General Supply Chain Management
Supply Chain Management - What's in a Name?
In healthcare, "Supply Chain Management" is the current term increasingly used as a name for the collection of functions previously categorized under a department name of 'Materials Management', a term that came into vogue in the mid 70's. Prior to "Materials Management," these functions were often part of a 'Purchasing' department.
So what all has changed? When the function name changed from Purchasing to Materials Management, there was usually an expansion of responsibilities. There was a concerted awakening to the potential for more rigorous contracting for supplies and equipment, as well as thinking more holistically about the interrelated functions that performed logistics within hospitals. This was the era in which most GPOs were conceived and began operations. Inventory management became a significant area of focus. Materials management information systems evolved and began to be adopted more widely. Often, Central Services department, or what is now frequently called SPD (for supply processing and distribution), was moved under the new Materials Management range of responsibilities. Of course, over the intervening years, many of these SPD functions have been moved away from Materials Management and now report to the Perioperative Services director.
Over the last five to ten years, the term "supply chain management" has become more frequently used for the functions related to directly to procurement, receiving, supply distribution, inventory management, and contracting. Materials management information systems have in many cases been replaced by ERP, or enterprise resource planning systems, which are far more integrated with financial management and often human resources management, to view resources in a more holistic way. With improved data capture, spend management has become a common term used for the analytics related to reviewing historical expenditures to determine which items, categories, suppliers and other cuts comprise the greatest proportion of spend, followed by a rigorous review and actions to ensure that major expense items are covered under the best possible contracts. Considerable discussion and many successful examples have occurred in the realms of value analysis and the broader clinical resource management, though these efforts are in early evolution. Group Purchasing Organizations (GPOs) have consolidated considerably, and have worked hard to expand their value to their clients, as well as differentiate themselves. There is increasing focus on benchmarking and metrics for comparing supply chain management results across healthcare facilities as well as a few efforts to compare healthcare supply chain processes and results with those in non-healthcare industries. There has been considerable evolution in an increasing level skills, education, and experience that the typical leader of these functions has today, in contrast with the past. There is considerably more professionalism as well as cross-pollenization from supply chain management professionals with deep experience from outside the heatlhcare industry. This has all been good for the industry, good for the profession, and has, for the most part, brought about improvements in providing support for patient care and business operations as well as contributing to better analytics and decision-making in managing costs of supplies and equipment while balancing implications on overall patient outcomes and quality.
While "supply chain management" still means different things to different people, the profession continues to move forward. One key example is the significant industry effort under way today to implement the Global Locator Number (GLN) standard for identifying each discrete "ship-to" location within each healthcare entity in a standard manner for use by GPOs, distributors and manufacturers. Simultaneously, efforts are underway to implement the Global Trade Item Number (GTIN) standard for unique identification of each product in each available unit of packaging. It has taken the industry nearly twenty years to get to this point, but it appears that we are very near critical mass, with a growing and broader conviction of that these standards have to happen as a critical foundation for progress to come. Clearly, once these standards are more fully implemented in the next 18-24 months, we will beging to see the world of supply chain management in healthcare evolve in a significant new wave of evolution in how we contribute to the underlying mission of getting the right item to the right place at the right time for the right price.