The Effects of Supply Management on Costs and Revenues

Length: 1648 words

As discussed in the fourth chapter of the study, the members of the healthcare industry has recognized the positive impact of supply management into the business side of their operations. Despite the inefficient adoption of such processes, supply management practices have enabled the organizations to reduce their costs and at the same time, increasing their revenue. This then concurs with the different researchers’ views on the perceived benefits of supply management practices for the members of the healthcare industry.

Chapter 6: Summary and Conclusion 6. 1. Summary Without a doubt, almost all countries in the world today, especially those that are still in the process of developing have all recognized the importance of supply management as a tool for price stabilization. It is because of the benefits of the said management initiative that it is becoming more and more popular in terms of being slowly incorporated into the strategies of corporations and other organizations who wish to provide better services to their customers.

Lines (2007) discussed that the use of supply management can be traced back to the agricultural price crises of the 1930s wherein the governments had to manage their commodity supplies in order to protect their own interests. Eventually, it evolved

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into its current status, being used by organizations to safeguard themselves from the problems and challenges brought about by increased global competition.

By definition, supply management is basically concerned with the proper handling or management of the supply chain which is then usually made up of three important things, which Singh (2007) identified as the following: (1) goods; (2) money; and lastly, (3) the flow of information. In all industries, these are being handled by the same entities which are eventually different from the manner by which institutions of health care are managed.

As a result, this study focused on the supply management practices within the healthcare industry, most especially that of the United States of America. This research primarily aims to look into the current status of supply management in the health care industry. It also aims to identify the reasons behind the perceived inefficient use of the supply management strategies in the healthcare industry. In the same manner, it seeks to identify the benefits that the members of the industry may receive once the supply management is properly integrated into the businesses.

Conversely, this research would also point out the negative effects that institutions of health care may experience due to the absence of an efficient management of the supply chain. Moreover, the researcher also considers the relative backwardness of the practices of the members of the healthcare industry and it is because of this that suggestions shall be made in order to help in its improvement, taking the actions of other industries into consideration.

Undoubtedly, the earlier parts of this study have revealed that the use of supply management practices has indeed been considered to be essential to all organizations hoping to increase their advantage over their customers, Handfield and Nichols (1999) discusses). Moreover, the use of the strategy was seen to be essential in ensuring the capacity of organizations or firms to stay alive despite being caught up in competition.

Eventually, SCM developed in the same manner as the business environment evolves. The researcher chose the health care industry for this research for two simple reasons: (1) is the need of the members of this sector to devote more resources to this area considering its relative backwardness as compared with that of other industries as brought about by many challenges; and (2) the benefits that the institutions of health may receive from incorporating efficient practices of supply management.

Both qualitative and quantitative aspects of this research revealed that health care institutions spend much on supply management. In fact, it is considered as the second largest area of expenditure, the United Parcel Service of America states (2005). But despite this, most institutions, even those who are said to hold high leadership status have generally failed in coordinating their operations pertaining to materials management with their plans for operating their businesses.

This particular information is also significantly highlighted by the perceptions of the respondents who noted that as employees, they are not made aware of these initiatives. At the same time, SCM is not also properly integrated into their business processes. Aside from this, previous researchers also took note of the SCM in the healthcare industry being relatively backward when compared with that of other industries. Although members were seen to have adopted efficient practices to reduce their costs, there are still problems being experienced by the industry.

Burns (2001), in Mckome-Sweet, Hamilton and Willis (2005) lists these problems as 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. Because of this, the members of the industry have started to adopt measures that are aimed to at least ensure the efficiency of their supply management practices. The researcher asked the respondents to validate the presence of such within the healthcare industry and the latter eventually agreed that these are indeed being used by their organizations.

The essential tools of supply management in the healthcare industry included the following: (1) the Global Location Number; (2) the United Nations Standard Products and Services Code; (3) the Global Trade Item Number; (4) the Global Data Synchronization Network; and finally, (5) the Radio Frequency Identification. However, the researcher, based on the qualitative and quantitative aspects of this study can conclude that the aforementioned have to undergo more improvements in order to ensure its success within the healthcare industry. Basically, until now, the current status of supply management in the healthcare industry is lagging behind the practices of other industries. As a result, member organizations must adopt practices that could improve the said initiatives which would be essential in ensuring a bright future for the members of the industry. 6. 2. Conclusion

There are many ways by which the current status of the American healthcare industry can be explained. Without a doubt, as it has been repeatedly discussed in this paper, supply management in the healthcare industry significantly lags behind that of the other industries. This relative backwardness of the healthcare industry regarding the manner by which they handle the management of their supplies is brought about by many factors, such as the absence of critical technology infrastructure, the nature of the sector itself, and the lack of standardized data. This is shown by the secondary data obtained by the researcher as well as from the quantitative responses by the survey participants.

It is then because of this that the researcher shall reject the first null hypothesis and accept the alternative hypothesis which stated that the current status of supply management in the health care industry shows its inefficiency and backwardness when compared to its counterparts. As earlier mentioned, the aforementioned challenges are brought about by the absence of technological tools and advanced practices that may have helped members of the health care industry to improve their supply management initiative. Thus, the researcher once again rejects the second null hypothesis and accepts the alternative which stated, the inability to make use of modern technological advancements and practices contributes to the inefficient use of supply management strategies in the health care industry.

As also discussed in this chapter, the members of the American health sector have recognized the importance of supply management to their businesses. As a result, they undergo various initiatives aimed at improving their practices. Moreover, the survey results show that the respondents have seen a reduction in the costs of their organization as a result of managing their supplies properly. In the same manner, majority of the respondents have reported an increase in their organization’s revenue due to their practice of supply management. Because of this, the third alternative hypothesis shall be accepted, which stated, the proper use of supply management strategies bring about benefits to the members of the health care industry.

In connection with the previous discussion, the respondents of this study, as well as the previous researchers mentioned recognize the fact that negative effects may be felt by the members of the American healthcare industry that would be caused by the inefficient use of supply management. This then leads to the acceptance of the fourth alternative hypothesis, inefficient supply management practices negatively affect members of the healthcare industry as it compromises the safety of the patients and eventually hamper the development of the businesses. Lastly, the results of the survey also reveal that there is a need for members of the healthcare industry to develop their own practices of supply management. This is because of the nature of supply management itself which needs to develop its own tools for supply management, not just imitating that of the other industries.

However, previous researches note that allowing the practices of other sectors especially that of the retail industry (the so-called Wal-mart system and barcode technologies) may help in ensuring the efficiency and competence of a practice of supply management that is unique to the healthcare industry. 6. 3. Recommendations The researchers recommend a more in depth analysis of supply management practices within the healthcare industry. In order to do so, it would help if future researchers would only focus on one aspect of the healthcare industry. Moreover, an in depth analysis could also entail the surveying of suppliers who are an essential part of the framework of these institutions concerning supply management.

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