakeholders,
with sufficient skills and leadership ability, to gain the respect and
confidence of all."
Elevating the importance of Supply Chain is
a key measure, fueled by results. "In 2005 Supply Chain became a strategic
focus by Intermountain senior leadership," Sorenson said. "Since that time,
Supply Chain has delivered significant savings and benefits to Intermountain
that has been critical to its financial stability."
Based on his experience, "a CEO expects a
Supply Chain Leader to explore every opportunity to gain efficiencies,
including labor benchmarking, and cost reductions obtained through contract
optimization, collaboration and utilization studies," Passarelli noted. "A
CEO expects a Supply Chain Leader to be a trend setter and an innovator and
not a follower."
That means being prepped and ready,
anticipating contextual requests, Parrish insisted.
"The CEO expects the Supply Chain Leader to be able to express
the impact of the supply chain at all levels of the organization," Parrish
said. "The effective Supply Chain Leader is able to communicate their vision
and how it effects the organization to distribution staff, nursing staff,
physicians and across the C-suite. Being able to engage all levels of the
organization in Supply Chain is crucial to achieving cost savings
initiatives and organizational Supply Chain Project Goals."
Several years ago, Aultman’s C-suite asked
the question, "How do we know our Supply Chain is effective?" according to
Remark. "From this question, our team built a comprehensive set of metrics
we monitor on a routine basis in order to gauge performance," he said.
"Having our Supply Chain Vice President at the leadership table helps him to
inform and educate our team, as well as advocate for the importance of
effective Supply Chain Management."
The CEO should expect the Supply Chain
Leader to "be proactive in seeking out and implementing current supply chain
improvements that can be proved to have identifiable impact to the
facilities’ bottom line," Kennedy said. "I feel that all employees within
the facility should work together to identify and implement supply chain
processes that will improve utilization, drive down costs, improve labor
components for those utilizing supplies, enhance reimbursement opportunities
and provide better patient outcomes."
Red flags,
bright lights
What are some warning signs that turn off
CEOs and the C-suite on their Supply Chain Leaders?
"Excuses," Fegley fired off.
"Too many descriptions of the barriers,"
Kronenberg added.
Johnson listed three hurdles: "Too much
business talk and emphasis. Not fitting in with senior leadership. Not
developing trust on delivering results or doing so with problematic
relationships."
Attitudes come into play again, Passarelli
asserted. "CEOs will be turned off if their Supply Chain Leader is not a
cheerleader for other managers to get involved in the supply chain
continuum," he said. "They will be turned off if their Supply Chain Leader
is an observer of what is happening around them instead of being a leader
and shaping the direction of a productive Supply Chain program. They will be
turned off if the Supply Chain Leader is not reporting continuous efforts
and results in reducing costs."
There’s trouble if the Supply Chain Leader can’t meet basic
cost savings goals and supply metrics, Parrish warned. "An effective Supply
Chain Leader can’t lose sight of the basic blocking and tackling of the
Supply Chain," he said. "Being able to meet annual cost savings goals and
benchmark goals is crucial to the success of the Supply Chain and the
organization."
You bet it does, Remark insisted. "A basic
goal for our Supply Chain team each year revolves around hedging inflation
through savings initiatives," he said. "As CEO, I would be concerned if I
sensed a lack of focus or planning around achievement of this goal. I am
also very interested in projects or strategies that move the Supply Chain
forward. Just focusing on savings alone is short-sighted in terms of the
strategic impact the Supply Chain can have on the organization."
Kennedy reported trust. "In my opinion CEOs
may become hesitant to trust Supply Chain Leaders when they are provided
with cost savings opportunities that do not materialize," he said. "Also
when Supply Chain Leaders fail to communicate or obtain key player or
stakeholder buy-in for supply chain-related projects and implement them
prematurely. I think that puts the CEO in an unfair situation that he or she
may have to use political capital to resolve. This kind of action could
damage the CEO’s trust with the Supply Chain Leader."
Supply Chain bright spots that turn CEO
heads can be easy to see.
"Accomplishments – not individual but team
accomplishments," Fegley insisted.
"That the leaders have been able to get
buy-in from the diverse constituent groups," Kronenberg noted, almost
echoing Kennedy’s earlier comment.
Kennedy also exclaimed about the trust
factor: "Without a doubt, repetitive savings and process improvements that
actually come to fruition!"
Passarelli reinforced his definition of leadership. "When a
Supply Chain Leader is innovative, able to involve others in the effort, and
when they produce results in spite of challenges and obstacles," he said.
"Bottom-line results," Johnson noted
matter-of-factly.
Sorenson shared the example of
Intermountain’s Supply Chain Center that opened in 2012 and was championed
by Supply Chain Leadership, citing its success to date as a milestone.
"The facility houses all operations
relating to the supplies Intermountain’s clinicians and employees use — from
negotiating contracts with suppliers to warehouse storage, from purchasing
to transportation logistics," he noted. "By purchasing supplies directly
from the manufacturer, handling the delivery of products, and streamlining
processes, Intermountain will reduce its costs by nearly $200 million in the
first five years while ensuring that clinicians and employees receive
supplies in a timely, efficient manner. The highly-automated facility
orders, purchases, stocks, and distributes about 5,000 different types of
medical supplies. More than 2.5 million medical items pass through the
center each year."
Remark cited Supply Chain’s big-picture
focus as a way to attract eyes.
"When the Supply Chain team steps forward
with a plan, idea or initiative which helps achieve the organization’s
overall goals, this amplifies their importance and underscores the fact that
Supply Chain is more than just saving money," he noted.
Playing well in the sandbox speaks volumes,
according to Parrish.
"When the CEO hears and sees the supply
chain leader effectively collaborating with other areas of the hospital,
such as medical staff, Nursing and Quality, it sends the message that the
Supply Chain Leader gets the big picture of the organization." 
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