Managing supply chain crises calls for elementary equation

Sept. 22, 2022
Which comes first: People, process or technology?

Since early 2020, the healthcare supply chain seemed to recoil from the just-in-time (JIT), modified stockless and stockless distribution methods that defined advanced, forward-thinking operations until they were tested by global supply chain challenges ignited by the COVID-19 pandemic.

From there, providers and suppliers alike shifted into pandemic (some say “panic”) mode, scrambling to source and deliver product amid mounting backorders, delays and shortages, overordering and overstocking to protect themselves.

By mid-2022, sensing – if not hoping for – an end to the pandemic and accepting COVID-19 as more endemic as influenza, the industry yearned to pivot to some kind of recovery mode, translating lessons learned to reshape how to handle future crises.

Arguably, the building blocks of any supply chain, regardless of industry, centers on three elements of an equation: People, processes and technology.

Back in August at the annual conference of the Association for Healthcare Resource and Materials Management (AHRMM) in Anaheim, there were plenty of educational sessions heavy conversations promoting people as key value providers in new roles, promoting technology as options to explore and promoting process improvements that involve both people and tech.

To optimally prepare to handle future crises for minimal impact on supply chain operations the question remains as to how to order the equation for the desired results. Do you:

  • Invest in people to plan process improvements and use tech to ensure progress (People, Process, Tech)
  • Invest in process (including improvement planning), assembling the tech for people to use (Process, Tech, People)
  • Invest in tech and then train people to use it so that they improve processes (Tech, People, Process)

Supply chain experts among providers, suppliers and technology companies offer mixed and varying perspectives on how to order the equation. Among the noteworthy observations: Not every tech company executive encouraged starting the equation with tech and not every supplier encouraged starting with process.

People process

Pundits may point to ongoing labor challenges, regardless of industry segment or type, but in healthcare experts emphasize that people should be priority one to prepare for whatever looms ahead.

While Jeff Jochims, Executive Vice President, COO and President, Products Healthcare Service, Owens & Minor, thinks at first glance the overarching perspective may be obvious, the fundamental indicator becomes resoundingly clear.

“It is of course correct to say that all three matter, but in our view at Owens & Minor, people remain at the heart of strong operations,” Jochims insisted. “The past several years have demonstrated over and over again that supply chain management is incredibly dynamic. While technology and processes are vital, people are the part of the equation that cannot be overlooked or undervalued. Empow­ering teammates with a framework for making decisions with technology tools allows for the optimal balance between tech and touch, whether we’re operating under normal business conditions or responding to something unexpected. After all, it is people that perform scenario planning, that exercise subjective judgment, that balance availability with options, that identify potential failure points, that identify countermeasures and so much more.

“At a most basic level, we can remove technology and processes, and still run supply chains,” Jochims continued. “We cannot remove people. I think that the pandemic demonstrated this beyond our wildest expectations.”

For Cory Turner, CMRP, Senior Director, Healthcare Strategy, Tecsys, with a background in provider-based supply chain at an award-winning healthcare system, a particular order makes the most sense.

“People, Process, Tech is, in my opinion, the optimal approach to managing crises in the supply chain as healthcare logistics teams move forward post-pandemic,” Turner noted. “We work with health systems across the nation to design and implement the technology backbone for more resilient supply chain practices, but I believe that our technology should underpin effective people and processes, not the other way around. The last thing you want to do is throw good money after bad, and investing in technology that speeds up or automates inefficient ways of doing business is exactly that.

“It reminds me of a conversation we had recently with Dr. Randy Bradley, in which he said, ‘the healthcare supply chain is not broken, it is performing as it was designed, we are just trying to use it in a way it wasn’t designed to be used and I think that has caused both supply chain leaders and other healthcare administrators to really rethink and try to reimagine what should our supply chain operations look like,’” he recalled.

People can represent a positive and a negative, according to Turner.

“Something to be cognizant of is that people – whether in attitude or aptitude – may unwittingly become a roadblock to navigating supply chain crises. On the flip side, it’s also people that make effective processes work. Investing in people is such an important priority,” he continued. “Ultimately, it’s a three-legged table. Each component is critical and relies on the other two. While there is an effective order of operations, it should not be conflated with an order of importance. Only when a supply chain organization builds its strategy around all three elements will they be best equipped to hug the curves of disruption.”

Angie Haggard, CEO, RDA, emphasizes the inherent connections between people, processes and technology.

“People are and will always be needed,” she indicated. “Even though fewer people are required with technology, people are still needed to operate and/or manage the technology. In addition, when you invest in people with training and career growth plans, the probability of employment retention increases. Retention is further increased when employees connect to the cause that supply chain impacts patient’s lives, and their actions can make a difference in that patient’s life – positively or negatively.”

But those connections must be precise and concentrated on accuracy, Haggard maintains. 

“Technology is wonderful and helps to automate manual processes; however, if technology is automating bad processes, the technology has just automated and magnified the problems … faster,” she noted. “Process improvements need to be streamlined and standardized prior to a major technology implementation, especially if it’s a technology automation of cross-functional processes. Granted, some technologies limit flexibility and extensive custom design, which is a good thing as you don’t want your organization’s implementation to be so customized that technical support cannot be provided.

Haggard supports an order of events, too, beyond people.

“When organizations do not optimize or evaluate processes first, the end result is higher costs with little improvements,” she said. “Utopia is to optimize processes first and then automate those processes, while fostering a culture of continuous improvement. In our current state of traveling and remote clinicians, high turnover rates and doing more with less, the more processes are standardized within a department, within a facility and across facilities, the better patient outcomes will be. Once people are in place and processes are optimized, it’s time for technology to be utilized to automate and monitor progress and performance.” 

Tom Redding, Senior Managing Director, Healthcare, St. Onge, stresses that people form the foundation from which process and technology build an operation.

“The first step is understanding if the organization has the right people with the right skills in the right job to adapt and drive the supply chain forward,” Redding said. “Investing in people is a critical factor to handle the ever-changing requirements for healthcare supply chain leaders. 

“Secondarily, supply chain leaders need to have a clear understanding of their primary processes and all of their supporting processes that may impact their ability to function effectively and efficiently,” he continued. “Too often, upstream process changes are made in a vacuum by other stakeholders and unfortunately impact the downstream process(es) of others.  Once a supply chain leader is confident in their team and processes, then they should explore options for technology and systems. We have all seen health systems purchase new technology and systems, and fast forward a couple years, are worse off than when they started. Don’t be a statistic.”

Investing in people to plan process improvements and use technology to ensure progress is the most optimal strategy for crisis management in supply chain, according to Bonnie Lai, General Manager, GHX Lumere.

“As a leader at a company that builds technology solutions for health systems, I very much recognize technology’s power and limitations,” she said. “Technology is great for automating well-defined and repeatable processes. However, we’re not yet at the point where technology can replace the critical thinking and problem solving you get from your best team members. For example, the COVID-19 pandemic was such a new and unpredictable problem that expecting technology to have solved all the related supply chain issues would have been foolish and misguided. Technology is also good at enabling efficient and repeatable processes that allow supply chains, clinicians and other key stakeholders to spend more of their time collaborating and problem solving to address patient needs.

“Despite advancements in artificial intelligence (AI) and machine learning (ML) in healthcare, I still believe these technologies are best deployed on more operational challenges than in clinical decision making at present,” Lai added.

Keith Lohkamp, Senior Director, Industry Strategy, Workday, acknowledges that all three models can be successful, particularly depending on the starting point of an organization, but one rises to the surface first.

“People are the optimal place to start,” he insisted. “Identifying the key skills and capabilities needed – analytical, adaptiveness, creative thinking, and ability to execute – and putting in place the right people is a critical first step. With the right team, even if processes put in place do not work, the supply chain organization can pivot and adjust more easily. So, with people and processes in place, the right technology can be implemented. But like with investing in people, it is critical to select technology that can adapt with the unique consideration of each crisis or change in the industry.”

An organization’s people experts are the foundation of a strong crisis management strategy, recommends Kyle MacKinnon, Senior Director, Operational Excellence, Premier.

“They are the ones who think, continuously learn and innovate – identifying and framing the challenges, root causes, as well as the design of optimal solutions,” he said. “These experts should work alongside stakeholders to define the ideal business process (desired state), at which point the appropriate technology solution should be decided upon and used to effectively enable and streamline that process. Once the model is deployed, it continuously improves through innovation in all 3 areas (people, process, technology) based on needs of the organization and customer. Over time, the efficiencies gained with technology can free up workforce capacity, allowing your organization to deploy people in other value-added areas.

Process for people

Even though some contend that with people in place the process can be improved, others highlight on process improvement with optimal technology to fortify people.

“The best strategy would be to start investing in process improvement planning, assembling the tech for people to use,” said Marlin Doner, Vice President, Data Analytics and Product Strategy, Prodigo Solutions. “Strategic responses should start by asking why, then investigate the how? As we look back at lessons learned, we can see that surge demand was driving product shortages in the early chaos of the pandemic. Now, as we have moved into recovery phase, labor disruption is still impacting availability in the supply chain. As supply chain practitioners, these are things we do not control; however, as leaders we can control our ability to respond and align supply with demand based on real-time data we are collecting.

“Better transparency into what is happening across our supply channels will help us manage our response,” Doner continued. “Process re-engineering from the point of demand to the source of supply will help an organization identify and eliminate weaknesses in their business processes. Tracking vendor performance data, such as fill rates, backorders and substitutions as well as operational metrics such as inventory turns and days of supply coverage, should let us benchmark and forecast demand based on variables such as patient caseloads and community infection rates.”

Even though Brandon Reeder, Vice President, Operations, Supply Chain Optimization, Medline Industries, suggestes starting with process improvement he transposes people with technology.

There is an order that I recommend, and that is investing in process improvement, then people and finally assembling the technology for people to use,” he said. “It is important to scope out what you’re trying to accomplish first. From there, you can create a team to fulfill your identified needs. Then that team can identify the technology needed.”

If anything, the pandemic taught the supply chain industry two key lessons, according to Atul Vashistha, CEO and Founder, Supply Wisdom.

1. The supply chain models we have relied on inherently underestimated risks of disruption in the demand planning and fulfillment process.

2. Our reliance on periodic assessments to understand the health of our suppliers and supply chains leave us in the dark and unable to support proactive disruption avoidance.  

“Take for instance, the just-in-time inventory model built on the assumption that there will be no disruptions in the supply chain,” Vashistha explained. “Even beyond the pandemic with the war in Ukraine and now escalating tensions between China and Taiwan, this assumption appears increasingly unreasonable as supply chain disruptions increase exponentially in terms of frequency and severity – with no end in sight.

“Furthermore, building our risk programs around periodic assessments, incorrectly assumed that the risk landscape doesn’t change much between assessments,” he continued. “The pandemic proved this assumption to be false and demonstrated that data from a single point in time was quickly stale in the rapidly evolving crisis. During the early days of the pandemic crisis, decision makers were forced to respond reactively without a clear or current view of the true health of their suppliers or supply chains.”

Vashistha recommends the first step to address these shortcomings should involve identifying what in the process needs to change.

“I believe it would be a mistake to consider today’s dynamic risk environment as a temporary crisis that will pass, and risk and inventory models should be adjusted accordingly,” he noted. “Today and going forward, proactive disruption avoidance requires access to current intelligence; therefore, we need to modernize processes away from legacy assessments with a point-in-time view of the supply chain to continuous monitoring and real-time risk intelligence.”

From that point, supply chain leaders should search for technology that will enable what Vashistha calls “radical transparency” and “proactive vigilance.

“The good news is that technology exists today that can enable this ‘always-on’ continuous monitoring with accurate real-time supply chain and risk intelligence,” he said. “The right solution enables proactive vigilance through radical supply chain transparency across all potential sources of disruption including financial, cyber, location, operations, ESG, compliance, and Nth parties. Better yet, now it’s possible to operationalize this intelligence and automate mitigation actions based on preprogrammed triggers or thresholds that align with an organization’s supply chain disruption mitigation strategy. In this way, organizations can realize significant improvements in risk management efficiency and effectiveness to better secure supply chains all while reducing costs.”

Vashistha emphasizes the need for “agile intervention,” whereby “people need to be trained not to reactively respond to disruptions but instead proactively respond before a disruption occurs for an agile intervention that minimizes the impact or even avoids the disruption altogether.”

Margaret Steele, Senior Vice President, Med/Surg, Vizient, warns that “it is not a matter of if there will be another disruption, but when it will occur. Therefore, healthcare organizations should start investing in process improvement planning and assembling the right technology for supply chain employees to use.

“To prepare for the next disruption, organizations should ensure they have the appropriate processes in place, the technology to assist in early notification and rapid deployment of resources,” Steele continued. “These are critical to ensuring that people can not only manage through a disruption, but that staff do not burn out in the process.  

Steele adds that high-performing organizations will focus first on process, but with an eye toward what can be enabled by technology and then ensure they have the right people. “Focusing on technology first often results in automating a bad process,” she reflected.

Tech drives process, enables people

In an ideal world, the industry standard approach is to start with hiring the right people, aligning them on the processes, and then layering on technology to make them most efficient, according to Shawn McBride, Vice President and General Manager, WaveMark Solutions, Cardinal Health. But the current operating environment is anything but idea, he adds.

“Given the present-day economic downturn and staffing shortages following the pandemic caused by burnout, turnover, and increasing labor costs, health systems may need to invest in technology solutions that unlock value across an enterprise,” McBride observed.

“While implementing technology, health systems are smart to hire supply chain and clinical leads with diverse experience who possess skills like curiosity, critical reasoning and interdisciplinary thinking,” he continued. “These leaders can build out teams to own, operate and extract value from the technology. Finally, having a process in place for department-level leads to come together to draw insights and act based on the information extracted from the technology is key.”

But McBride remains realistic within a less-than-ideal marketplace.

“Motivation meets purpose when staff understand how, despite the initial pain of change, technology improves the efficiency of their jobs over the long term,” he said. “It’s important to underscore that technology is not a replacement for people; it augments the jobs of people to make them more efficient. Eventually, the industry will shift back to where people are driving the processes to evaluate new technological needs for the healthcare ecosystem to navigate future crises that have yet to occur, be it extreme weather events, security threats, or future pandemics.”

Ashok Muttin, Founder & CEO, SupplyCopia, emphasizes the need for technology implementation first because of the analog nature of many providers.

“There is a significant portion of the health systems – mainly small and mid-size – [that] conduct their business in a manual or semi-automatic manner,” he indicated. “Yesterday I saw an assistant director of supply chain manually creating a PPE estimate report for their management. He manually takes the data from multiple systems, puts them into an Excel spreadsheet, and prepares this report. Investing in technology that automates these processes will yield a significant amount of productivity gains. This is especially true in the current environment where there is a significant shortage of people in the market. A significant percent of the current supply chain leadership is retiring in the next 1 to 3 years.”

Mark Wheeler, Director, Vertical Marketing Practice Lead, Zebra Technologies, recognizes a blurring of the lines between models that may improve process efficiency and people skills.

“It used to be taboo to talk about investing in technology first, but much of the new technology coming to the supply chain requires a degree of experimenting and learning by doing,” he said.  “I would propose start investing in tech and training people to use it so they can improve processes. From autonomous mobile robots (AMRs) to machine vision, to RFID and temperature-sensing devices, the industry is teeming with new technologies that will prove to be disruptive to longstanding supply chain practices. Those who try new things, learn fast and will have a significant early advantage in understanding how these new technologies can be profitably applied to unique business operations to drive value.

Read on:
Post-pandemic, what’s wrong with the status quo anyway?

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