Report: Supply Chain Analytics Revamp Could Boost Hospital Margins

Across all manner of verticals, efficient supply chains can boost margins, but in order to capture those efficiencies, supply chain management processes need a technological overhaul.

So it is with the healthcare industry, according to a recent report by Sage Growth Partners. The headline numbers show that, as reported on sites such as FierceHealthcare.com, more efficient supply chain management can give operating margins a lift of at least a few percentage points.

Thus, the case for investing in supply chains (and garnering a return on investment) seems clear – but, as the study found, many executives are not pulling the trigger on those investments, and are still relying on outdated processes when it comes to supply chain management.

The study, based on a survey of more than 100 C-level and supply chain executives in the healthcare space, was conducted by Sage on behalf of Syft, a supply chain management firm formerly known as Management Health Solutions. The insights come as supplies (spanning medical and other products) are among the more significant parts of healthcare spending. Other research, such as that conducted by the Association for Health Care Resource & Materials Management, has estimated that, as early as next year, spending on supplies will surpass labor costs as the largest hospital expenditure.

“Like IT, managing the supply chain was historically relegated to the basement – largely regarded as an expense rather than as a strategic business imperative that can positively impact margins,” Sage said in its study, titled “The Largely Untapped Value Opportunity: Optimizing Supply Chain Management.”

Yet the findings show that although executives express confidence in managing supply chains, the solutions they use are more limited than might be expected, especially in complex, high-cost settings like the operating room. To track margins by surgical procedure, said the study, 46 percent of executives use in-house solutions based on manual or spreadsheet processes.

According to the report:

• Most executives perceive supply chain management to be a “priority,” and believe such management efforts can positively impact costs. A majority of respondents – 52 percent – say margins can be boosted by between 1 percent to 3 percent. The survey found that 35 percent believe such investments can increase margins by more than 3 percent.
• Ninety-eight percent of the respondents say supply chain management is a medium (33 percent) or high (65 percent) work priority, while roughly 13 percent call it their highest priority for operational investment.
• Some 38 percent of survey respondents say a single platform with an intuitive dashboard and analytics suite “has the most potential to positively impact business operations.”
• The study found that 18 percent of respondents do not analyze their supply chains at all.
• Roughly three-quarters of the respondents reported using their supply chain management solutions to satisfy basic analytic functions such as tracking inventory (at 76 percent) or consolidating suppliers (at 71 percent). “More advanced functions, such as obtaining cost per case or by surgeon, or anticipating supply expiration dates, are available in only about half of respondents’ solutions,” said the study.
• Among the top operational investment priorities for 2019 are patient throughput (24 percent of respondents), process improvement (21 percent), perioperative environment (15 percent) and staffing turnover, retention and management (15 percent). Supply chain management came in at 13 percent.