Denise Odenkirk, Vice President, Supplier Sales, GHX09.06.23
The one constant for healthcare suppliers over the past several years has been to expect change—and there has been plenty of it. Whether it’s adapting to raw material shortages, high inflation rates, economic instability, or employee turnover, suppliers have repeatedly been forced to recalibrate their operations.
While product demand is strong, many suppliers are struggling to keep up and right-size their operations. So far this year, only a handful of companies have shared positive earnings reports. And notably, current growth figures typically represent a smaller increase from the previous year so there is a lack of any meaningful business growth. As a result, many suppliers are reducing their workforce and restructuring their businesses to survive.
Navigating so much change in such a short period isn’t easy. The pandemic had a significant impact on product innovation and an even more profound effect on operations. Preparing and reacting to constant change has understandably created a kind of paralysis around decision-making, slowing the industry’s rebound. Now is the time for healthcare organizations to reevaluate and reset priorities to make the most of the economic recovery.
A recent report from McKinsey found that organizations that adjust their business models to challenging circumstances are most likely to thrive and grow as the economy rebounds. To drive operational efficiency, healthcare suppliers must get back to basics to break through the malaise and rebuild high-performing teams.
Doing more with less also means less institutional knowledge. Unfortunately, many new employees have not received proper training due to longtime staff members retiring. These new team members are under extreme pressure to satisfactorily resolve a seemingly endless stream of customer issues. To further complicate matters, previously established processes have changed or haven’t been communicated, making it difficult for newcomers to navigate their roles.
The lack of defined business processes and proper training has resulted in teams playing a never-ending game of whack-a-mole as they struggle to address issues. Consequently, too many healthcare suppliers have had to adopt a sink-or-swim mentality during the pandemic that’s not serving anyone well. Thus, companies must focus on solving problems rather than tolerating them.
Case in point: Contract pricing is an area ripe for improvement. Healthcare contracting is a dynamic, highly complex process and there remains a significant opportunity to save costs around pricing alignment and reconciliation. Thousands of contract price changes happen daily, and manufacturers, distributors, and providers attempt to reconcile them within their systems manually. We see the same pricing issues happen repeatedly before they get fixed. Not only is it labor intensive, but it also generates a significant amount of work, rework, and costs for all parties involved. Rather than trying to boil the ocean, suppliers should consider adopting new processes that are touchless to support the rollout of a new contract or a new product launch. Importantly, this process should ensure all data (i.e., part, unit of measure, and price) is accurate.
Companies can also return to basics by enabling employees with clearly defined job descriptions and work instructions. That means making sure workers are adequately trained. The individuals with the knowledge and expertise to handle various issues and minimize their impact are no longer in the organization or industry. Therefore, it’s crucial to empower new employees. To do this, workers must first understand their role and responsibilities, and that of their colleagues, to properly manage handoffs and prevent issues from escalating. And, of course, creating defined processes is critical to helping teams run efficiently.
Amid so much change, it can be challenging to find a starting point. In addition to contract pricing, some areas to consider focusing on could be 1) clearly defined processes around handling product and material shortages; 2) automating procure to pay for Ambulatory Surgery Centers (ASCs); and 3) segmenting products to drive greater efficiency and help suppliers begin to thrive again.
Supply shortages: Without question, there will be ongoing shortages of raw materials and finished products. To address upstream supply chain issues, define a process for managing supply shortages with all suppliers consistently rather than handling each situation individually. Imagine having a decision matrix an internal team and suppliers can use in the event of a shortage. This approach would help avoid supply disruptions because a company could execute the alternative plan before going on backorder. The decision matrix may trigger decisions to expedite inbound shipments or to initiate product substitutions with high-volume providers to avoid backorders. It is essential to ensure everyone understands the decisions that need to be made and are empowered to implement these changes without having to second guess the path forward.
ASCs: These outpatient facilities also present an opportunity for refining processes. With an increasing number of procedures taking place in ASCs, suppliers are receiving more manual orders and must ship products to various locations. The supply chain processes supporting ASCs shouldn’t be manual. Instead, harness the power of automation as the industry has done with acute care hospitals and bring this technology to the emerging ASC market.
Product segmentation: Another process ripe for improvement is thinking about the go-to-market strategy for each of a suppliers’ product groups. First, companies should evaluate their current go-to-market approach and assess gaps. Then they need to build a plan and approach that considers factors such as total cost to serve, including freight cost and service levels, the kinds of product segments that should go through distribution versus direct, and how to standardize the approach to optimizing processes.
Although it may not feel like it, healthcare is no longer in crisis mode. Collectively, the industry is in rebound mode and must push for continuous improvement. The past few years have been exhausting, as the world has been beset by change and chaos. The good news is healthcare can emerge from this bedlam stronger by taking the time to get back to basics, be operationally focused, and ensure every transaction is seamless.
Denise Odenkirk is a vice president at GHX, working with manufacturers, distributors, and hospitals to improve their business processes. Denise brings more than 20 years of experience in healthcare from a manufacturing, distribution, and third-party logistics perspective. Her career began in IT leadership roles at Warner-Lambert, and Aventis and expanded to include operations while at Bracco Diagnostics, Owens & Minor and Symmetry Surgical. Her passion is to improve healthcare supply chain business processes and help companies improve their overall healthcare supply chain efficiency.
While product demand is strong, many suppliers are struggling to keep up and right-size their operations. So far this year, only a handful of companies have shared positive earnings reports. And notably, current growth figures typically represent a smaller increase from the previous year so there is a lack of any meaningful business growth. As a result, many suppliers are reducing their workforce and restructuring their businesses to survive.
Navigating so much change in such a short period isn’t easy. The pandemic had a significant impact on product innovation and an even more profound effect on operations. Preparing and reacting to constant change has understandably created a kind of paralysis around decision-making, slowing the industry’s rebound. Now is the time for healthcare organizations to reevaluate and reset priorities to make the most of the economic recovery.
A recent report from McKinsey found that organizations that adjust their business models to challenging circumstances are most likely to thrive and grow as the economy rebounds. To drive operational efficiency, healthcare suppliers must get back to basics to break through the malaise and rebuild high-performing teams.
Doing More With Less
Most supplier organizations face the daunting task of improving operational efficiency without additional headcount. This means doing more with less to tackle everyday challenges such as price discrepancies, backorders, and part number substitutions.Doing more with less also means less institutional knowledge. Unfortunately, many new employees have not received proper training due to longtime staff members retiring. These new team members are under extreme pressure to satisfactorily resolve a seemingly endless stream of customer issues. To further complicate matters, previously established processes have changed or haven’t been communicated, making it difficult for newcomers to navigate their roles.
The lack of defined business processes and proper training has resulted in teams playing a never-ending game of whack-a-mole as they struggle to address issues. Consequently, too many healthcare suppliers have had to adopt a sink-or-swim mentality during the pandemic that’s not serving anyone well. Thus, companies must focus on solving problems rather than tolerating them.
Resolving Issues by Focusing on People and Processes
To break this cycle, managers need to get back to basics, bringing more discipline to the business to rebuild high-performing teams. A mindset must be established where inefficiencies are not allowed to persist; such an approach can be achieved by focusing first on people and processes and using existing technology to support them. An excellent place to start is by identifying and addressing repetitive issues.Case in point: Contract pricing is an area ripe for improvement. Healthcare contracting is a dynamic, highly complex process and there remains a significant opportunity to save costs around pricing alignment and reconciliation. Thousands of contract price changes happen daily, and manufacturers, distributors, and providers attempt to reconcile them within their systems manually. We see the same pricing issues happen repeatedly before they get fixed. Not only is it labor intensive, but it also generates a significant amount of work, rework, and costs for all parties involved. Rather than trying to boil the ocean, suppliers should consider adopting new processes that are touchless to support the rollout of a new contract or a new product launch. Importantly, this process should ensure all data (i.e., part, unit of measure, and price) is accurate.
Companies can also return to basics by enabling employees with clearly defined job descriptions and work instructions. That means making sure workers are adequately trained. The individuals with the knowledge and expertise to handle various issues and minimize their impact are no longer in the organization or industry. Therefore, it’s crucial to empower new employees. To do this, workers must first understand their role and responsibilities, and that of their colleagues, to properly manage handoffs and prevent issues from escalating. And, of course, creating defined processes is critical to helping teams run efficiently.
Amid so much change, it can be challenging to find a starting point. In addition to contract pricing, some areas to consider focusing on could be 1) clearly defined processes around handling product and material shortages; 2) automating procure to pay for Ambulatory Surgery Centers (ASCs); and 3) segmenting products to drive greater efficiency and help suppliers begin to thrive again.
Supply shortages: Without question, there will be ongoing shortages of raw materials and finished products. To address upstream supply chain issues, define a process for managing supply shortages with all suppliers consistently rather than handling each situation individually. Imagine having a decision matrix an internal team and suppliers can use in the event of a shortage. This approach would help avoid supply disruptions because a company could execute the alternative plan before going on backorder. The decision matrix may trigger decisions to expedite inbound shipments or to initiate product substitutions with high-volume providers to avoid backorders. It is essential to ensure everyone understands the decisions that need to be made and are empowered to implement these changes without having to second guess the path forward.
ASCs: These outpatient facilities also present an opportunity for refining processes. With an increasing number of procedures taking place in ASCs, suppliers are receiving more manual orders and must ship products to various locations. The supply chain processes supporting ASCs shouldn’t be manual. Instead, harness the power of automation as the industry has done with acute care hospitals and bring this technology to the emerging ASC market.
Product segmentation: Another process ripe for improvement is thinking about the go-to-market strategy for each of a suppliers’ product groups. First, companies should evaluate their current go-to-market approach and assess gaps. Then they need to build a plan and approach that considers factors such as total cost to serve, including freight cost and service levels, the kinds of product segments that should go through distribution versus direct, and how to standardize the approach to optimizing processes.
Although it may not feel like it, healthcare is no longer in crisis mode. Collectively, the industry is in rebound mode and must push for continuous improvement. The past few years have been exhausting, as the world has been beset by change and chaos. The good news is healthcare can emerge from this bedlam stronger by taking the time to get back to basics, be operationally focused, and ensure every transaction is seamless.
Denise Odenkirk is a vice president at GHX, working with manufacturers, distributors, and hospitals to improve their business processes. Denise brings more than 20 years of experience in healthcare from a manufacturing, distribution, and third-party logistics perspective. Her career began in IT leadership roles at Warner-Lambert, and Aventis and expanded to include operations while at Bracco Diagnostics, Owens & Minor and Symmetry Surgical. Her passion is to improve healthcare supply chain business processes and help companies improve their overall healthcare supply chain efficiency.
