5 Supply Chain Insights From Innovative Healthcare Leaders

In this article, we discuss ways healthcare leaders can leverage cloud-native enterprise-wide systems to future-ready their supply chain:

• Collaborate Closely With Finance
• Activate Systems That Deliver Results
• Weigh Supply Chain Resiliency and Supplier Transparency Alongside Price
• Don’t Discount the User Experience
• Always Look for Opportunities to Innovate

From rail freight disruptions and European port congestion tied to the Russia-Ukraine conflict, to interruptions in manufacturing, and access to raw materials caused by increasingly frequent natural disasters, the global nature of modern supply chains is ripe for risk. 

In fact, Modern Healthcare reports that health systems are grappling with supply shortages, and supply chain managers are frequently forced to use the fourth, fifth, or sixth option in their list of substitute products, requiring a new workflow for nurses and physicians.

At the same time, historic inflation is driving higher prices, even for reliably available products. Hospital supply expenses per patient increased 18.5% between 2019 and 2022, outpacing increases in inflation by nearly 30% according to the American Hospital Association, while hospital expenses for emergency services supplies experienced a whopping nearly 33% increase. 

“These increases in cost, as well as reductions in support from the government, are putting pressure on hospital finances,” says Keith Lohkamp, Workday’s senior director of healthcare industry strategy. He adds, “We're seeing that margins are below pre-pandemic levels.”

Still, Lohkamp notes that the industry’s many challenges have sparked a wave of tech-fueled innovation, as healthcare organizations embrace artificial intelligence (AI) and machine learning (ML) and predictive analytics to bolster supply chain resiliency and strengthen adaptability. “We often focus on how these technologies are going to revolutionize how we deliver care, but we also are seeing these technologies revolutionize how enterprise management systems, like Workday, support finance, supply chain, and HR teams,” he says.

Healthcare leaders looking to future-ready their supply chain are already leveraging cloud-native enterprise-wide systems to streamline processes and proactively troubleshoot potential challenges. Workday customers share hard-won insights and advice for the future:  

1. Collaborate Closely With Finance

While the pandemic laid bare the cracks in the global supply chain, for many healthcare organizations, it also highlighted the lack of collaboration between finance and supply chain management. For some, that’s meant shifting supply chain into the same reporting structure as finance, while others have simply bolstered the lines of communication and ongoing collaboration. 

“If you think big picture, from a growth and revenue perspective, the more supply chain and finance can work together to cut costs, the more those savings open up money for capital to grow the business—whether that means investing in new oncology centers or getting into the services world where healthcare supply chain hasn’t normally been,” says Ryan Koos, chief supply chain officer for Sharp HealthCare. 

The Southern California healthcare provider previously relied on several disparate supply chain management tools to track roughly $1 billion in spend across 10 different departments. The manual processes required to aggregate and analyze spend-data consumed an incredible amount of time, while only delivering partial visibility into supply chain operations. By moving to Workday Supply Chain Management, Sharp HealthCare was able to centralize its data in a single, unified platform, with transactional data and analytics housed in the same system. 

The shift has eliminated the need for time-intensive manual data aggregation—along with the inefficient spreadsheets, phone calls, and meetings to disseminate information. Now, Koos and his team generate reports in a matter of minutes, sharing tailored status updates with financial leaders from directly within Workday. 

2. Activate Systems That Deliver Results

OU Health is known for its high-quality care, historic clinical trials, and groundbreaking research. Yet, the organization’s decentralized sourcing, contracting, and supply chain processes made it difficult to access essential information. The OU Health team knew they needed a change. To have one unified system and improve operational efficiency, they implemented Workday Supply Chain Management including Strategic Sourcing, Procurement, and Inventory. Mark Anway, AVP of strategic sourcing, shares, “As soon as we announced our supply chain transformation, we had a groundswell of support from clinical and non-clinical staff who advocated for these changes.”

These improvements to contract, negotiation, product trial, and request processes helped OU Health reach and exceed its standardization goal, helping strengthen the speed and quality of patient care. Joshua Bakelaar, VP of supply chain shares, “We have a $12 million savings target this year, and we already passed that.” He adds, “What helps us smash our targets is people using the mobile app.” The app lets stakeholders accelerate inventory tasks, simplify receiving, approve requisitions, and check the status of supplies.

And, the increased confidence in the supply chain process, including centralized access to supply chain contracts, workflows, and projects has increased collaboration and improved employee engagement. “Good people and a good process with a great tool help amplify those behaviors, which adds to our success,” Anway says.

3. Weigh Supply Chain Resiliency and Supplier Transparency Alongside Price

“We’ll always go after price in supply chain management, but it’s not just about price anymore,” says Koos. Recent years have spurred Sharp HealthCare to seek greater visibility into the 6,000 or so suppliers that comprise its supply chain. Do they own the raw materials that make up the final products? If so, where are the materials manufactured? How much of the manufacturing or logistics process does a supplier own?

“We haven’t always had to think about that—the supply either showed up at the docks or not, and maybe you’d have back orders here and there,” he says. But now, there’s an industry-wide push for greater supply chain resiliency and stronger risk mitigation around shipping delays and volatile prices. A shipping container filled with healthcare supplies might have cost $4,000 last year and could easily top $15,000 now, Koos says.

Some healthcare organizations are turning to nearshoring to shorten supply chains and lessen the risk of high shipping prices. Others, including Sharp HealthCare, are partnering with more vertically integrated suppliers that own a greater share of the materials, manufacturing, and logistics journey.

As Workday’s Keith Lohkamp says, “The supplier relationship has really shifted from transactional to a more strategic partnership.”

4. Don’t Discount the User Experience

Streamlining, from a technology perspective makes a real, day-to-day difference for the many workers who navigate business operations systems. Franciscan Health is seeing user experience ease for its employees. For example, Steve Ellis, vice president of supply chain management at Franciscan Health shares, "Workday Supply Chain Management has improved our user experience and provides access to key information. The capabilities provide efficiencies and automation that drive operational effectiveness. Since deploying Workday, the Franciscan team has achieved value including increased throughput with purchase orders and improvements compared to our legacy system.” 

5. Always Look for Opportunities to Innovate

Before Sharp HealthCare implemented Workday in 2021, the hospital system used three contracting systems plus a group purchasing organization and didn’t even have a dedicated sourcing platform. The efficiency boost that came from implementing Workday Strategic Sourcing was swift and significant. 

“Within the first eight months, we saw a 30% reduction in the amount of time it takes to do sourcing events, and reduced request for proposal (RFP) cycles by four weeks,” he says. “We were able to save about $4.2 million in the first six months.”

But when asked what challenges he hopes to tackle in the near future, Koos wastes little time talking about past wins. Instead, he’s focused on the company’s five-year opportunity assessment for supply chain improvements, and embedding sourcing and contract initiatives into Workday’s strategic sourcing pipeline. 

“We all learned the hard supply chain lessons with COVID-19,” he says. “Now, as a community, it’s time to think differently and think smarter—not just about fine-tuning the supply chain, but about using technology to cut costs and to think creatively, so we can better the supply chain as a whole.”

To learn more about the future of healthcare supply chain management, check out our joint report with Deloitte which discusses how organizations can mitigate supply chain disruptions, streamline operations, and improve visibility with real-time insights. Read the report.