Efficient Supply Management Practices
This subsection, as its heading implies shall discuss the different challenges that are hampering the development of an efficient practice of supply management within the health care industry, leading to its’ perceive backwardness when compared with other industries (Scalise, 2006). In the same manner, the discussion shall also be discussed in a manner that would highlight only the experiences of the American Healthcare Industry, as discussed by the secondary data obtained by the researcher.
As often repeated in this paper, and as the MIT Center for Transportation and Logistics (2006), the healthcare supply chain is extremely sick and is definitely in need of attention. Generally, the backwardness of supply management practices in the Health care industry is brought about by its nature. According to Scalise (2006), unlike other industries, health care is a cottage industry wherein key players, such as the clinicians are independent contractors which have their own preference of supplies.
In the same manner, other researchers also note that this particular industry is different in a sense that financial and information flows play more important roles in the decision making concerning the design of the supply chain management practices (MIT Center for Transportation and Logistics, 2007). Furthermore, the MIT Center for Transportation and Logistics (2007) notes,
Due to the convoluted interactions between a very diverse set of stakeholders, the healthcare sector is unique in many ways and it is difficult to compare it with any other sector or industry. But more importantly, a failure in this sector has life and death implications that can’t be adequately compensated in money terms. Consequently, efficiency and cost concerns are trumped, often unjustifiably, by the diktat for superior patient care.
In the same manner, the healthcare industry is also characterized by the tendency of supplies and processes to vary from one another, thus also contributing to the risk that its members may bring to their patients (Scalise, 2006). This is also supported by the paper published by the MIT Center for Transportation and Logistics (2007) which said that the peculiar nature of the healthcare professionals’ jobs also contribute to the ineffective management of supplies in their industry.
These often include the following, as cited by the MIT Center for Transportation and Logistics: (1) an unavoidable entanglement of products and services that are usually combined with each other during treatment; (2) the uncertainty in the demand pattern of treatment existing and remains unique for each patient; and finally, (3) the lack of data standardization. Clearly seen, the very nature of the health care industry contributes so much to the failure of its SCM. However, it was Dudas (n. d. ) who thoroughly described the problem of the Health Care Industry with regard to the adoption of Supply Management Practices.
He stated, The supply chain has advanced in other industries (retail, auto, grocery), but the health care industry is just now learning the benefits of electronic commerce, vendor-managed inventory (consignment), evaluated receipts settlement, and just-in-time replenishment. The problem is that many of these efforts are falling short of the expected benefits. Some suggest the primary reason we struggle is due to the lack of a solid, underlying infrastructure. The investment in core technology and data standards has not been made in healthcare.
The researcher concurs with the statement made by Mckone-Sweet, Hamilton and Willis (2005) in their article, published in the Journal of Supply Chain Management entitled The Ailing Healthcare Supply Chain: A Prescription for Change in saying that one can find a number of written and published work that describe the importance of supply chain management but these literature failed in terms of enumerating the different challenges being faced by the Healthcare industry in terms of applying an effective supply management strategy.
However, it was Burns (2001), in Mckone-Sweet, Hamilton and Willis (2005) who enumerated the different problems that serve as barriers in this particular industry.
These are the following: (1) the constant evolution of technology that contributes to the different products’ short life cycle, contributing to the increase in the prices for the items preferred by the physicians; (2) a difficulty in predicting frequency, duration and primary diagnosis for patient visits and the products that the latter may require; (3) a lack in standardizing the nomenclature or coding for the different products and commodities needed by the members of the healthcare industry; (4) the industry’s lack of capital in order to build a sophisticated information technology infrastructure that they need to support the efforts of the company pertaining to supply chain management; and finally, (5) their inadequate business education and SCM capabilities among hospital-based buyers.
Everard (2001), as also mentioned in the work of Mckone-Sweet, Hamilton and Willis (2005) also noted the lack of strong managers as one of the reasons behind the failure of supply management within the healthcare industry. According to Everard (2001), efficient supply chain managers must be knowledgeable of the best practices of other industries with regard to supply chain management. In the same manner, these people must also possess a business education that may prepare them from the demands of their work as managers of the supply chain. They should also possess a knowledge and understanding of the drivers and influences of the supply chain together with the ability to engage in strategic thinking. Lastly and most importantly, these people must have the capacity to influence the entire organization.
This is because according to Singh (2007), healthcare institutions are indeed businesses after all, ensuring the satisfactions and happiness of their patients, their customers. Aside from this, hospitals must also remember the importance of maintaining their profit margins as this is a manner by which they are assured of the satisfaction that their patients receive from their services. The United Parcel Service of America (2005) on the other hand concurs with the work of Mckone-Sweet, Hamilton and Willis (2005) in saying that challenges arise from the pricey items that are preferred by the physicians due to the absence of product standardization in the health care industry.
It is through paying special attention to these products and its standardization can help so much in improving product savings opportunities of the different health care institutions, the United Parcel Service of America (2005) notes. The problems brought about by the lack of product standardization in the health care industry are also recognized by Frank Fernandez, assistant vice president and corporate director of materials management for Baptist Health South Florida, as cited by Stewart (2007). He states, “There are significant inefficiencies in the healthcare supply chain, due to lack of standards, resulting in increased costs for manufacturers, distributors and health care providers. ” Aside from the inability of the members of the healthcare industry to standardize their products, Stewart (2007), Singh (2007) and Dudas (n. d.
), as earlier discussed, also said that the health care institutions have also failed in terms of synchronizing the data of their product with their manufacturers and the other members of the supply chain. As Garvin (2006) puts it, the data in the healthcare supply chain is broken. According to Dennis Black, another important person cited by Stewart (2007), the synchronization of important data could help institutions in a manner by which errors concerning shipping are avoided. In the same manner, these could also help in enhancing the productivity of two important functions of the organizations: the back-office and customer-facing. The MIT Center for Transportation and Logistics (2007) strengthens this point, thus discussing,
Another critical aspect of the healthcare sector is the ambiguity vis-a-vis its end customer and the complexity of the demand creation process… The health sector [also] presents additional unique challenges since products and services have to be highly customized to perfectly match patient needs in most cases. Unlike other industries, the desired and preferred degree of customization is not under the direct control of the customer (patient). It is thus difficult to sway the customers to select a particular configuration over others, otherwise referred to as demand shaping. This peculiar feature further compounds the highly unpredictable demand patterns making it almost impossible to plan efficient supply of products and services in this environment.
The inability of health care institutions to synchronize their vital information also led to their data’s loss of integrity which is then seen to significantly hinder the development of their supply chain processes, costing hospitals, manufacturers, distributors and group purchasing organizations (Materials Management in Health Care, 2006). According to Bill Francis, a representative of the Hospital Corporation of America, the health care industry in itself is complicated enough but this complex nature could be significantly lessened when supply ordering is properly managed through the synchronization of data and avoiding the loss of data integrity (Materials Management in Health Care, 2006). Related to the problem of healthcare institutions with data that are unsynchronized is their inability to make use of modern technology and incorporate these to their supply chain networks (Dudas, n. d. ).
However, Perry (2005) discusses that members of the healthcare industry have but one dream, expressed in the views of Thomas Hughes, the Executive Director of SMI. For Hughes, as cited in the article of Perry (2005), the healthcare industry would experience a futuristic world wherein all products would be easily identified as they possess the same name and the same number through the use of a certain system. Under this particular arrangement, health care institutions would have their own common identifier that would link them with the supply chain and the other process that may fall outside of it that they opt to choose (Perry, 2005). This in the same manner would facilitate easy shipping, invoice matching and receiving.
However, up to now, the health industry was only successful with these goals only to a certain point, Perry (2005) discusses. Eventually, the problem regarding the inability of health care institutions to make use of modern advancements in technology is the reason behind the similarity among the products, leading to the high prices of physician-preferred commodities (Perry, 2005). Sargent (n. d. ), also concur with the aforementioned discussion, stating that database development within the healthcare industry has yet to be completed, thus contributing to the absence of essential vital product information which then in turn put the safety of the patients at risk.
Gavin (2006) then lists the following as the advantages that synchronized data may bring to the institutions of healthcare: (1) reducing costs; (2) reducing or eliminating manual re-work; (3) reducing clinical frustration; (4) reducing operational expenses; (5) facilitating patient safety; (6) improving speed of delivery; (7) improving spend analysis; (8) improving the recall process; (9) increasing collaboration; (10) improving business intelligence; and (11) improving back office productivity among others. The previous section of this literature review discussed the health care industry’s use of RFID technology as part of their supply management practices. However, the success of this technology is brought about by its tendency to put the patient’s privacy at stake. The Healthcare Resource and Management News (2005), in their article says that institutions of healthcare must be able to address privacy problems in order to ensure the success of the RFID technology, leading to the potential development of supply management in the industry.
However, the RFID technology is not superior when compared to the barcode strategy that is not present in the healthcare industry and yet not adopted by the institutions of healthcare (Sargent, n. d. ). The use of the barcode technology could enhance the business practices of the health care institutions for purposes such as inventory control, information pertaining to patients and other essential information that may be needed to ensure the success of one’s services through supply management. It is because of this that healthcare professionals such as Sargent (n. d. ) discussed the importance of incorporating this barcode strategy into their industry in order to experience the success felt by other industries that made use of this particular practice.
Without a doubt, the different tools and practices earlier enumerated only shows that despite the presence of the aforementioned in the healthcare industry, there is still a need to develop such considering the fact that these were unable to at least improve the management of supplies amongst the institutions of this industry. However, the inability of organizations in the said sector to incorporate SCM into their overall business strategy brings about problems as well. The MIT Center for Transportation and Logistics (2007) states, Unfortunately, in most organizations in the healthcare sector, the supply chain is treated purely as a role player that has no place in the overall strategy of the organization. Consequently, supply chain related decisions are tactical at best and focus primarily on supporting or delivering organizational performance objectives.