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Hospital Supply Chain Survey Points to Needs for Broader Education and Alignment Across Healthcare Delivery Support Supply Chains

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Global integrated healthcare services and products distribution company Cardinal Health has released findings of a recent Hospital Supply Chain Survey and the results once again reinforce the need for far more supply chain management focused efficiencies among hospitals, along with broader stakeholder alignment across healthcare delivery supply chains.  _DSC0083

The survey, conducted in late October 2016 included responses from slightly over 400 doctors, nurses, service line leaders or supply chain administrators. What especially caught our Supply Chain Matters interest were the findings indicating that 57 percent of physicians did not have the right products needed during a planned procedure. The study highlighted that one in four hospital staff have observed or heard of an expired product being used on a patient and 18 percent have observed or heard of a patient being harmed due to a lack of necessary supplies at the right time. The responses further indicate that nearly 20 percent of front-line caregiver time is consumed by supply chain management expediting or follow-up which then amplifies further to service line and other administrators.

A fundamental tenet of our community is that the supply chain exists to serve the needs of the end-customer, and in the case of healthcare, patients and frontline caregivers. Ladies and gentlemen of the healthcare focused supply chain community- these findings point to continuing systemic issues in your supply chain processes and they well should be garnering added calls-to-action.

Then again, from our lens, it is yet another indicator of the current stakeholder misalignments across healthcare supply chains. While most care givers, those on the front lines for delivering quality patient care and managing healthcare delivery costs, believe that the seamless operation of the supply chain is critically important, the other supply chain participants seemed aligned to other conflicting interests.

For the first time, we included pharmaceutical and drug supply chains in our industry-specific predictions for 2017. The principal reasons were twofold and somewhat inter-related. The increasingly global reach of the industry’s various supply chains is adding continued possibilities for risk and disruption. According to the U.S. Department of Commerce, the United States is now the biggest importer of pharmaceuticals from other countries. Pharmaceutical and drug production is now global in scope. Incidents of counterfeit drugs and medicines have been a constant challenge and lately, conformance to generally accepted production practices have become troublesome. Second, within the U.S. especially, there remains an enormous groundswell of political and social backlash directed at what is perceived as artificially high and inflated pricing stemming from conflicting buyer self-interests across the industry’s extended supply chain. Pharmacy Benefit Managers (PBM’s) negotiate pharmaceutical and drug prices on behalf of heath insurance plans and de-facto now include a far higher share of control over the supply network. The latter challenge alone is beyond explanation in a single blog commentary.

Latest Survey Responses

Survey responses from this latest Cardinal sponsored survey indicate a fair to poor rating among 52 percent of respondents for having the right product when needed, 53 percent indicate a fair to poor rating for the ability to keep track of recalled products or tracking product expirations, and 56 percent a fair to poor rating for the ability to manage inventory volumes. The full details of this hospital supply chain survey report can be downloaded at this Cardinal Health web link.

Let us be blunt and to the point. Processes for supporting timely supply of right product with the ability to manage updated and timely product information have proven business process solutions that have been acquired both in healthcare process pilots and from many other industries. Likewise, the technology needed to support accurate and timely product data is available today in either new product labeling, active item-level chip or other Internet of Things (IoT) enabling technology.  The missing element seems to always come back to the alignment of stakeholders across the extended supply chain and to leveraging process and technology investments consistently across the healthcare supply chain. Buying influence is a big determinant as well, especially when state and federal government are factored as buyer influences.

Frontline care givers should not be having to constantly manage supply and inventory tasks and similarly, hospital supply chain administrators should be allocating time to occasional supply and demand alignment exceptions. As the survey responses and the Cardinal report findings reinforce, such time is better freed-up for patient time.  Once more, today’s integrated supply chain planning and customer fulfillment systems are up to the task for planning healthcare supply needs.

We agree completely with the conclusion that improvements are long overdue and they are centered on the current conflicting stake holding interests. However, supply chain inventory management is basic and has proven solutions.

Again, by our lens, hospital teams should be viewing these challenges as both local supply chain management education and in external supply chain network-wide process alignment perspectives. Seek out supply chain management business process and technology experts for education. Work with your major supply distributors and PBM’s on the most efficient and cost affordable means to align with existing automated supply response management processes that link both manufacturers, distributors, and your local facilities in extended supply chain inventory supply visibility.  As we have noted in a prior Supply Chain Matters commentary, Cardinal Health supports its own supply chain innovation laboratory. Likewise, other distributors and manufacturers are willing to collaborate on overall supply chain visibility and addressing more automated local supply chain processes and decision-making needs.

This blog and this Editor is willing to do our part in broadening industry education and in visibility to new, more cost affordable technology or business practices. However, we as healthcare consumers, along with frontline healthcare providers need to be far more vocal in influencing the broader industry that local supply chain management supply and decision-making needs need to be far more intelligent and far more simplified for hospitals and services providers.

Bob Ferrari

© Copyright 2016. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.

 


Apple’s December-Ending Performance Provides Indications of Supply Challenges

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Supply Chain Matters provides added insights to recent financial and operational performance reports from major companies. We reflect on Apple’s latest report of December-ending (Fiscal 2017 Q1) financial and operating results which acknowledged supply constraints as limiting even more sales growth.  Apple Logo

Wall Street headlines were generally positive as the iconic consumer electronics provider reversed three straight quarters of declining iPhone sales. Total revenues grew 3 percent to a record $78.4 billion while net income was reported as $17.9 billion, $400 million lower than the year-earlier period. International sales accounted for 63 percent of total revenues. Total inventories grew by $580 million in the latest quarter.

Overall iPhone shipment volumes reportedly increased by 5 percent. The irony is that sales could have been higher but uncharacteristic supply chain challenges were encountered.

During the company’s management briefing, CEO Tim Cook, whose background DNA includes prior leadership of global supply chain operations acknowledged some planning and operational missteps that could have impacted additional sales. Insufficient supply impacted several product lines, including the newly announced Air Pods wireless earbuds, the iPhone 7 Plus model, and the Apple Watch. The former garnered a lot of visibility early in the quarter, delaying the actual product launch. We venture a guess that many of our readers had first-hand visibility to some of these supply issues.  Cook indicated demand for the larger iPhone 7 Plus was:

the most we’ve ever seen by far and we under-called it. We clearly missed some sales because of that

In other words, Apple’s sales and operations planning process likely planned for higher product demand for the baseline iPhone 7. As early as October, customers placing an iPhone 7 Plus order on Apple’s website were being informed of a wait time of up to eight weeks for the device to arrive, especially for its new “Jet Black” finish. This was also the period of the spillover from Samsung’s Galaxy Note7 product recall due to battery fires, and consumers were trying to substitute their product choice for the iPhone 7 Plus model.

Further, supply chain information leaks leading up to product launch had indicated that Apple had initially planned for three model variants, the largest being a “Pro” model that would include more features and a 5.5-inch screen, offered at a higher price point to compete with Samsung’s now ill-famed and suspended Galaxy Note 7 smartphone. That was later scrapped for the two-model product strategy. and during volume build further pointed to usual volume ramp-up challenges related to new components.

Readers may also recall that a major earthquake struck Taiwan a year ago, in an area that includes major suppliers such as semiconductor fab supplier TSMC and other lower-tiered consumer electronics component providers. Throughout 2016, apple placed additional pressures on component suppliers to reduce prices to boost margins on the company’s iPhone revenues.

Upon reviewing Apple’s performance in the all-important holiday fulfillment quarter, readers can take solace in the takeaway is that even the world’s most admired, most visible, and influential supply chain is not immune to S&OP product forecasting and planning mix challenges, supply disruption and capacity constraints. Even when the CEO has first-hand supply chain leadership experience.

Apple performed well in spite of many challenges but it could have performed better.

Sales and operations planning is a continuous process of product demand and supply balance supported by the most contextual and timely decision-making. That applies to all industry supply chains including the most admired and most visible.

Bob Ferrari

© Copyright 2017. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.

 


U.S. Auto Producers to Idle More January Production Amid Market Inventory Oversupply

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As we pen this Supply Chain Matters commentary in the week just after the Christmas holiday, many thoughts turn towards objectives in the year 2017. For the U.S. auto sector, those thoughts currently reflect on a situation of building oversupply of certain models.

Just before the holiday, reports surfaced that all three U.S. auto domestic manufacturers have scheduled additional idle time at some factories in response to building finished goods inventories of some models of sedans and minivans. There is additional caution that light vehicle demand will cool in the coming year. ford-f150_450

General Motors indicated it would idle production at several factories in January accompanied by some additional job cuts. According to media reports, GM is expected to cut 3000 jobs in the first quarter due to slackening product demand and building inventories. According to a report by The Wall Street Journal, GM entered December with upwards of 870,000 vehicles on dealer lots, 26 percent more than the same period a year earlier.

Fiat Chrysler indicated plans to temporarily idle two Canadian plants, each responsible for producing the Pacifica model minivan, during the first week of January. According to WardsAuto.com, four brands of Chrysler vehicles had the equivalent of 92 days of supply and the end of November, 13 days higher than the year earlier period.

Likewise, Ford Motor plans to idle a Kansas City truck plant for a week in January to curb a reported rising of model F-150 pickup truck components and work vans inventories.

According to various auto dealerships providing background color to industry reports, the current industry challenge is reflected by continued high demand for pick-up trucks and large SUV’s, resulting in burgeoning inventories of standard and fuel efficient sedans.  This period of lowered gasoline prices has made the U.S. consumer somewhat hyped on acquiring the largest, most expensive vehicles, while gasoline prices remain low. Obviously, the days of $3-$4 per gallon fuel costs have taken a back seat in consumer memories, even as gasoline prices now begin to climb again.

Perhaps the good news is that U.S. auto producers are taking more timely proactive steps to manage the buildup of certain model inventories and to set realistic production schedules for the coming year.  The not so good news, however, is an industry that is content to keep promoting sales of the largest, most expensive vehicles to boost bottom-line margins, while defeating efforts to spur sales of more fuel efficient and environmentally friendly vehicles. The result may well be U.S. consumers with rather large, multi-year auto loans that could dampen overall industry demand for many future years to come.

One wonders if any lessons from prior years have been absorbed.

Bob Ferrari

© Copyright 2016. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.


Delivering on Customer Promises in both Automotive and Retail Industries

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At the Council of Supply Chain Management Professionals (CSCMP) Annual Conference held in late September, this author had the pleasurable opportunity to moderate two very informative panel discussions. These sessions were jointly sponsored by The Washington Post and Ryder Inc.

Panel One: How a refreshed distribution strategy revs up savings in the automotive industry, featured Steven Crowthers, Director of Distribution North America, FRAM Filtration, and J Steven Sensing, President, Global Supply Chain Solutions, Ryder System, Inc. Our discussion touched upon several challenges impacting automotive supply chains today, the impact of on-line, Omni-channel commerce.

Panel Two was titled: Is it possible to achieve high touch deliverables with lower costs?, featured Abhinav Shukla, Senior Vice President and Chief Operating Officer, True Value Company along with John Diez, President of Dedicated Transportation Solutions, Ryder System, Inc. This panel focused on how a traditional retailer is meeting the challenges of online commerce, particularly in relationship to transportation and inventory replenishment needs.

The videos recorded for both panel discussions are now available and can be viewed by clicking on this Washington Post Brand Studio web link.

 

As a reminder, if your organization is in need of noted and knowledgeable speaker or interactive panel facilitator please check out our speaker services web page.

Bob Ferrari, Founder and Executive Editor

© Copyright 2016. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.


Is There More Immediate Financial Crisis Involving Retailer Sears?

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Late last week, a published report by web-based Business Insider indicates that retail chain Sears is on the brink of financial catastrophe. This report cites both the sudden departures of two of the retail chain’s highest ranking executives along with speculation among internal employees, suppliers and several banks fearing that the retail chain may soon file for bankruptcy.

Sears has consistently and repeatedly dismissed such speculation.

The report notes that a recent SEC filing indicates that Executive Vice President Jeff Balagna departed the company last week, a highly unusual move for any retailer during the absolute peak of the holiday sales period. A further executive departure was Sears President and Chief Member Officer Joelle Maher which Sears confirmed to the online publication, but declined to indicate reason for the departure.

Sears will formally report third-quarter financial results later this week.

Further noted is that the retail chain’s Sears Hometown and Outlet Stores business unit has been experiencing significant inventory availability challenges along with reinforcement that a least six suppliers have “significantly’ reduced inventory shipments to Sears over broadening concerns related to financial health. In October, Supply Chain Matters highlighted reports that toy supplier Jakks Pacific suspended inventory shipments to the Kmart business unit due to concerns for overall financial health. Also in that month, Fitch Ratings identified Sears as one of seven retailers at risk of going bankrupt in the subsequent 12 to 24 month period. In August, Sears indicated that its overall cash balance had fallen to $276 million from $1.8 billion over the last 12 months.

Business Insider notes that Sears CEO Eddie Lampert has many other financial levers yet to be exercised to keep the retailer alive including the sale of additional real estate or major private brands. More news will likely come to light later this week when Sears makes its financial report to investors.

Each of these financial lifeline steps weaken consumer’s and supplier’s confidence in the longer-term financial sustainability of Sears as an influential national retailer.

In our revisit of our 2016 Predictions for Industry and Global Supply Chains, we indicated that the B2C Retail sector with include several financial casualties because of the ongoing compelling effect for consumers opting for online buying. Casualties this far in 2016 have included the bankruptcy and liquidation of Sports Authority along with athletic goods retailer Finish Line having to shutter upwards of 600 retail stores. Candidly, we can also disclose to our readers that when we formulated this prediction at the start of this year, we were of the belief that Sears would also succumb. We suppose some credit should be extended to Sears management for continuing to financially prevail, but any recent visit to a Sears retail outlet is a remainder of a very scaled-back retail operation with far more limited merchandise options. Once more, there are visible signs of degrading inventory management.

How Sears ultimately performs in this critical holiday fulfillment quarter will be crucial, but the current signs of senior executive departures and widening supplier concerns already point to downward spiral.

Bob Ferrari

© Copyright 2016. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.


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