Publisher’s Letter

Mindset Change: Supply Chain is an asset

John Pritchard

John Pritchard

I am starting to hear more and more thought leaders in the U.S healthcare system changing their tune on Supply Chain. Whereas they used to consider it an operational expense, now they’re beginning to think of it as an asset. This might not seem like a big deal, but I believe it may be just what we need for true transformation to take place.

The past decade’s emphasis by Supply Chain leaders was often on decreasing cost. The Supply Chain leader of the future will be focused on something different value creation. This is major progress and will ensure Supply Chain will touch all the functions of healthcare organizations. Put another way, I overheard a well-respected Supply Chain Leader say: “Supply Chain is a major asset. It’s as important as finance and human capital, touching every aspect of the organization.”

In the past, Supply Chain focused on procuring all the same stuff and more for less resources. Often times this was very attainable until variables we were not expecting were thrown at us, like physician preference items and their planned obsolescence not keeping up with reimbursement, or the Affordable Care Act and the ever-escalating cost of specialty pharmaceuticals.

Moving forward, if Supply Chain is treated like an asset, everything changes. And if the measurement of productive buyer-seller relationships is based on value creation, we will see innovation and integration way beyond risk share agreements. While the complexity of the marketplace continues to increase due to duplicative contracting strategies and the continuum of care having to be serviced, there is no doubt that best-in-class sourcing practices will finally start to emerge and be adopted. They will be adopted because the value they create will be apparent to all the stakeholders.

Supply Chain practices (just like clinical practices) can only have one best practice. But just like we are hearing clinical preference variation is being reduced and predicated on patient need, so will Supply Chain practices. Every healthcare organization can have only one best Supply Chain protocol, and I think we can only get there when the measurement of success is based on value creation, not cost reduction.

We would love to hear your thoughts on this mindset change, and how you and your healthcare organization are pursuing value creation through your Supply Chain activities. Enjoy this issue of The Journal of Healthcare Contracting.

John Pritchard




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