Supply Chain Excellence

Stephen Tambolas, MPM, CPSM, C.P.M.VP, Supply Chain & Facilities Admin.

Conemaugh Health System

• Memorial Medical Center• Tertiary, teaching hospital rated as a Distinguished Hospital (Clinical

outcomes among the top 5% in the nation) by HealthGrades • The only hospital in the state and one of just 15 in the country honored with

HealthGrades Excellence Awards in both the Maternity Care and Women’s Health

• 555 licensed beds and 72 skilled nursing beds • Level 1 Trauma Center / Medstar Aeromedical Helicopter Transport • Level 3 Neonatal Intensive Care Unit • Largest teaching hospital in the region 

– Eight medical residency programs – Pharm D. residency – School of Nursing – School of Allied Health

• Conemaugh Home Health is one of the largest agencies in the region

Conemaugh Health System

• Crichton Rehabilitation Center

• Miners Medical Center– A 20-bed community hospital serving

Northern Cambria County

• Meyersdale Medical Center– A 20-bed designated critical access,

community hospital serving Southern Somerset County

My Journey

• AGH 1971• Polyclinic 1987• PinnacleHealth 2000• Tambolas Consulting

Group 2002• AHS LLC 2003• SSCM5 Inc. 2005• CHS 2009 present

• CPHM 1985• C.P.M. 1995 (life)• CPSM 2008• Med. Ind. Group - ISM• BSBA – RMC• MPM - CMU• Doctoral Candidate –

Walden University

What’s the opposite of Supply Chain Excellence?

Un-natural Disasters

“We should not fear failure; rather we should fear succeeding at something that really doesn’t

matter.”

Modern Translation: Philippians 3:7-14

Un-natural Disasters

• Price focus • Subject matter limited to

medical commodities• End users rule• Silo processes• Ignoring Balance Sheet• Healthcare only networks• Adopting “Best Practices”

as a Strategy• Failing to acquire or

maintain skills

• Doing it alone• Fear of

failure/confrontation• Lack of communications• Clerical only retreat/Living

in the CZ• Everyone gets along• Failure to Lead• The consultant arrives

and careers abruptly end

Why Excellence?• 50% higher net margins • 20% lower SG&A expenses (Sales, General & Administrative) • 12% lower average inventories (think - days cash on hand) • 30% less working capital expenses/sales • 2X the ROA (return of assets) • 2X the ROE (return on equity) • 44% higher overall economic value added • 2X return on stock prices (reflecting how outsiders view their

performance) • etc., etc.

Swink, M., Rajdeep, G., Richardson, T., (2010, March/April). Does Supply Chain Excellence Really Pay Off?. Supply Chain Management Review, Vol.14, No. 2, pps 14-21

How to Sell Excellence• 50% higher net margins • 20% lower SG&A expenses (Sales, General & Administrative) • 12% lower average inventories (think - days cash on hand) • 30% less working capital expenses/sales • 2X the ROA (return of assets) • 2X the ROE (return on equity) • 44% higher overall economic value added • 2X return on stock prices (reflecting how outsiders view their

performance) • etc., etc.

Swink, M., Rajdeep, G., Richardson, T., (2010, March/April). Does Supply Chain Excellence Really Pay Off?. Supply Chain Management Review, Vol.14, No. 2, pps 14-21

Why Reinvent The Wheel?

Strategy without Tactics is the slowest route to victory.

Tactics without Strategy is the noise before defeat.

Sun Tzu – The Art of War

SIZE DOESN’T MATTER!

World Class Supply Chain

• S

• P

• A

• C

• E

World Class Supply Chain

• S

• P

• A

• C

• E

SSCM5 Inc./Tambolas Model©

World Class Supply Chain

• Strategic

• P

• A

• C

• E

Supply ChainA Dept.,…..but not a Dept.

• Management Discipline

• Applies to all non-labor expense

• Similar to HR– policies guide organization-wide behavior– positioned on org. chart – line 2 (main bar)

S tra te g ic

IT H R F in an ce S u p p ly C h a in

C E ON u m ero U no

World Class Supply Chain

• Strategic

• Performance (strategy drives design)

• A

• C

• E

World Class Supply Chain

• Strategic

• Performance

• Architecture (end-to-end)

• C

• E

World Class Supply Chain

• Strategic

• Performance

• Architecture

• Collaboration

• E

World Class Supply Chain

• Strategic

• Performance

• Architecture

• Collaboration

• Effective use of Metrics

The 5 Core Disciplinesof Cohen and Roussel

• Strategic

• Performance (design to)

• Architecture (end-to-end)

• Collaboration

• Effective use of Metrics

Ten Traits of the Best Supply Chains

• Sound Strategy supported by Solid Leadership

• Focus of Financial Impact• Portfolio approach to

innovation and PI• Selective Collaboration

with trusted partners• Excellence in Strategic

Sourcing

• World Class Logistics Execution

• Proficiency in Planning & Responsiveness

• High Customer Integration & Satisfaction

• Anticipate and Manage Risk

• Globally Optimized Operations

World Class Supply Chain

• Strategic

• P

• A

• C

• E

Sound Strategy supported by Solid Leadership

Anticipate and Manage Risk

Proficiency in Planning & Responsiveness

World Class Supply Chain

• S• Performance (design to)

• A

• C

• E

Excellence in Strategic Sourcing

World Class Logistics Execution

World Class Supply Chain

• S

• P• Architecture (end-to-end)

• C

• E

Portfolio approach to innovation and PI

Globally Optimized Operations

World Class Supply Chain

• S

• P

• A• Collaboration

• E

Selective Collaboration with trusted partners

High Customer Integration & Satisfaction

World Class Supply Chain

• S

• P

• A

• C• Effective use of Metrics

Focus of Financial Impact

If every expert in the field is saying the same thing

does it apply to healthcare?

Or are we different - again?

A Case Study

CVAC

Clinical Value Analysis Committee

Voting Members

– CMO (Chairperson)– Chair Dept. CV– Chair Dept. of Surgery– General Surgeon– Orthopedic Surgeon– Internist– Family Practice– Chair, Dept. of Med.

Non-Voting Members

– President– VP Revenue

• Financial Analyst

– VP SC • VA Coordinator (RN)

– VP Clinical Services– Dir. SS– Dir. Pharmacy

CVAC

Price Bench Marking

Price Benchmarking

• ECRI – Medical Commodities

• Propurchaser.com – Raw Materials

CVAC

Price Bench Marking

Neuro CVAC

CVAC

Price Bench Marking

Neuro CVAC

CV CVAC

CVAC

Price Bench Marking

Neuro CVAC

CV CVAC

Supply Chain Exec Committee

SCEC

• President

• All hospital VP’s

• CMO

• DMM

• Dir. Pharmacy

• Chairpersons of all Supply Committees

SCEC

• Meets quarterly

• Reviews results– Report out from each committee/group

• Reviews current benchmarks

• Establish new goals and objectives

• Focus on Income Statement and Balance Sheet

• Annual Strategic Retreat

CVAC

Price Bench Marking

Neuro CVAC

CV CVAC

Supply Chain Exec Committee

SC/SS

CVAC

Price Bench Marking

Neuro CVAC

CV CVAC

Supply Chain Exec Committee

SC/SS

Lean SS

LEAN Six Sigma

• Hospital wide rollout.

• Every manager and director expected to achieve Green Belt status.

• Green Belt requires demonstration project.

• Hospital wide teams created by senior leadership.

CVAC

Price Bench Marking

Neuro CVAC

CV CVAC

Supply Chain Exec Committee

SC/SS

Lean SS

SC/Construction

CVAC

Price Bench Marking

Neuro CVAC

CV CVAC

Supply Chain Exec Committee

SC/SS

Lean SS

SC/Construction

MRO

MRO

• Uses LEAN for all processes.

• Addresses service and indirect spend categories.

• Chaired by Dir. Facilities Operations (GB).

• Staff includes Finance, MM, BioMed, and PI (BB).

CVAC

Price Bench Marking

Neuro CVAC

CV CVAC

Supply Chain Exec Committee

SC/SS

Lean SS

SC/Construction

MRO

SC/Facilities

CVAC

Price Bench Marking

Neuro CVAC

CV CVAC

Supply Chain Exec Committee

SC/SS

Lean SS

SC/Construction

MRO

SC/FacilitiesPhys. Led Capital

CVAC

Price Bench Marking

Neuro CVAC

CV CVAC

Supply Chain Exec Committee

SC/SS

Lean SS

SC/Construction

MRO

SC/FacilitiesPhys. Led Capital

Capital Mgt. CouncilSC VP

What the Voting Members of CVAC Understand

Product Life CycleThe Bell Curve

• Innovators 2%

• Early Adopters 14%

• Early Majority 34%

• Late Majority 34%

• Laggards 16%

32.43% of Medical Product Introductions Fail (Karakaya, 1994)

Karakaya, F. (1994). New product development process: An investigation of success and failure in high-technology and non-high-technology firms Journal of Business Venturing, 9(1), 49-66. doi:10.1016/0883-9026(94)90026-4

Sales

The Close

• “Secrets Of Closing The Sale”, Zig Ziglar, over 100 closing techniques illustrated.

• “24 Techniques for Closing The Sale”, Brian Tracy, “These are 24 of the most ruthless tactics -- kept under wraps for years -- 

that can turn even your most hard-nosed prospects into cash-generating customers.” Kevin Wilke, Founder, NitroMarketing.com

• “6 Tried and Tested Closing Techniques”, David Quinn, “..closing sales are what top performing professionals do for a living…”

Average first-time sale requires 6-8 close techniques

How many can you identify?

Strategic

• Organizationally Positioned

• Senior participation• High expectations• No apologies• Participation expected• Viewed as broad

management resp.• Proper resource

allocation

• Both Income Statement and Balance Sheet responsibility

• Skill sets appropriate to goals

• Future stretch goals set

• Ongoing Process• Planned

Performance

• Committee/Structures designed to meet goals

• Staffed to meet goals• Fuzzy definitions• Application of LEAN

to all functions

• Organization changed to meet objectives

• Disruptive Policies reflecting principles

• SC empowerment

Architecture

• Another Session on Strategic Sourcing, Logistics & IC

• Key personnel (OR, etc.) integration

• All order processes & inventories

• Products enter via prior peer review (gatekeeper)

• LEAN principles

• Disposition (waste, recycle, etc.)

Collaboration

• With, not To

• Physician/User integration first

• Supplier integration second

• System-wide dialog

• Disharmony (emphatic honesty)

Effective use of Metrics

• Benchmark once – trend forever

• All decisions related to trend impact

• Cost decisions as both top and bottom line

• Inventory decisions related to liquidity

• Provide full disclosure of all data

• Use outside research

• High level (Board) reporting of SC metrics

Continuing Education

• Certification

• Skills– Lean SS– Negotiations– Finance– Marketing

• Supply Chain Theory

• General Management Theory

Thank You

Questions

Suggested Readings• Cohen, R., Roussel, J. (2005). Strategic Supply Chain Management: The 5

Disciplines for Top Performance.

• Poirier, C., Quinn, F., Swink, M. (2010). Diagnosing Greatness: Ten Traits of the Best Supply Chains. Fort Lauderdale, FL: J. Ross Publishing, Inc.

• Rudzki, R., Smock, D., Katzorke, M., Stewart, S. (2006). Straight To The Bottom Line: An Executive’s Roadmap to World Class Supply Management. Fort Lauderdale, FL: J. Ross Publishing Inc.

• Emmett, S., Crocker, B. (2006). The Relationship-Driven Supply Chain: Creating a Culture of Collaboration throughout the Chain. Hampshire, England: Gower Publishing, Ltd.

• Lencioni, P. (2002). The FIVE Dysfunctions of a TEAM. San Francisco, CA: Jossey-Bass Publishing.

• Swink, M., Golecha, R., Richardson, T. (2010, March/April). Does Supply Chain Excellence Really Pay Off? Supply Chain Management Review, Vol. 14, No. 2. 14-21.