What does the ideal
supplier-provider relationship look like in the future?
by Jim Francis, Division
Chair/Assistant Treasurer - Supply Chain Management, Mayo Clinic
the transformation from volume-based to value-based begins, providers now
know better than ever that current healthcare costs are unsustainable. Most
healthcare organizations expect a 20-40% reduction in operating costs will
be necessary over the next five years. It is anticipated that by 2019,
healthcare providers must provide the same level of service as today — at
75% of today’s operating expense. How are hospitals going to improve quality
while dramatically reducing costs and increasing access to care? As a 25
year veteran of this industry, I believe we must change the way we do
business and how we work together with our suppliers.
Twice a year I attend the Strategic
Marketplace Initiative (SMI) Forum, an event that brings together executives
from integrated delivery networks (IDNs) and suppliers in an open,
non-competitive environment to exchange ideas and to work on problems facing
the healthcare supply chain. It’s a place where real, honest and tough
discussions happen between suppliers and providers. At the latest SMI Forum
in Dallas, I was asked to facilitate a discussion to answer the question,
"what does the ideal supplier-provider relationship look like in the
future?" Twenty-four senior healthcare executives from leading supplier and
provider organizations, sat down over lunch to share their thoughts on the
expectations they have of each other in the future and the behaviors they
want to see changed. This group of industry thought leaders identified the
following 10 key components of supplier-provider relationships in the
Transparency. Suppliers and
providers in this discussion agreed that greater transparency is needed to
sustain future relationships. Providers specifically want clearer
intentions, especially around profitability. More powerful analytics will
allow for a higher level of transparency around product classifications,
costs and terms. Greater transparency can lead to significant improvements
in patient safety and efficiency.
Trust. Both suppliers and
providers want deeper collaboration and integration of our collective
supply chain efforts to help build the trust that is necessary for
successful trading relationships. They need to know more about each
other’s businesses in order to discover improvement opportunities. This
deeper integration of trading partner efforts will facilitate greater
collaboration and help to educate stakeholders.
Alignment of goals. As
providers and suppliers learn more about each other’s businesses, better
alignment of goals will increase the commitment of both suppliers and
providers. This group wanted clearer expectations of each other to help
manage risk and gain predictability in the future.
Open communication. Suppliers
and providers said they want to practice open communication, emphasizing
the importance of building long-standing relationships. Utilizing the same
vocabulary when referencing products and product classifications will also
help establish better communication.
Compliance. One of the biggest
challenges facing our industry is compliance. All trading partners need to
adhere to their agreed upon plans and obligations. This group agreed that
as new technologies emerge, the improved access to data will help both
providers and suppliers meet the demands of compliance.
6. Utilization. Suppliers and providers
can build stronger relationships in the future through utilization
information and studies. By working together, providers and suppliers can
identify variances in not just product utilization patterns, but in the
utilization of other resources as well. When trading partners better
understand the motives of product users, proactive management of the
supply chain becomes easier.
Focus on service. Over the next
few years, many hospitals will experience some consolidation, sometimes
leaving suppliers to wonder where, with whom and how best to engage with
their customers. In order to deliver the highest level of service, it must
be clear to suppliers how best to enter and then service a hospital
This team of thought leaders agreed that the time for demand forecasting,
automated replenishments, and better inventory controls is here. The
product needs of caregivers and their patients require an improved supply
chain. This team agreed that suppliers and provider need to collaborate to
establish demand signals as other industries have done, creating more
streamlined demand forecasting and inventory management systems and
GS1 data standards (GTINs and GLNs).
Making sure suppliers and providers speak the same language is another key
to building long-lasting business relationships for the future. One way to
do that is by utilizing the Global Trade Item Number (GTINs) and Global
Location Number (GLNs). Dennis Black, BD’s Director of e-Business, who
participated in this discussion said, "It is important that providers and
medical device manufacturers begin utilizing GTINs and GLNs to help
improve supply chain processes and to enable clinical programs. Using
GTINs and GLNs will help with trading partner collaboration and
Thinking differently. This
group agreed that both suppliers and providers will have to think
differently to survive and thrive in this new era of healthcare reform.
Utilizing creativity on product design for example may help the
sustainability of a product. They will need to think outside of the box
and work together to reduce costs and improve patient safety.
Is this a challenging time for the
healthcare supply chain? Yes. But we have an opportunity to change things,
set healthcare on a different course and improve patient care and quality.
The relationship between supply chain IDN executives and their suppliers is
a vital part of the healthcare reform equation. We have an opportunity to
align our stakeholders, forge new partnerships, and reengineer the
healthcare supply chain marketplace.