There can be no question that the strains, conflicts and pain inflicted by COVID-19 on the healthcare supply chain are as enormous as they are far-reaching. Amid supply disruptions and capacity limitations, many suppliers simply do not have the flexibility to quickly and cost effectively adapt to fast-changing circumstances. Healthcare providers are seizing the opportunity to translate critical lessons learned into a new paradigm for selecting members of their supplier community.
The bitter pill
With the ultimate goal of providing the level of care all patients need and deserve, healthcare providers today struggle with a number of supplier selection attributes including flexibility, cost, performance management and consistent contract compliance. Beyond the cost-to-serve model, providers seek holistic supply chain solutions in which strategic suppliers become embedded partners. As partners, they directly assist in developing highly tailored solutions aligned to provider strategy, support through turbulent times and above all, optimal patient care outcomes. The challenge? Because many providers continue to deploy classic (pre-COVID-19) strategic sourcing principles in which total cost and speed-to-value create short-term selection advantages, buyers are deprived of a partner in driving meaningful change and continually advancing patient care outcomes. No one would argue that cost, in and of itself, is an insignificant attribute. But neither is a supplier’s proven ability to support, enhance and nurture the buyer’s culture. It’s time to ask for both.
The road to recovery: 5 questions
In searching for the right path forward from the challenges of the past several months, many healthcare providers are developing a refreshing yet uncompromising new approach to supplier selection. The ideal approach empowers potential suppliers, generates increased cross-functional buyer enthusiasm and more closely aligns the seller’s asset portfolio to the buyer’s market and patient care strategies. By asking five very simple (though potentially painful) questions, savvy buyers are becoming educated diagnosticians capable of filtering out the nonessentials and confirming if the supplier candidate has the tools, processes and vision to heal, support and sustain the buyer’s supply chain:
- Do you understand your culture? It’s a serious question. How do your employees spend their time outside of work? Where do you make charitable contributions? How do you encourage diversity? Suppliers with cultural norms, beliefs and practices that diverge from yours would not be suitable to assist with details of your strategic plan.
- Does it really take a village? Doctors, nurses, accountants, sourcing and supply chain experts are all required to manage the selection filter. As all combine their voices into one in order to improve ultimate patient care outcomes, their involvement in the sourcing process elevates functional goals, patient care needs and financial imperatives to the forefront. Everyone in the village must know their role in the end-to-end process.
- Are we managing our own performance? The relationship between doctor and patient achieves incredible results when both focus on the diagnostics, decisions and outcome responsibilities. Buyer-supplier relationships are no different. Performance management is designed to unlock hidden value; buyers cannot exclude their own actions and performance from the equation.
- What do you want to improve? Is your organization committed to continuous improvement (CI)? Where do you need to improve? How fast? What are your quantitative improvement targets? What skills do your suppliers bring? What are their CI bona fides? Is CI imbedded within their culture? CI can and should promote both financial improvement and supply chain agility. Evaluating the CI successes and tools of your prospective supplier will go a long way to confirming their ability to hold up their end of the contractual bargain (and yes, those CI targets should be in your next contract).
- Do you like to share? Cost savings and process improvement are valid outputs from a successful buyer-supplier relationship, and meaningful, sustainable change requires valuable time and resources. Do your improvement targets match your generosity by sharing improvements with your suppliers? Establishing contract-based CI gainshare mechanisms for both strategic CI endeavors and tactical process improvements not only empowers suppliers to dedicate experienced CI personnel willingly, but it also maintains focus on the nature of an embedded relationship in which the partners equally unlock the value and share the results.
A holistic approach to strategic sourcing abandons single-point selection analytics in favor of a comprehensive, tailored supplier prototype that represents the complete plug-and-play ecosystem best suited to meet cultural, financial, strategic and change requirements. Equipped with the right prototype, buyers are in a far better position to evaluate total cultural fit and select suppliers best suited to be an equal partner in the drive for value and unlocking sustainable operational excellence. Armed with the RFP and its embedded prototype, buyers can proceed to market with confidence and develop the operational contract required to drive mutual performance, achieve critical continuous improvement goals and deliver on the promise of cultural inclusion, plus the rewards of improved supply chain health. Let the healing begin.
Principal, Life Sciences
+1 215 561 4200
Director, Supply Chain Strategy
+1 858 704 8019