Supply Chain Management

Client relationships and the supply chain

August 13, 2019 2:27 pm

The supply chain’s direct clients include the health system’s leaders and department heads and staff, both clinical and non-clinical. The supply chain also has an important client relationship with the patients the health system serves.

The use of “client” instead of “customer” or another alternative is intentional. Client relationships assume a long-term commitment. They are built on principles of collaboration, dedication and mutual respect. They encourage honesty and creativity in understanding and responding to a client’s needs. They flourish when the client’s best interests are consistently and conscientiously pursued.

In order to excel in its client service function, the supply chain also needs the support of its clients. A hospital or health system that wants the best possible client service from its supply chain must provide resources — including staff, technology and tools — as well as opportunities to collaborate on decision-making that will position the supply chain for success.


What the supply chain needs to do

The most essential services the supply chain provides connect directly to the challenges health systems face today. Downward pressure on payment rates and softening inpatient volumes make cost containment an ongoing priority. New technologies and care models require new investments. Payment models tied to the quality of patient outcomes and experiences keep raising the bar for clinicians. Consumers face higher deductibles and other out-of-pocket costs and seek affordable healthcare options.

To meet these challenges, the primary focuses of supply chain leaders should include the following services:

Assisting the hospital or health system in achieving its cost containment goals. Cost containment within existing operations is an imperative not only to maintain margins within a tightening payment environment, but also to free up the resources needed to invest in new care models and technologies.

Linking purchased products and services to patient care, outcomes and experience. Healthcare has lagged behind other industries in its ability to link specific inputs with specific outputs. As increasing attention focuses on patient outcomes and experiences, the supply chain must establish processes that enable tracking of purchased products and services through to individual patient encounters.

Comparing its performance with peer organizations. Supply chain leaders need to benchmark their performance, both internally and against peer organizations, for two reasons. First, a comparative framework enables supply chain leaders to identify opportunities for improvement in areas where their performance is lagging behind that of their peers or not moving in the right direction. Second, a combination of internal and external benchmarks can demonstrate to the supply chain and the clients it serves how consistently it is performing within the organization and how well it is performing against peer organizations. Where the supply chain excels, a comparative analytics framework can validate and quantify the supply chain’s contributions to the organization.

Forming long-term relationships with both vendors and clients within the organization. The supply chain is the client with respect to a health system’s vendors and should demand the same level of service that the supply chain provides to its clients within the health system. Just as the supply chain needs the support of its clients to provide the best service, so too should it support its vendors with honest feedback, relevant data, and an openness to collaboration and creativity in securing agreements that work to the mutual benefit of both parties.

For the supply chain’s own clients, leaders must work to build relationships of trust and mutual respect. Supply chain leaders must demonstrate their awareness of and dedication to the role that purchased products and services play in supporting the efforts of clinicians to improve the quality of patient care and the patient experience, department heads to effectively and efficiently operate their functions and administrators to provide a stable and well-functioning operating environment.

What the supply chain needs

Because the supply chain is integral to so many aspects of the enterprise, its needs often are not unique — the same technologies and tools that will best support its efforts may benefit administrative, operational and clinical efforts as well.

The primary needs of the supply chain include the following:

Accessible and reliable data. Cost and utilization data enable supply chain leaders to detect variations across departments and facilities and identify areas where product standardization could generate savings, support bundled-payment and pricing initiatives or provide greater leverage for volume-based discounts from vendors. Utilization data can support predictive modeling for demand trends that supply chain managers can use to ensure sufficient inventory is on hand.

For many organizations, providing this data at the needed level of granularity and timeliness will require investment in sophisticated cost accounting, inventory management and clinical systems. However, the benefits of this investment will extend beyond the supply chain to finance and the clinical enterprise. 

Seamless system interfaces. To be most effective, supply chain leaders need to draw information from multiple systems, including inventory management, cost accounting, and electronic health record (EHR) systems. In many organizations, this is a cumbersome process, requiring manual workarounds where system interfaces are limited in their utility. Again, this problem is not limited to the supply chain. Investment in improving system interfaces will ease the burden on time and resources across the organization.

Internal and external industry benchmarks. Without the ability to compare performance across internal units of the organization and with external peer organizations, it is difficult for supply chain leaders to understand where performance may be lagging and where it is leading. This information is essential to identify and prioritize opportunities and set goals that are both ambitious and realistic. A comparative analytics solution that includes cost benchmarks for major categories of purchased products and services can supply this information.

A seat at the table. Supply chain leaders must have a seat at the table when purchasing decisions are being made across all areas of the enterprise. This is not a question of control, but of collaboration. Supply chain leaders have a comprehensive view of purchased goods and services across the enterprise and of vendor terms. If an alternative to a product or service is being proposed or a new vendor is recommended, supply chain leaders can provide critical insights into what costs might be associated with carrying new inventory or working with a new supplier. If a decision is made to move forward, supply chain leaders can ensure that the terms for the new purchase or relationship are consistent with the enterprise’s existing agreements.

Hospitals and health systems count on their supply chain to manage what can account for as much as 40% of costs. By supporting the data and analytic needs of the supply chain, respecting the expertise of its leaders and ensuring they have a seat at the table, health system leaders can expect the very best client service. 


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