Transactional to Strategic: Transforming Healthcare Supply Chain Management

With an emphasis on resilience, many healthcare organizations have increased their focus on supply chain transformation and  view it as a strategic imperative. In fact, 60% of healthcare providers say they need to completely overhaul or update their clinical sourcing and supply management, according to the IDC report “Evolving Healthcare: Turning Disruption into Innovation.”   

“The days of going with the lowest-cost vendor are over,” shares one chief supply chain officer. “I can’t risk not having supplies as a Level 1 trauma center. That’s a different mindset for working with suppliers and how we partner with them.”

Organizations that previously adopted a “just in time” strategy of purchasing only what they knew they were going to use and prioritizing the lowest unit cost have realized that such a strategy is no longer working.

As per-patient hospital supply prices have increased in recent years and outpaced the broader inflation rate, according to the American Hospital Association, pressure has been put on organizations to “do more with less” while trying to provide affordable and high-quality patient care.  

Organizations are now realizing that they need to shift to a strategy that balances cost, quality, and outcomes. Supply chain management can be a strategic function, supporting the shift to value-based care. But it must dovetail with finance, clinical operations, and other functions. This strategy requires unified technology, automation, and data-driven purchasing decisions. 

Below, we share three ways technology can transform supply chain management into a strategic enabler.

1. Integrate Supply Chain Management With Enterprise Finance and Other Key Functions

The healthcare supply chain can never reach its strategic potential if it’s buried in an organization’s basement, so to speak. Effective supply chain operations go hand in hand with efficiencies and strategic alignment—contracts and purchasing practices that are in tune with financial planning, HR, and clinical demands. Organizations need a mindset shift to ensure they’re balancing costs, quality, and outcomes. Prioritizing physician preference over standardization when the clinical outcomes are the same can no longer be a common practice. Letting outcomes data drive supply purchasing is essential. 

For supply chain management to boost productivity and drive operational objectives that support quality care, organizations need a 360-degree view that brings together key functions. This requires a single cloud-based system enabling real-time visibility into supply chain data and performance. Contrast this view with antiquated systems and workflows that involve “too much paper, too many manual processes, and too much data sitting in silos—all of which causes complexity as leaders struggle to get a handle on cash flow,” says Tina Murphy, president and CEO of Global Healthcare Exchange (GHX). 

In search of cross-functional collaboration via a single source of truth that ensures data transparency, consistency, and accuracy, nearly 70% of hospitals and healthcare systems expect to adopt a cloud-based approach to supply chain management by 2026. And nearly half (45%) have already done so, according to a September 2023 GHX survey of healthcare leaders.  

Technology is no supply chain panacea. Ultimately, strategic value and agility flow from strong relationships across the C-suite. When one chief supply chain officer started in her role at a large health system, she reported to one of the medical center’s two hospital presidents. Then the organization decided to take a corporate view of more functions, including supply chain, bringing the officer into regular meetings with financial and managed care leaders. The officer shares that the collaboration has “given me insight into strategic areas across the organization and how they all feed into overarching goals.” She adds, “You just can’t function in silos, and that includes supply chain.”

2. Leverage Data to Drive Outcome-Based Decisions

The biggest trend in U.S. healthcare today is the shift to value-based care, and supply chain management must be part of that shift. 

Strategically enabling the supply chain “is all about achieving clinical alignment, which means making the right decisions for the right patient at the best cost,” Murphy says. “A clinically aligned supply chain is about getting the data right, and collaboration between supply chain and clinical leaders.”

A unified cloud-based system enabling real-time access to both supply chain and clinical data sets the stage for more value-based care. Patient-outcomes data can be tied to purchasing decisions—and supply chain management transformed into a patient-centered strategic practice. 

“Once you have the data across your health system, you have the insights to thrive in a value-based future,” Murphy says. “COVID showed us that the supply chain is a powerful lever for high-quality, accessible, affordable care. So the door is open in a way it hasn’t been before.” 

One organization that implemented Workday Supply Chain Management for Healthcare in 2023 is planning to make supply chain contract decisions only after analyzing patient-reported outcomes and clinical data. “It's going to give us an opportunity to think differently,” says the organization’s chief supply chain officer. 

Access to real-time, accurate data also provides a big value-creation opportunity for supply chain leaders in the realm of spending compliance. Contract-compliance breakdowns cost healthcare systems 6% to 8% of every dollar on average, Murphy says, adding up to millions in lost margins.

“Those dollars are being lost because we’re missing the opportunity to leverage technology and clean data to guide buying decisions across thousands of purchasing decisions,” Murphy adds.

Supply chain leaders will have their work cut out for them in the coming years as they juggle cost-containment strategies with  efforts to bolster clinical outcomes. Quality data, delivered via modern tools like customized dashboards and scorecards, simplifies this complex balancing act.

3. Embrace AI-Based Automation to Boost Efficiency, Free Up Talent for Higher-Value Work

Healthcare organizations operating with antiquated systems often struggle to get a handle on cash flow and to protect squeezed margins. Manual processes involving orders, invoices, and payments create complications that supply chain and finance leaders don’t need. Fortunately, automation can be a simple solution.

For one, Murphy says, 100% of invoicing and payments should be automated to digitally transform supply chain management. Many healthcare providers agree. Automation of tasks such as invoice matching and inventory management is the top AI use case providers are now considering for operations, IDC found. Other areas for potential automation include substitutions if first-choice items are unavailable, and supply anomaly detection.

By automating routine business operations, workers can focus on higher-value tasks and projects. “That’s one of the things we’re currently looking at post-Workday implementation,” says one chief supply chain officer. “What can people do differently that’s more exciting and fulfilling for them, and for the organization? Let technology pick up the other areas where it makes sense.”

Learn more about how Workday can boost your supply chain confidence.