Becker's Hospital Review

8 3 ways to build a top-performing supply chain in and out of the hospital By Ayla Ellison F rom ineffective inventory management to lack of standardization, health system organizations face many challenges in managing their supply chains. However, by ironing out some of these supply chain management challenges, hospitals, health systems and other pro- viders can become more efficient and free up cash flow. e supply chain is a prime target for health system leaders looking to cut costs. is isn't surprising given the large portion of a hospital's op- erating budget dedicated to the supply chain. Outside of labor costs, the supply chain is the second biggest expense for hospitals, representing nearly a third of their operating expense, according to the Healthcare Financial Management Association.1 Although health system executives know it's important to effectively manage supply costs, the complexity of the supply chain prevents many organizations from maximizing savings in this area. How can health system leaders reduce cost and excessive waste in their organizations' supply chain? By leading change across the organization through alignment around a primary goal: improving inventory man- agement through standardization of products. Align around a common goal Before beginning any efforts to improve the supply chain, it's vital for health system organizations to establish a main goal. is is especially true on the nonacute side, where the diversity of specialties, recent ac- quisitions and hundreds of facilities spread over a broad geography can complicate supply chain management. "In many nonacute supply chains, it's not super clear what the goal is," said Brad Hilton, Senior Vice President of Customer Experience at McKesson. "Sometimes people say the goal is the lowest cost possible, sometimes they say the goal is the best patient outcomes possible, and sometimes they say it's to be the most provider-centric. I don't think you can maximize all three of those at the exact same time." Many health system organizations partner with experts, such as those from McKesson, to help implement efficient supply chains. However, even with outside help, providers may see their efforts to correct supply chain inefficiencies fall short if they aren't aligned around a common goal. "Nobody really wants to change unless everyone understands the goal and is rowing in the same direction," Mr. Hilton said. Use data analytics to improve inventory management Ideally, hospitals and other providers would always have enough sup- plies to meet demand without carrying excess inventory. However, this is rarely the case. Many providers err on the side of excess to ensure they'll have supplies available when they need it. Buying in bulk pushes costs higher, as prod- ucts sometimes expire before they can be used. For hospitals with lean inventories, drug shortages, natural disasters and other unexpected cir- cumstances can leave them in a difficult position. Sponsored by: "Nobody really wants to change unless everyone understands the goal and is rowing in the same direction." - Brad Hilton, Senior Vice President of Customer Experience, McKesson

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