Calling All Supply Chain RE-Engineers
By Chris Oleksy
The impending change coming to Washington with the installment of the next president is creating rampant speculation about healthcare reform, of which medical devices are a large segment. And, many would argue—for various reasons—that it is long overdue. At a recent meeting held by the Advanced Medical Technology Association in Washington, DC, Sen. Hillary Rodham Clinton (D-NY) made it quite clear that “change is coming.”
If we were in the midst of the 1980s, one could argue that what really is desired is that decade’s overused term “Business Process Re-engineering,” or BPR. While most supply chain experts realize that today, they already perform this daily, back then, many felt that BPR was the concept of completely re-engineering or redesigning the way things were to be done. No industry was spared the need to re-engineer. If you didn’t re-engineer your business, you would be gobbled up by the world-ending Y2K monster—which, by the way, ended up missing in action along with the Loch Ness Monster.
Eventually, BPR became underused as a result of the “R word”: RE-engineering. Many executives felt that if nothing was wrong with their business processes, then there was no need to re-engineer anything. The old adage, “If it’s not broken, don’t try to fix it,” reigned supreme. Unfortunately, this kept many organizations from benefiting from the power inherent to BPR thinking.
In support of BPR, consider this philosophy: If you’re not trying to make your business processes better, they are broken indeed.
In the 1990s and still going strong today is the concept of supply chain/ value chain engineering, which is similar in many ways to BPR. Many find the concept of the supply/value chain much easier to understand than BPR. Unlike BPR, which covers virtually all business processes, the supply/value chain generally resonates in the “supply” aspects of business.
What has made the supply/value chain successful is that it does not have the “R word” associated with it. Therefore, it is accepted practice to continually look for ways to improve or engineer your supply/value chain to achieve optimum results.
Lean thinking in this decade has added yet another twist—engineering a product; configuring a supply/value chain; engineering how a front office payroll system should operate; and so on. The concept of removing variability and waste is paramount to delivering efficient, repeatable results. From products to front and back offices, lean thinking applies universally.
Lean Engineering of the Supply/Value Chains
Merriam Webster’s definition of experience is “the direct observation of or participation in events as a basis of knowledge.” Reform in the healthcare/medical device space is complex and will require a convergence of the experience that has been gained during the past three decades. It will require the lean engineering of the supply/value chains and business processes that make up this domain. But that’s not all. In also will require a societal, consumer understanding and appreciation for the extended life expectancies we all enjoy and what we are willing to pay for them.
The most difficult of this entire convergence is the perspective of the consumer. When the consumer becomes a patient, a new dimension comes into play. There is a key difference between an automobile purchased by a “consumer” and a medical device purchased by a “patient,” but we often confuse the two. When hearing the cost of a new automobile is $30,000, we shrug our shoulders and are frustrated. But nine out of 10 times, we still purchase the vehicle. When we are told that a medical device will cost $30,000, the immediate reaction often is shock and dismay—and, in many cases, outrage. In fact, if one were to consider that this device would enable the individual to live 30 more years of priceless life enjoying friends, family and everything life has to offer—including that $30,000 automobile—$1,000 per year sounds quite affordable.
It is true that there are opportunities to lower the costs associated with healthcare and devices, but this must be accomplished in the right way. We’re dealing with patients, not simply “consumers.”
Merriam Webster’s definition of engineering is “the application of science and mathematics by which the properties of matter and the sources of energy in nature are made useful to people.” One almost can substitute the definition of engineering for the definition of medical devices. The bottom line is, the medical device industry and the concept of engineering are inherently aligned.
Healthcare medical device reform is primed to use a pseudo engineering algorithm that supply chain experts use daily and is as straightforward as the formula E=mc2:
SUCCESS = RP → RT @ RT in RP
SUCCESS = The Right Person, Doing the Right Thing, at the Right Time, in the Right Place
Here are some examples of the algorithm in use key to the healthcare space:
• Engineers and inventors need to be able to invent new lifesaving devices and therapies for mankind without having to cut corners, which could injure patients.
• Engineers must re-invent existing devices/therapies, lean and economically, to reduce the costs of products.
• Supply chain/value engineers must lean out every aspect of how to plan, source, make and deliver therapies and devices globally.
• Medical device companies must continue to invest in research and development and be allowed a fair return on their efforts.
• Medical device companies should not be forced to reduce costs so much that they misguide their focus away from the patient and be forced to spend their precious resources focusing solely on how to make products cheaper.
• Contract manufacturing companies must produce increasingly more product supply, allowing the medical device companies to stay focused on patient needs. Only through the escalation of global outsourcing partnerships can this occur.
• Component suppliers should become best in class at what they do and not water themselves down trying to be all things to all people.
• Fairness doctrine should be allowed, as should a win/win relationship across the value chain, to prevent the “I win, you lose” mentality that has been prevalent in some industries.
• We must recognize that we are patients and not merely consumers, and there is a cost associated with life.
• There must be greater focus by the “consumer” on prevention to minimize the cost of becoming a “patient.”
These are just a few examples of many elements that need to converge as a means of restoring order in the healthcare/device reform debate. The focus should start, and end with the consumer/patient. We should never forget that we all will be patients someday—and in our zeal for cost effectiveness, we must not create a problem instead of solving one.
Consider this a call to all “Supply Chain RE-Engineers.” We all can engineer the correct solution to healthcare and medical device reform if we focus on The Right Person, Doing the Right Thing, at the Right Time, in the Right Place. It won’t be easy… it might not be cheap … but it also isn’t optional. The quality of our lives depends on it.