General Hospital Has Been Cancelled! – A Need for Renewed Emphasis on Healthcare Supply Chain Management
A Supply Chain Matters Guest Contribution from Rich Sherman
So you think that Obamacare is changing the healthcare industry in the United States? Think again.
It’s just the tip of the iceberg. The healthcare industry is undergoing a fundamental transformation from delivering patient treatments to delivering patient outcomes. And, it’s turning the industry upside down. The television series General Hospital may have celebrated its 50th anniversary last year; but, in real life General Hospital is about to be cancelled.
With the transformation to patient outcomes, healthcare providers simply can’t afford to treat anything generally. Specialty patient outcome centers (SPOC) are emerging throughout the healthcare industry. With nurse practitioners having expanded diagnostic and treatment licensing, general health clinics are appearing in every corner drugstore, 24/7. Emergency treatment and diagnostic centers are emerging in every strip mall. SPOCs, such as oncological, cardiac, ophthalmic, orthopedic, cosmetic, etc. for every ailment are emerging in every city. Quite simply, patient care centers are appearing and proliferating across the country increasing the cost and complexity of healthcare supply chain management as well as operations management in general.
Consider that it is not unusual for supply chain costs to consume 35% or more of the operating budget of a healthcare facility.
Supply chain management is a new term to most hospital and healthcare administrators. Haven’t they got enough on their plate with compliance, reimbursement, Electronic Medical and Healthcare Records (EMR/EHR)? Yet, with the transformation in the industry, administrators have to be more focused on revenue and cost. Effective supply chain management addresses both and healthcare providers have to consider bringing on a new breed of supply chain professionals to their leadership team even to the extent of hiring a Chief Supply Chain Officer. Most other industries are recognizing the significant contribution supply chain excellence makes to the financial health of the organization.
Transforming from materials and procurement management to supply chain management requires a more holistic view of the organization’s operations. Beginning with demand generation, acquiring patients to generate revenue, through demand fulfilment, delivering a successful patient outcome, supply chain management is the support system that enables cost effective, high quality delivery. And, it’s not optional. With the proliferation of patient delivery locations, competition for revenue is heating up. We’re finding more and more of our clients are seeking help in attracting patients just to maintain occupancy and revenue. But, that’s just treating the symptom.
The cure is to be found through providing a successful outcome for operations excellence. Operations excellence requires professional operations management. Medical professionals have to focus on patient outcomes not operational outcomes. This will create a transformation in the leadership structure of many healthcare providers from medical leadership to management leadership. The days of doctor controlled operations are waning. Healthcare providers that are restructuring their organizations for effective supply chain management will lead the way as the industry transformation continues.
General Hospital may be cancelled; but, the requirement for delivering successful patient outcomes will never end.
About the Author: Rich Sherman is an internationally recognized researcher and author on trends and issues across supply chain management. He currently serves as a Principal Essentialist at Trissential LLC in their supply chain consulting practice. His book Supply Chain Transformation: Practical Roadmap for Best Practice Results (Wiley, 2012) has received praise by practitioners, academics, and non-supply chain executives as a great read on business transformation. Rich has been a previous guest contributor to Supply Chain Matters.
We along with other recognized supply chain thought leaders have been raising awareness to the current talent shortages regarding areas of supply chain management, particularly individuals with experience related to linking the introduction of new products and product management with overall supply chain ramp-up and ramp-down deployment needs.
One of globe’s top-ranked supply chains, Apple, has been under considerable pressure of-late because of the perception that its product innovation cycles have slowed and industry competitors are quickly narrowing the gap in surpassing such capabilities.
A newly published report from the Wall Street Journal (paid subscription or free metered view) places a poignant perspective to Apple’s growing need. The report indicates that Apple is in the midst of hiring hundreds of new engineers and supply chain managers across China and Taiwan in its attempts to speed product development and introduce a wider range of innovative products. The report notes that current victims of this hiring blitz include the likes of HTC Corp. and other Taiwanese technology firms. According to the report: “The total number of engineers and (supply chain) operations staff in China now exceeds 600…”
The report further outlines that while core research and development will remain in Cupertino, engineering and supply chain management talent investments within China pale in comparison to those in the United States, implying an ever more expanded presence in China. Further disclosed is that Apple has added contract manufacturers Wistron Corp. and Compal Communications to help produce upcoming versions of iPhones and iPads.
Supply Chain Matters has often commented how Apple’s purchasing clout and volume scale can lock-out smaller high tech and consumer electronics OEM’s from lowest cost pricing and favored supply agreements. With this latest report regarding the current talent seeking hiring spree centered on China, the industry can probably add talent raiding and talent shortages to the impacts of Apple along with its competitors.
Talented and experienced cross-functional supply chain management professionals with experience in new product ramp-up and time-to-market, along with alleviating supply chain choke points are going to be in the catbird seat across global locations, since the talent war seems to be escalating across high-tech supply chains.
Last week, Home Depot named Craig Menear to be its new president of U.S. retail operations, assuming leadership of this retailer’s over 2200 retail outlets.
The Wall Street Journal characterized this appointment as a “transfer of power” and marked the end of the previous rebuilding era for Home Depot, including investment in a more streamlined and responsive supply chain capability which Supply Chain Matters has praised.
This appointment is part of the home improvement retailer’s succession planning, paving the way for the eventual retirement of current CEO Frank Blake whose leadership has done wonders for the retailer’s current stock performance. The WSJ, cites in-part, Blake’s achievements as the following: “He ushered in a huge overhaul of the company’s supply chain and technology systems, spending billions of dollars to make its operations more efficient and move more workers out of the back rooms and onto its sales floor.”
Menear previous role was head of merchandising, responsible not only for the assortment and pricing of all Home Depot products but also its suppliers, supply chain and online operations. In essence, if this succession plan comes to pass, we will have another CEO with operations, supply chain and procurement leadership as a part of their resume.
What makes this development more interesting to our community is that Blake’s leadership efforts included the hiring of a new cadre of supply chain management leaders. That included the hiring of Mark Holifield, a highly experienced retail and consumer products supply chain leader. The new appointment of Menear as president of retail operations includes the elevation of Holifield to the role of executive vice president supply chain and product development, reporting to Menear. Another executive brought in to transform U.S. distribution was Charles Armstrong, vice-president of distribution, who has outlined the transformation of Home Depot’s distribution networks at prior CSCMP annual conferences.
It has long been the contention of Supply Chain Matters that companies with critical value-chain dependencies are increasingly seeking senior management teams with solid grounding and understanding in principles of operations and supply chain management. These firms often desire that the supply chain continues to serve as a competitive differentiator for business outcomes. There are many industry examples. We can reflect on the CEO’s if firms such as Apple, McCormack Foods, and global apparel retailer Zara, part of Spain’s Inditex Group. Each came to their role with solid supply chain wide leadership experience and grounding. There are others as well.
The takeaway for those future leaders aspiring for a path to the top leadership role within an industry with critical value-chain dependencies is that focusing your career in cross-functional supply chain leadership can indeed be favored over backgrounds in solely financial management or sales, marketing or merchandising. Responsive product lifecycle management is an added experience differentiator, especially when coupled to integration to value-chain needs.
These trends continue to reinforce how important responsive and resilient supply chain business processes, supported by differentiated enabling information technology capabilities, are becoming paths to the top. While some in supply chain leadership may feel, at-time, unappreciated, your experience and insights really do matter.
Over the weekend and again this week, business media has provided amplification of the labor union representation vote held at the Volkswagen manufacturing facility located in Chattanooga, Tennessee. It was obviously a significant development concerning labor organizing efforts across the U.S. and the implications for management and labor relationships.
For readers who are not familiar with the events leading up to this election, they involve Volkswagen’s sanctioning of a union representation vote. Many of Germany’s large and small manufacturing and services enterprises embrace the concept of a “Works Council”, where direct representation from labor at the highest levels of management incorporates labor’s input on policies and practices related to work conditions, employee grievances or other matters related to compensation and benefits. Enterprise software provider SAP AG, incorporates the Works Council structure along with many other German firms. They are very much the fabric of encouragement of management and labor collaboration and shared benefits for companies.
The Chattanooga production facility was one of a very few Volkswagen global based facilities not having a formal Works Council and thus the German based IG Metall labor union advocated to Volkswagen’s senior management to encourage the formation of such a structure in the U.S. It so happens that this same facility is located in the heart of the U.S. Southeast region where multiple automotive OEM’s have located their facilities because of the “right-to-work” non-union environment fostered across this region. Certain politicians across the South were not that pleased with the concept of a foreign based manufacturer actively supporting a unionization election. Thus, a large-scale lobbying effort began to unfold for fears that a union vote in Chattanooga would lead to other organizing efforts in this region.
The ultimate vote concerning the United Auto Workers (UAW) union attempts to represent Volkswagen’s Chattanooga’s workers failed to win a majority, but the vote was close, with a final reported tally of 712 to 626 indicating rejection of labor union organization.
Prior to the vote, the highly conservative leaning Wall Street Journal featured an Editorial striking fear for workers and other automotive manufacturers if the UAW was successful in its recruiting efforts. Elements of Republican Party led conservatives including anti-everything activist Grover Norquist, Tennessee U.S. Senator Bob Corker and Tennessee Governor Bill Haslam mounted a strong anti-union campaign including fears that future work at the plant would be suspended or at-risk if the plant voted for UAW representation. Vocal factions among Volkswagen’s production workforce added their own voices as well, mostly anti-union, with accusations that these factions were supported by outside interests.
With the election results now recorded, Supply Chain Matters wanted to weigh-in in an argument for civility and objectivity on both sides. First and foremost, our intent is not to take bias to either side, but rather to point out some observations that we believe need reflection and consideration.
On the anti-union side, it seems that we all tend to suffer from long-term memory loss. Reflect back to 2008-2009 when two of the largest automotive OEM’s in the United States, General Motors and Chrysler, were forced into bankruptcy. The situation was dire and there was a need for significant business re-structuring, to include finding an alternative to a significant industry burden of high direct labor, pension and healthcare costs. During that crisis, the UAW worked with both OEM’s and U.S. government re-structuring teams to grant tiered wage concessions, reform pension programs and develop the creative solution for forming and funding a separate Healthcare Trust entity under the umbrella of the UAW, which allowed the industry to shift its legacy burdens to this trust. The trust itself was funded by one-time payments from individual OEM’s and from granted OEM stock ownership to the UAW which has its own value for the Trust. Today, both GM and Chrysler are again competitive and better able to compete in global and domestic markets.
During the same global economic crisis that severely impacted the Eurozone region, Works Councils across Germany collaborated with manufacturers large and specialized to avoid outright layoffs by agreeing to modify compensation structures and allow workers to keep their jobs. The solution was for labor to work somewhat less hours, with additional subsidies from the government of Germany provided to maintain adequate wage levels. It is a recognized fact that these same German manufacturers were able to bounce back from the recession much more quickly because workers were not permanently displaced and skill levels were maintained. That by our lens, was evidence that Works Councils can be a positive force in business and labor collaboration and mutual gain sharing.
Certain labor unions are obviously not without fault. Polls continue to indicate that non-unionized workers across the southern region of the U.S. generally are not favorable to unionization because workers do not perceive some of the value outlined above. Workers have also voiced displeasure on being burdened with union dues that do not provide perceived continuous value. Thus, U.S. labor unions need to continue with efforts to target the needs of workers and substantiate their value. Yet, across the U.S., there is mounting evidence that the income gap among the wealthiest and the rest of the working population grows ever wider.
When either of these factions begins what are perceived as heavy-handed tactics or threats, the other faction cries fowl. Some manufacturers threaten to withdraw, suspend or not source work to a unionized facility. Local politicians provide manufacturers incentives to locate in specific U.S. states that will foster right-to-work laws. National politicians advocate for less regulation, particularly when it concerns rights to organize and card check campaigns. Certain labor unions evangelize the evils of management, top-heavy management and the declared rights of workers to maintain a living wage.
What is missing is a level playing field where workers can determine in their own wisdom and judgment, whether their rights and welfare are being well served or whether they desire to be more represented directly at the management table.
The need for skilled manufacturing talent remains critical across multiple industry supply chains yet candidates are not attracted by perceived low current compensation levels for entry-level workers. Securing experienced talent that incorporates the voice and collaboration of direct labor workers remains a critical need for innovative, industry leading manufacturers. Whether that voice is obtained by small work groups, Works Councils or a unionized work force should be the purview of both parties, and without the need for threats and heavy-handed tactics.
In either case, supply chain leaders should have the leadership and collaboration skills to be able to manage in either environment.
This week, Supply Chain Matters had the opportunity to be invited to MIT’s Global Supply Chain and Logistics Excellence (SCALE) Research Expo 2014 which was held on the MIT campus. These was the third consecutive year that we have attended this event and remain impressed with the caliber and potential of supply chain focused candidates within MIT’s international student programs.
This year, besides members of MIT’s Center for Transportation and Logistics (CTL) corporate members, invitations to the event were also offered to local APICS and CSCMP chapters, allowing potential hiring managers to view future talent.
The program involved candidates within MIT’s Center for Transportation and Logistics, the Zaragoza Logistics Center in Zaragoza Spain, the Center for Latin-America Logistics Innovation in Bogota Columbia and the Malaysia Institute for Supply Chain Innovation each presenting student research projects. The topics and student presentations we witnessed were impressive, including the timely including multiple thesis papers on the subject of supply chain disruption and risk mitigation, S&OP implementation, how to retain supply chain talent, global retail SKU segmentation sustainability and carbon tracking. After hearing many of these presentations there was no doubt in this author’s mind that our supply chain community is in good hands for its future. Sincere congratulations to all of these students for their obvious hard work and professionalism.
In addition to the student presentations, a series of short 15 minute research briefs delivered by nine individual MIT faculty researchers addressed today’s other timely topics in supply chain management. We had the opportunity to sit in on Dr. Jarrod Goentzel’s talk on how supply chains saved lives during a humanitarian crisis such as the earthquake that struck Haiti and conflict in Darfur. The same principles of supply agreements, inventory management and secure transportation apply for each crisis. Jim Rice provided an overview of MIT research in demystifying supply chain innovation across and process and we gained some new knowledge. We also had the opportunity to sit-in on talks by Dr. Roberto Perez-Franco and Dr. Shardul Phadnis on rethinking supply chain strategies and formulation and application of scenario planning which we found incredibly interesting. Other presenters included Dr. Bruce Arntzen, Dr. Edgar Blanco, Dr. Chris Caplice, Dr. Alexis Bateman and MIT CTL Director and well noted Logistics author Dr. Yossi Sheffi.
Bob Trebilcock, Executive Editor of Modern Materials Handling penned his impression of this MIT event and we could not agree more. Not only were these students bright, they were enthusiastic and passionate for solving challenges. Perhaps we will indeed have a new cadre of leaders that shun finance and instead opt for the day to day challenges and rewards of global supply chain management.
Many times this author is asked about which individual certification program is most appropriate for those aspiring to have a career in the field of supply chain management. With multiple certification choices it seems that many are confused as to which certification program will provide the most benefit for that dream job.
I along with Rich Sherman from Trissential were recently interviewed for an article featured on the Software Advice web site titled: Supply Chain Certifications that will Help You to Land a Job. This article provides some good perspectives and considerations regarding four certification options:
Certified Supply Chain Professional (CSCP)
Certified in Production and Inventory Management (CPIM)
Certified Professional in Supply Management (CPSM)
We are passing this along since our readers, members of their organizations or aspiring professionals can gain benefit from the perspectives in this article.