Abe Eshkenazi, CSCP, CPA, CAE
APICS CEO

Those of us in the APICS community know how efficient supply chain practices can leverage power across organizations. Healthcare organizations are no different in this respect, yet supply chain management in this industry remains largely underdeveloped. Perhaps now more than ever, as U.S. government leaders looks at ways to reform healthcare, supply chain management should play a central role.

Earlier this week, I read with interest “The State of Healthcare Logistics: Cost and Quality Improvement Opportunities,” a report published by the University of Arkansas and the Association for Healthcare Resource and Materials Management. In short, researchers found the healthcare supply chain to be immature, collaborative, strategic, expensive, information poor, and talent rich.

The study’s authors, Heather Nachtmann, Ph.D., and Edward Pohl, Ph.D., write the following in their foreword: “We do not know where the fundamental inefficiencies and associated costs subsist within the complex supply chain. We also do not know where the opportunities for the greatest increases in quality exist within the healthcare supply chain. This lack of knowledge contributes to healthcare supply chain inefficiency.”

APICS has the tools, resources, and expertise to identify and overcome these challenges. Consider the drivers of supply chain performance, which are excerpted here from the APICS Operations Management Body of Knowledge Framework (OMBOK):

• Facilities—Supply chain performance is often affected by the design and location of facilities.
• Inventory—Inventory can improve supply chain flexibility by acting as a buffer to decouple supply from demand when appropriate.
• Transportation—Transportation decisions can make major differences in both benefits and costs.
• Information—Another major influence on supply chain effectiveness is the ease with which information is shared up and down the chain.
• Sourcing—Sourcing decisions are important within the supply chain and rely on standards and policies being maintained.
• Pricing—Pricing is perhaps the most important strategic decision. Whether price is set high, low, or in the middle sends a strong message to all members of the supply chain, competitors, customers, suppliers, and potential new entrants.

Healthcare leaders have known about this supply chain inefficiency and opportunity for some time, yet they have been unable to make significant progress. In 1996, a group of experts crafted the study Efficient Healthcare Consumer Response (EHCR), which evaluated the supply chain as part of overall healthcare expense. EHCR still stands as a benchmark for the industry, but the goals seem as far away today as they were 14 years ago.

In last week’s edition of Operations Management Now, I mentioned the 2009 update of OMBOK, which will include an appendix that correlates the relevance of the framework’s topics to operations management professionals in healthcare and other nonmanufacturing industries. In addition, APICS is setting up online communities for those of you interested in networking with other operations and supply chain management professionals serving in nonmanufacturing environments. Your participation will be very important as we try to help APICS grow in relevance to these nontraditional industries. In addition, this kind of collaboration will further develop the APICS body of knowledge, enabling APICS to better serve you throughout your career.

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