The holiday season is perhaps the busiest time of year for the retail sector. Between Black Friday, Cyber Monday and many well-timed new product launches, we can assume that the supply chain is working overtime.
While end-of-season discounts and “door-buster deals” aren’t applicable to healthcare, there are many insights to be gleaned from retail. Mike Duffy, president of Hospital Solutions and Global Supply Chain at Cardinal Health – who has spent more than 20 years in diverse supply chain roles across consumer packaged goods, automotive, and healthcare – shares his takeaways on the parallels between healthcare and retail supply chains.
1. Delivering on patient experience
As consumer-driven healthcare plans push patients to be more accountable for their cost of care, patients will understandably have greater expectations of the “care experience.” They’ll also be increasingly involved in understanding the cost of treatments, quality of care1 and available alternatives. To deliver on these rising expectations, hospitals need to challenge old paradigms and improve the patient experience, while reducing cost and improving quality. The question is how? One lever that’s often overlooked is the supply chain.
In a fee-for-service reimbursement model, the supply chain’s job was to ensure product availability. With the rise in consumerism and the evolution towards fee-for-value reimbursement models, the supply chain not only needs to ensure “right product, right place, right time,” but also needs to work holistically to reduce the total cost of care delivery. It’s no longer about the price of the product alone. Reducing administrative costs of delivering the product to the point of use is critical as well.
Making this transition requires a more complete understanding of how products move along the value chain, from point-of-use all the way back to point-of-manufacture. This shift will require partners to align goals and incentives. It will require new collaborative models and new workflows. Simply put, if we in the healthcare industry want to reduce the total cost of product use, we’ll need to establish new levels of trust among partners across the supply chain.
2. Achieving Greater Transparency
The first step in building trust is improving the transparency of how products move through the extended supply chain. Greater visibility reduces the opaqueness that exists today — opaqueness that leads to misgivings between partners and the inefficiencies that follow.
Retail provides a useful illustration of the benefits of transparency. The retail industry differentiated itself by its early adoption of technology that streamlines supply chain processes and enables data capture (think barcoding and the scanner at the checkout counter). This critical supply chain transformation began when large industry players decided to focus on the “first moment of truth” — the moment a consumer first encounters a product — and moved toward a consumer-driven supply network.
During this transformation, the retail industry focused on ensuring that product was available at the shelf when the shopper wanted to buy it. This meant delivering product in the most efficient manner, damage-free and with sufficient product dating (for products that had expiration dates). Today, the consumer-driven supply network depends on understanding the complete movement of product; from point of manufacture to the store shelf. Success hinges on identifying opportunities to streamline the supply chain and make it more responsive to changing consumer tastes or needs. How information flows is just as important as how product flows.
Global adoption of the barcode and data standards, such as GS1, provided a platform to give all partners real-time data visibility into product movement. This foundation led to improvements in trust and, subsequently, performance. Because of readily available data from standard data sources (like GS1), stores that were once regularly out of stock on highly favored items were able to reduce out of stocks, or eliminate the problem altogether (think of the inkjet in-stock promise many office supply retailers offer). At the same time, retailers could quickly replace products that weren’t moving, such as garments, with those that were, dramatically reducing end-of-season markdowns and obsolescence write-offs.
3. Creating a patient-driven supply chain
In retail, if a store doesn’t have product on hand or has set the price too high, the consumer can simply go to a competing store. While the first retailer will suffer (loss of sale and poor customer experience), the consumer will still get their product, albeit with some inconvenience.
In healthcare, patients do not have that luxury. Once admitted to the hospital, the patient needs products to be available 100% of the time. Patients cannot simply move to the next hospital if a product isn’t available or the cost is too high. A poor patient experience will adversely impact patient satisfaction scores and may influence where the patient goes the next time care is needed, especially if the patient finds cheaper but equally effective alternatives.
To respond to evolving needs and delivery models, the healthcare industry needs to go through the same sort of supply chain transformation that revolutionized retail and other industries. We need to focus on the first moment of truth and move toward a patient-driven supply network. We need to extend our thinking beyond our own four walls (be it provider, manufacturer or distributor setting) and think holistically. We need to collaborate with all partners and focus on our shared patient, just as retail and consumer goods manufacturers focus on their shared customer. We need to embrace data standards and leverage emerging technologies that can do for healthcare what the barcode has done for retail.
The patient has already become a growing presence in how care is delivered, and we need to be ready, and able, to accept this shift.
1 http://www.npr.org/sections/health-shots/2016/04/20/474981709/medicare-delays-plans-for-new-star-ratings-of-hospital
Originally published on Essential Insights