For most non healthcare-related companies like Wal-mart, Tamro, Ford, and others, being able to innovate their supply chains to be more efficient than competitors leads to significant advantages. Why then is there so little focus on supply chain in healthcare. Could it be that hospitals simply see their materials management departments and supplies as their total supply chain? Let’s look at some non-healthcare examples and see what we might be able to learn from their successes.
Although Wal-Mart has been “moving towards transportation consolidation for years,” (Hoffman, W., 2006), the Remix strategy takes it to a new level. In basic terms, the Remix strategy requires vendors to work together with their shippers to consolidate freight and shipping schedules so that “shipments arrive as full truckloads at stores,” (Hoffman, W., 2006). It also realigns the packing of freight to optimize the loading and unloading with higher turnaround goods being packaged and shipped together.
Should hospitals perhaps see the delivery of care as part of their supply chain? Is not the patient simply an end-of-chain customer purchasing both products and services which are all part of the healthcare delivery supply chain, much the same as if a car is first serviced by the dealer and detailed prior to delivery to the customer. How many car dealers have gained a competitive advantage by filling a gas tank at time of purchase or washing a vehicle dropped off for service?
In the Wal-mart example, both vendors and shippers alike comment that Remix relies “heavily on technology … and it all comes down to data,” (Hoffman, W., 2006). The program was tested in Florida and resulted in “a reduction in stock-outs, improved store efficiency, and increased sales, encouraging the retailer to roll out the program nationwide,” (Refrigerated Transport, 2005).
What can healthcare learn from this and why do so few hospitals use technology to improve their patient throughput? They even experience greater delays (as in longer ED wait times when implementing an EDIS) in throughput when implementing technological solutions. Why haven’t more hospitals implemented technical solutions like Web-based scheduling or enterprise scheduling in conjunction with processes like LEAN or Six Sigma to improve their patient flow or, in other words, their supply chain.
But technology is not the only way to improve supply chain efficiency. Partnering combined with technology can yield significant advantages. The Tamro Group is one of the largest pharmaceutical wholesaler and distributor in Northern Europe. “The key competencies of Tamro compared to its competitors are its logistical efficiency and an automated, state-of-the-art distribution system that enables extremely fast deliveries of pharmaceutical products to retailers,” (SSH Tectia., 2006). The key to the distribution system lies in exchanging highly secured encrypted data across the supply chain. The answer was in a technological solution that all partners had to standardize on but proved to increase efficiency across the supply chain.
Like Tamro, another example of healthcare supply chain partnering is Alliance Imaging who provided mobile and onsite medical imaging devices and services to over 1,200 hospitals in over 46 states. The core problem was that “Alliance’s fleet of mobile imaging units was being created manually. They “had 20 people across the country consumed with details on which truck and what driver was going to complete which move. The biggest issue, however, was that the route plans were not created with the needs of the business in mind,” (Descartes Case Study, 2009). The solution was that by partnering with outside IT vendors and clients to implement the Descartes Route Planner, they were able to improve customer service, become more efficient, and save $1.7 million dollars annually.
In keeping with the healthcare theme, another example in the world of hospital imaging comes from our own hospital, King Edward Memorial Hospital (KEMH). Like numerous other hospitals around the world, we must supply imaging reads 24 hours a day, but with the shortage of radiologists, our solution was partnering with outside vendors and other larger hospitals to do the after hour reads. Initially we used a “Night Hawk”-like radiology service that provides reads in a follow-the-sun model throughout the world. Our after hour reads were done in Australia. Now, expanding on other partnerships, we are considering moving that to an East Coast hospital that is a core BHB business partner.
While there are both advantages and disadvantages to partnering, the focus should remain on the end result. From the research, perhaps the biggest disadvantage is that most partnerships have a core IT component that may be expensive or not align across the individual company’s strategies. These partnerships rely in the transfer of data to succeed, which implies a level trust and also joint solution-oriented approaches to avoid finger pointing and relationship disintegration that can happen when IT solutions have problems.
On the plus side, the advantages — like in the case study of KEMH — can lead to improved service to the clients or, in the case of healthcare, the patients. For KEMH, it assures timely reading of medical images along with world class medical interpretations that we could not cost-effectively or efficiently have offered the patient on our own. Properly thought through and executed, supply chain partnerships should provide a win-win solution to all components of the supply chain.
Thinking outside the box and looking at the supply chain in other ways, one can make the argument that the patient is actually a core component in the physician and hospital supply chain. EHR and EMR initiatives (which one can argue are partnering initiatives), like those driven by ARRA, conceptually will reduce supply chain time and cost by providing the patient with more accurate treatment in a faster manner. Proper use of these types of initiatives may also reduce cost and errors creating a better overall delivery of products and services.
Remix and the Tamro Group are key examples of success in innovative and imaginative reinvention of supply chain processes. Obviously these are not the only examples and, day after day, other companies implement lessons learned from these innovators. While based on numerous cross-industry examples, supply chain improvements will increase a company’s efficiency, they can also lead to significant competitive advantage and may even result in market-leading status. Perhaps the healthcare vertical should learn from other industries and seek to innovate delivery of care by improving supply chain components. In this author’s opinion, it will be the organizations that think outside the box, redefine the supply chain, and innovate that will gain the competitive advantages and dominate their markets.
1. Hoffman, W. (2006). Mixing it Up. The Journal of Commerce, 64A–68A. Retrieved on 7/4/09 from http://web.ebscohost.com/ehost/pdf?vid=7&hid=2&sid=e2cd5b82-e07a-48ab-aa78-b77c59529b3a%40sessionmgr8
2. Supply Chain Digest. (2006). Will Retailer/Wal-Mart Inventory Cut Backs Mean Sales Risk for Consumer Goods Companies? Retrieved on 7/4/09 from http://www.scdigest.com/assets/NewsViews/06-05-25-1.cfm?cid=713&ctype=content
3. SSH Tectia. (2006). Tamro Case Study. Retrieved on 7/4/09 from http://www.ssh.com/documents/48/SSHTectia_CaseStudy_Tamro.pdf
4. Descartes. (2009). Alliance Imaging Case Study. Retrieved on 7/4/09 from http://www.descartes.com/resources/case_studies/09feb_cs_allianceimaging.pdf
5. Refrigerated Transporter. (2005). DSC to service Wal-Mart Remix program. Retrieved on 7/4/09 from http://refrigeratedtrans.com/news/Wal-Mart-picks-DSC-Logistics/