Over 20 years on 3 different continents, I’ve been amazed at the supply chain miracles built by global companies like Walmart, Apple, P&G, GE, Amazon.com and others. While many credit the stupendous success of Apple to Steve Jobs’s genius and Jony Ive’s design capabilities, I firmly believe Tim Cook (then head of operations and supply chain) played a significant role in making sure every one of the Apple products was manufactured to the highest standards, was defect free, and was shipped on time. Maybe that’s why Steve chose Tim Cook as his successor.

Look at Walmart. It’s essentially one giant global supply chain organization. If case studies and anecdotes are to be believed, Walmart tracks its supply chain from the time a cotton seed goes into the earth to the time a cotton shirt reaches the shelves. Jeff Bezos has also been fanatical about supply chain at Amazon.com, and has built a delivery behemoth.

Now fast forward to my “chilling experience” (literally) at a hospital. I was discussing challenges of order management with a supply chain director. When I mentioned to her that it’s kinda chilly in their offices, she very calmly informed me that it’s because the offices are very near the morgue! At first I tried to rationalize it by saying it makes sense to have the material management offices near the warehouse so that receiving and inventory management become easy. But another thought kept bothering me: Are material management offices located near the morgue because that’s the least expensive real estate? And if so, is that indicative of the significance of the supply chain to healthcare management?

Before you answer, consider these facts:

  • Material costs in a hospital are arguably the second largest expense after people costs. The teams that manage this expense hardly get the attention, budgets or infrastructure required to manage that spend intelligently. How many heads of supply chain are invited to the board meeting or formation of strategy?
  • Siloed, expensive, non-scalable IT infrastructure. As a result of M&A activity or by the blessings of the group purchasing organizations (GPOs), hospital infrastructure is stuck in the dark ages. Its time supply chain management took the IT into their own hands.
  • Managing physician preference items spend. This was a much talked about subject in every hospital. Generally there is a sense of resignation in the supply chain community that spend is always driven by the physicians. While none of us want to be operated on with a lesser quality, What if the supply chain had evidence that a “Porsche” internal combustion engine was being used by a physician when only a small internal combustion was required? Especially when that decision to use the Porsche engine was influenced by the sales guys?
  • Supply chain teams that are resistant to new ideas and technologies. This cartoon says it best:
  • An abundance of data but none of it easily available. While industries like retail, manufacturing and finance are redefining themselves using big data analytics and predictive intelligence technologies, healthcare lags behind either because of HIPPA compliance, privacy laws, or in most cases vested interests who like the status quo (and the profits they derive from it).
  • Over reliance on GPOs, their antiquated technology solutions and strong hold on “percentage compliance to GPO contracts.” This one speaks for itself.

Our objective at www.nogpo.com is to help supply chain management get a visible seat at decision making. We want to empower each material manager with on demand intelligence so that they can truly be the “game changers”.

Disclaimer: Porsche trade mark and engine is used only as a comparison of cost. The author does not mean any dis-respect to Porsche (which happens to be my all time favorite cars)