How can hospital CEOs recognize supply chain weakness?

When CEOs aren’t actively engaged with their supply chain operation, potential savings and other benefits can be missed. That’s why CEO attention is paramount for optimal supply chain performance. Jon Pruitt, senior vice president of CHC Supply Trust, offers guidance to help community hospital CEOs evaluate and oversee their supply chain.

JP: Some CEOs are not aware of the significant impact that supply chain improvements can have on their bottom line. Across the country, astute community hospital CEOs are taking action to learn more and are seeing positive changes.

JP: It’s common knowledge that supplies often comprise 25% or more of a typical hospital budget, creating the second largest spending category. Compared to larger institutions, community hospitals with less buying clout might see an even greater percentage going to supplies. Considering the business-critical nature of the supply chain operation, CEOs are advised to compare their organization’s supply chain to other similar facilities while educating and overseeing their materials managers in order to make educated decisions and positive changes.

JP: There are six effective ways for CEOs to influence positive changes in the supply chain:

1. Start by hiring the best supply chain professionals available.
2. Get personally educated and involved.
3. Reward supply chain behavior that benefits the entire company.
4. Invest personal time in learning about recent advances in the supply chain field.
5. Use external benchmarking data.
6. Get advice from outside experts.

JP: It’s very helpful for CEOs to engage with their supply chain leaders and ask questions, even if they aren’t fully educated about the intricacies of their supply chain. Top-performing CEOs share these characteristics:

• Understand supply chain operations. An engaged CEO must have knowledge to understand why changes will drive organizational efficiency and cost savings.
• Hire a strong material management executive. The supply chain is more complex than ever, and supply chain leaders need formal education, significant experience, or both. In order to attract and retain qualified talent, supply chain management leadership needs to be a valued career path within the organization. Increasingly, these individuals have a place on the executive team.
• Understand the purchasing process. Ask what contracts are in place, how often those contracts are reviewed and what selection criteria are used. Also find out if the prices your facility pays are competitive and purchased through established contracts.
• Set and review benchmarking metrics. Conduct external benchmarking to understand where you stand. Otherwise, it’s impossible to set goals for improvement. A CEO needs to push for supply chain benchmarking and best-practice analysis — and personally review the results.
• Educated about supply chain technology enhancements. As long as supply chain management remains a black box to the CEO, deficiencies will likely occur. Understanding the latest supply chain practices, technologies and trends helps CEOs evaluate the performance of a supply chain executive and a group purchasing organization (GPO). This knowledge also enables CEOs to evaluate the business case for new technology.
• Supply chain expertise should be central to planning efforts. CEOs, if fully engaged, demand that relevant business planning and negotiations anticipate and explicitly address important supply chain ramifications.

JP: If a supply team is managing relationships with several GPOs as well as supplemental independent suppliers, consider the manpower required to individually handle purchasing research, contracts and other supply-related work in-house. Often a hospital can save time and money by working with one preferred provider.

CHC Supply Trust clients that transition to our GPO and focus on supply chain improvement often save up to 20% annually on supplies. That type of improvement is always helpful to the hospital’s CEO.

To learn more, visit www.communityhospitalcorp.com