How the supply chain can better participate in strategic decision-making

In a rare skill-set combination, supply chain managers often navigate the minutiae of daily details with the visionary scope of strategic planning, making their spot at the decision-making table invaluable to corporate leadership.

“The C-suite really needs to pay attention to their supply chain efforts,” says Curtis Rooney, president of the Healthcare Supply Chain Association (HSCA), a Washington, D.C.-based trade association that represents 14 GPOs, including for-profit and not-for-profit corporations, associations, multi-hospital systems and healthcare provider alliances. (HealthTrust is a member of HSCA.)

“If you look at a hospital spend, labor is 45 to 50 percent and ‘stuff’ is the rest of it,” Rooney says. “You have actual materials, like cotton balls, and then outsourced services are also part of the non-labor costs, which are 45 percent of a hospital’s budget. So supply chain management controls the second most significant part of a hospital’s budget. They are very important.”

While supply chain traditionally has been defined as the division that integrates supply and demand management within a company by connecting vendors with the customer, Rooney says the perception about supply chain is being revised, particularly within healthcare because of the work of Fortune 500 companies.

Interestingly, Rooney credits WalMart’s business model with the perception change. As the world’s largest retailer and the third largest public corporation, according to the 2012 Fortune 500 Global list, no one disputes the success of a company built on the negotiation of lower prices through volume sales.

Now as WalMart expands into healthcare with in-store clinics, as announced in April at the GS1 Healthcare Conference in Buenos Aires, Argentina, Rooney says the same business model that has transformed retail shopping for much of the world may impact healthcare.

“This could have larger ripple effects,” he said regarding WalMart.

WalMart aside, within the healthcare sector, passage of the Affordable Care Act and the continual emphasis on cutting costs has raised the profile of the supply chain, Rooney says.

While supply chain professionals, as well as their C-suite leadership, may consider that procurement and logistics are the primary role for the supply chain, Rooney maintains that supply chain managers often can provide a unique perspective of the big picture, such as leaks in the system.

“If you can show where those tactical elements can fit into a strategy,” Rooney says, “that’s where supply chain can be more valuable.”

“If you can show where those tactical elements can fit into a strategy, that’s where supply chain can be more valuable.”

Rooney uses the area of implantable devices, such as spines, knees and hips, as an example to illustrate his point.

“Say you’re using this one particular device, but this other device has a lower price,” Rooney says. “If the supply chain can show data to the C-suite that supports using the lower cost device without compromising patient health and safety, then the C-suite can engage the physician community with the data. That’s a skill that only the supply chain can bring.”

For supply chain managers to get a seat at the decision-making table—or at least within view—Rooney suggests adopting a lifelong learning philosophy.

“I think for supply chain leaders, they have to ask ‘Who does the C-suite turn to for answers? What keeps the leadership up at night?’ ”

If the answers to these questions fall within the supply chain manager’s scope of responsibility, then the supply chain manager can demonstrate leadership by providing solutions to top-level management. If a manager isn’t yet at the level to interact with the C-suite, then start with that person’s direct supervisor, Rooney says.

“Find out what the boss’ questions are and figure out what they know and how to apply it to become a solution provider,” says Rooney. “To show value, supply chain managers have to demonstrate what they know. Make it part of a long-term professional growth strategy.”

In an editorial published in Inbound Logistics, Terry Harris, managing partner at Chicago Consulting, suggests it’s time for “Chief Supply Chain Officers” to take a place in the C-suite, and he suggests taking lessons from retail and sales.

“Retail marketing and sales executives watch competitors. Supply chain executives should, too. We should know how our competitors run their supply chains—what they do well and not so well, what their cost structure is, and what their plans and strategies are,” Harris says.

“By managing supply chain interdependencies and adopting a full view of service and cost, supply chain executives can amplify their organizational scope and heighten their financial contribution to attain the C-designation they deserve,” he says.

The lifelong career track should also include continual reading to stay on top of the most recent news and trends, Rooney says.

“It really is a small world, especially in healthcare,” he says, noting a handful of thought leaders publish the majority of materials.

His personal reading list includes books and articles by Lawton Robert Burns and Eugene Schneller. Burns authored the definitive volume The Business of Healthcare Innovation. Schneller, along with Larry R. Smeltzer, wrote Strategic Management of the Health Care Supply Chain (with a foreward by Burns). 

Rooney also recommends subscribing to a variety of blogs, including the HSCA blog.

“Keep reading and get out,” Rooney says. “Go to a conference and see what other people are thinking. It’s worthwhile to get out and network.”

The HSCA website lists national and regional events, as well as webinars.

Whether solutions are coming from the boardroom or the supply chain office, the fundamental goal is the same: “Contributing to the strategic bottom line of your organization is the key to success,” Rooney concludes.

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