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How to Improve Healthcare Supply Chains

Analysis  |  By Christopher Cheney  
   September 01, 2022

McKinsey & Company experts say health systems should focus on three areas to boost the performance of their supply chains.

A recent article produced by McKinsey & Company provides advice on how health systems can improve their supply chains.

The coronavirus pandemic has heightened interest among healthcare executives in revamping their supply chains. For many health systems and hospitals, the pandemic served as a reminder of the key role of supply chains, with many organizations struggling to secure personal protective equipment such as respirators in the early months of the crisis.

The McKinsey article identifies three areas where health systems can bolster their supply chains.

1. Clinician engagement

Including clinicians in formal and informal supply chain roles is essential, the McKinsey article says. "In high-performing organizations, clinicians play an integral role in supply chain initiatives: They provide input on supplier selection and contracting strategies, including their financial impact; they support compliance with contract terms (for example, by committing to give a supplier a negotiated share of business); they manage the use of supplies; and they otherwise contribute to achieving financial, quality, or other goals," the article says.

The McKinsey article says health systems can take three approaches to maximizing clinician engagement in the supply chain.

  • Involvement of senior clinical leaders: The chief medical officer, chief clinical officer, chief nursing officer, and service line leaders should be fully engaged in the supply chain. "Leaders can accelerate progress and enable best-in-class performance by offering clinical guidance, building clinician confidence in supply chain efforts, making tough decisions, and holding other clinicians accountable for changes in behavior," the article says.
  • Formal teams assessing category strategies: Formal teams drawn from clinicians and supply chain leaders should play pivotal roles in contracting and utilization. "Optimally, one accountable and influential physician—for example, a service line chair or high-volume surgeon—will chair each committee. The absence of such leadership can result in extended delays, fewer savings, or stalled initiatives," the article says.
  • Establish a frontline supply chain team: Top executives cannot lead supply chain initiatives on their own—pairing supply chain managers with clinicians can guide supply chain functions such as product choices and compliance with contracts. " Supply organizations may consider filling this role with supply chain professionals who have clinical backgrounds and a threefold mission: support supply chain initiative implementation, identify local opportunities for improvement, and develop relationships with physician and facility leadership to better understand and meet their needs over time," the article says.

2. Establish goals across facilities and functions

Supply chains should set annual goals in conjunction with other clinical and non-clinical departments, a process that is often not achieved, the article says. "This lack of goal sharing can lead to misaligned incentives between the supply chain function and other stakeholders, siloed decision making, resistance to supply chain initiatives, and the perception that the supply chain function is focused solely on cost savings rather than broader organizational goals."

Three approaches can be taken to attain effective goal setting, the article says.

  • Establish mutual savings targets: "Shared savings targets between the supply chain function and its partners—specific functions, service lines, and facilities—help ensure that the organization is unified in its mission to find and implement savings opportunities. Such targets also reinforce the notion that all stakeholders are accountable," the article says.
  • Goal incentives: Supply chain actions are often associated with change for some clinicians such as dropping a preferred supplier, so enticements can be useful tools. "To assist this change, systems may consider providing incentives for reaching targets. These incentives can be financial or nonfinancial and may include a commitment to reinvest a percentage of savings in things prioritized by physicians, such as equipment, conference attendance, or publications," the article says.
  • Report goal progress: "Once targets are established, tracking performance and ensuring that stakeholders have access to up-to-date information on their progress is critical to fostering a sense of accountability. Ensure that dashboards display the high-level metrics that matter most (for example, savings and contract compliance for medical implants)," the article says.

3. Data and analytics

While data and analytics can play a pivotal role in supply chain performance, many health systems struggle to develop accurate and actionable information, the article says. "Organizations outside the hospital's walls—such as those that supply medical devices, pharmaceuticals, and services—often have better visibility into a health system's spending and utilization than the system itself does. As a result, the health system may be unable to effectively negotiate or identify savings."

Health systems should consider four kinds of investment to improve data and analytics, the article says.

  • Data management: "Having clean, categorized supplies data enables proactive identification of opportunities through granular product comparisons. This is especially important for systems that have gone through M&A activity because systems and data nomenclature must be reconciled across the system before savings opportunities can be identified," the article says.
  • Practical and applicable tools: "Analytical tools are only useful if they provide relevant insights to their users, which may require individual customization and, for convenience, accessibility on multiple devices. For example, a supplies cost-per-case tool, which shows the cost of all supplies for a given operating-room procedure, should provide the relevant views for physicians so that they can see the supplies they used; the cost compared to supplies used by peers; alternative supply options; and, where possible, quality outcomes," the article says.
  • Effective dashboards: "Organizations need to ensure that supply chain tools and reports are being used not only to review results but also to enable decisions. Organizations should ensure ample visibility into key supply chain metrics across all levels of the organization and ensure that conversations focus not just on what has happened but also on what actions can be taken to influence future performance," the article says.
  • Staffing: "Building a robust analytics engine requires an integrated team comprising analysts, data translators, visualization experts, and data engineers, among other roles. Recruitment that focuses on these skills, regardless of previous industry experience, can expand the talent pool and ensure that leading practices are brought into the organization, including from industries such as tech that have invested substantially in developing data and analytics as part of their core businesses," the article says.

Related: Physicians Can Play Formal, Informal Roles in Healthcare Supply Chain

Christopher Cheney is the senior clinical care​ editor at HealthLeaders.


At health systems, clinician engagement is essential to establish a highly functioning supply chain.

To get the most out of their supply chains, health systems should set goals across facilities and functions.

Health systems should invest in supply chain data and analytics.

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