The widening world of healthcare supply chain

Back in the days of yore, healthcare supply chain was known as "purchasing" and oversaw the procurement of a variety of commodities, equipment, furniture and staples for a healthcare organization — nowhere near as complicated and varied as the shopping list may be today, which includes all sorts of surgical, laboratory, information technology and diagnostic imaging equipment and products.

In fact, as healthcare supply chain today has elevated the caliber of its executive leaders and managers and as business and clinical operations have become more complex, the historical limitations of the department, traditionally residing in the basement, have been lifted just as it as emerged from the basement.

Today, supply chain accounts for a plethora of accountable functions and responsibilities that include contracting, purchasing, sourcing, inventory management, distribution and logistics, warehousing (to some extent), purchased services, as well as environmental services, facilities management, housekeeping, mailroom and printshop. In some places, supply chain can oversee sterile processing, food service and nutrition, information systems, hospitality, landscaping, parking services, real estate, business incubation, clinical facilitation, project management and value analysis.

To some, this litany appears to be a catch-all for anything and everything operational outside of administration, clinical services and finance, which reinforces that supply chain's realm — if you include purchased services for contracted, outsourced, third-party labor — represents the No. 1 cost/expense category within a healthcare organization ... dethroning the historical No. 1 of labor after decades at the top.

Arguably, some content that supply chain still remains No. 2 — even if a close No. 2 to labor at No. 1 — but that's only justified if individual departments control their own budgets and expenses for labor and supplies. With the emergence of purchased services in this century, that's debatable.

Based on this premise, Leaders & Luminaries asked members of the Bellwether Community — Bellwethers, Ammer Honorees, Future Famers, Sustaining and Event Sponsors, Board and Advisory Council members to share their insights on the relatively rapid expansion of healthcare supply chain's influence and why this may be beneficial for the profession and industry at large. Here's what they said.

"I have seen that all indirect spend, in some cases, is being added to the Chief Supply Chain Officer's responsibilities, with business processes to assure all contracting goes through supply chain. This would include all non-labor expense. I have also seen two places where the Chief Supply Chain Officer is also the de facto Chief Spend Officer and owns labor expense."
Rand Ballard, Chief Customer Officer, Vizient, Founding Sustaining Sponsor

"Supply Chain's role has expanded and plays a pivotal role in serving as the non-labor spend resource expense management leader of any organization as a pacesetter, bringing forward the expense management and reduction strategies. Much like the Chief Human Resource Officer sets the people strategy for an organization, the Chief Supply Chain Officer sets practices and standards for sourcing, procurement, contracting, supplier relationships and expense management for all non-labor expenses (all goods and services). We are the supportive arm providing insights, trends and guidance on sourcing practices of goods and services, bringing forward balance in decision-making across the continuum of considerations (cost, quality, service, environmental sustainability, diversity, value, etc.). Supply Chain is the strategic and operational arm of the organization, driving efficiency and strategic alignment and serving as a dyad partner to stakeholders across the organization and a conduit to all the external supplier relations."
Amanda Chawla, FACHE, CMRP, Chief Supply Chain Officer and Vice President, Stanford Medicine, Bronze Sustaining Sponsor

"As insight into the value of supply chain expertise continues to grow, especially in healthcare, and margins continue to be squeezed, supply chain is being asked to apply this expertise to 'non-traditional' areas. In my experience this has included management of the contract processes for an organization to provide a big picture overview of organizational spend. Supply chain has developed teams to work with food services, hospitality services, facilities (including all contracting for building and construction as well as maintenance and groundskeeping,) human resources contracts as well as consulting agreements in addition to the clinical product selection and management teams. The supply chain expertise in contracting and negotiation can help organizations not only save money, but avoid future spend and duplication and ensure that limited resources are spent wisely. One of the biggest cost partnerships that supply chain can forge is with pharmacy. With the ever-increasing cost of pharmaceuticals, shared expertise with inventory and warehouse management as well as contracting and negotiation can provide value.

"The overall value of supply chain expertise and necessity was very evident during COVID and continues to be evident when major supply disruptions are experienced. Elevating the understanding of supply chain has enhanced the focus on the need to continue to develop technology, data standards adoption and metrics. However, unfortunately, the memory of disruptions is often fleeting, and supply chain will need to continue the practice of demonstrating value to their respective businesses."
Deborah Templeton, Chief Administrative Officer (retired), System Support Services, Geisinger, Bellwether Class of 2023 and Bronze Sustaining Sponsor

"As healthcare supply chain matures toward expanding the scope of its sourcing span of control that includes all non-labor spend (e.g., HR, Finance, IT, Pharmacy, Risk Management, Marketing and other purchased services), there has been the exposure of where these services may have had voids of required leadership. It has been through this expanded sourcing experience that Supply Chain leaders grew further in their understanding of these services and their operations. Furthermore, especially during the COVID challenges, there was greater likelihood of recognizing that Supply Chain executives have proven to be strong leaders. Hence, in the marketplace today, there is more evidence of Supply Chain executives taking on broader responsibilities among these purchased or ancillary services, migrating into the role as Chief Resource Officers.

"Today, you will find myriad responsibilities among Supply Chain executives that are overseeing functional departments such as Pharmacy, Environmental Services, Construction, Patient Transportation and hospitality services. As they have built stronger knowledge and leadership experiences through sourcing, logistics, business intelligence and performance, utilizing the talent of these Supply Chain executives has been certainly attractive to taking on more of these direct functional responsibilities."
Tom Lubotsky, Bellwether Class of 2022, Vice President, Supply Chain, Allina Health, Bronze Sustaining Sponsor

"The elevated role of the healthcare supply chain and emergence of the Chief Supply Chain Officer has created positive and significant transformation of the industry over the last decade.

"Supply chain departments are increasingly responsible for the total cost of care and managing their organization's non-labor spend. On top of that, teams are charged with adjusting and scaling supply chain resources to meet the needs of growing organizations, including additional services found outside of a non-acute care setting. This shift has authorized and empowered supply chain executives to take holistic stock of all non-labor expense and find opportunities for improvement — with greater impact on operating margins, efficiencies, supply chain stability and the overall financial health of an organization to support the mission of high-quality, cost-effective patient care.

"Against this backdrop, third-party purchased services — everything from food and nutrition to snow removal to laboratory services and more — are integral to hospital operations and consume a significant portion of hospital budgets. A comprehensive purchased services technology platform can equip providers with a real-time view into usage and spend — and can be indexed by supplier, category, service-level terms or contract renewal date. This type of technology can also set and manage specific savings targets, identify diverse suppliers, and ensure the services received match contracted terms, including quality and price.

"In addition, hospitals and supply chain teams should consider GPO contracts, as they can yield the greatest savings and have the fewest discrepancies, which saves time for both buyers and sellers. Industry-leading purchased services contracts, technology and partners can help hospitals and health systems reduce costs, increase revenue, improve workflow and efficiencies, and enhance quality."
David Hargraves, Senior Vice President (retired), Supply Chain Services, Premier, Founding Sustaining Sponsor

"Since successful/mature supply chain teams have their tentacles in so many areas of the organization, it is a natural evolution to increase the span of control for these teams based on the value and strategic advantages that have been proven and already delivered year over year. A logical career progression for a successful supply chain leader is to that of a Chief Operating Officer and overseeing all key operations of the organization. Supply chain leaders are well positioned for this expanded scope since so much of the operations of an organization passes through the purview of a mature supply chain team.

"Growing the span of control and therefore value to the organization allows for increased efficiency from a cost perspective with the expansion of the 'supply chain model' to other non-traditional areas. These efficiencies manifest in the form of financial savings with the use of fewer resources, engaged staff due to proper governance, and a culture of data/metric-based decision making."
Erik Walerius, Future Famers Class of 2016, Chief Supply Chain Officer, UW Medicine

"The obvious answer is much of the spend is outside the traditional 'supply chain' and thus if the supply chain leader can influence these other categories, then savings can be more rapidly achieved. That being said, I would suggest that there is an even greater benefit for the profession and industry at large. If a supply chain leader has these areas of responsibility, he or she will be at the table in the C-suite all the time! The ability to influence more broadly in the organization will be directly correlated to how close the Supply Chain Leader is to the 'power' in the organization."
Jane Pleasants, Bellwether Class of 2015, Executive Director, SMI

"The spread to purchased services can ultimately be areas that make large impact on total supply chain cost without as much risk to the patient consumer. Also, a continuation of standardized products and services along with best practices of the utilization of those products ultimately leads to less potential error on and behavioral changes of how product is used (again affecting risk of health) and potential overuse/misuse of product."
Maria Hames, Partner, HealthCare Links, Event Sponsor

"Applying supply chain principals to any expenditure provides benefits. This can include risk mitigation, improved costs, added services and more. It can also identify areas of symmetry that can streamline work, improve outcomes and further reduce costs."
Mary Starr, Bellwether Class of 2018, COO, Greenhealth Exchange

"Cybersecurity is number one and AI will be next that will impact all supply chain processes."
Charlie Miceli, C.P.M., Bellwether Class of 2023, Vice President, Network Chief Supply Chain Officer, University of Vermont Health Network