Reflections on the 2010 AMR / Gartner Healthcare Supply Chain Forum

Yesterday, I had the opportunity to attend the AMR Research / Gartner Healthcare Exchange 2010 event held in Boston.  The program brought together both AMR Research analysts and a select group of supply chain related executives in addressing current and future challenges within healthcare and life sciences related supply chains.  This event was also a staging point to announce AMR’s Healthcare Supply Chain Top 25 listing of companies, similar to AMR’s Top 25 Supply Chains Rankings.

For me, one of the most insightful portions of the program involved a lively panel discussion that included four industry executives representing Orlando Health, Dana Faber Cancer Institute, Cook Medical, and Broadline Group.  It was one of the better executive panel discussions I’ve observed this year. These executives each did a great job at providing both a customer and patient lens for the ongoing challenges involved in healthcare supply chains, as well as the key challenges needing to be addressed.  One clear takeaway from this and other exchanges is that the current path of healthcare-supported supply chain processes is unsustainable from both an overall cost and services perspective.  The audience, made-up of manufacturers, other health and technology providers, provided, in turn, more insightful Q&A interchange.

There is an acknowledged need for increased alignment in overcoming barriers of shared outcomes, increased efficiency and more cost effective service levels.  Hospitals are frustrated with manufacturers who market, sell and service directly with individual  physicians or clinicians, without some consideration to the need for inventory and service balancing.  Manufacturers, in turn, drive the perception that they prioritize the need for market share and demand creation over helping partners improve overall efficiencies along the supply chain.

In a previous Supply Chain Matters commentary, we noted that the challenge of reducing healthcare’s value chain costs and improving collaboration was bigger than any one player in the network.  Those messages were again delivered loud and clear by the panel participants in the AMR exchange, but there were signs that some progress is being made. Providers and suppliers are starting to better understand where they can align for mutual outcomes.   Clearly, one end goal on which all can agree is the need for the entire value-chain to align to benefit patient and provider needs.  Excess inventory and an overall tendency toward priority air as the prime mode of transportation service level are systemic challenges that need to get solved.

A couple of other observations come to mind.  First, there was a lot of emphasis placed throughout the day on the need for increased collaboration among healthcare supply chain participants.  What I did not sense was more emphasis of segmentation of value-chains, namely understanding supply chain models that can support commodity or replenishment-oriented items vs. models that deal with innovative, time-sensitive, or highly specialized clinical or pharmaceutical supplies.  Some of the panelists indicated that A-B-C inventory classification planning methodologies were being practiced but these methods do not totally address the broader classification and deployment of different value-chain management processes.  Each requires a different perspective on collaboration models and activities, especially around physician-specific supply needs. I came away with a sense that a lot more value-chain segmentation, blocking and tackling concerning process improvements, and a higher sense of urgency among healthcare value-chain participants are the prescriptions for meaningful transformations.

Finally, a comment on the designated AMR / Gartner Top 25 healthcare supply chain rankings.  First, as with the broader Top 25 Supply Chain rankings, too much weighting seems to be placed on subjective and qualitative vs. financial and performance oriented weightings.  This writer just about fell off the chair when Johnson and Johnson (J&J)  was announced as the #2 ranking, ahead of manufacturers such as Novartis, Becton Dickinson, Glaxo Smith Kline and others.  This is the same J&J that experienced a severe breakdown on manufacturing quality that involved multiple over-the-counter brand name product recalls this year, the closing of an entire manufacturing facility, and the acknowledgement from the CEO that the company stumbled. That was a shocker, not so much that J&J would be included in a top 25 ranking, but that it would be ranked that high.  Then again, 2010 is turning out to be the year of ranking extremes.

Bob Ferrari

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