Designing the Supply Chain Leader of the Future (3rd Try)

The longer you write, the more likely you are to visit the same subject twice.

Or three times.

So it is with this subject- “What traits should the future Supply Chain leader possess?” Over the years, I have had scores of articles published. There have been scores more that are either filed away, partially-completed or totally forgotten.

As I was contemplating the subject matter for this article, I remembered that I had written an article for Healthcare Purchasing News entitled “5 people I would hire to run my supply chain.” I tried finding the article online, but couldn’t, so I went to the pile of old magazines in my basement to look for it. I discovered it- from the May, 2007 edition. I also found an article that I co-authored in May, 2009 with Ed Hisscock of Trinity Health and Nick Gaich, formerly of Stanford Health entitled, “Seeking out the next-generation supply chain leaders.” Both articles were written to serve different purposes. The first was written to highlight a group of five people that I thought were exemplary leaders. The second showcased a concept Ed, Nick and I had about the characteristics of the “Transformational organization.”

What the two articles had in common was that they both included a list of subject matter that the leader needed to have mastery over or familiarity with.  In the first article, the requirements I identified were:

There are many requirements I would have for a SCL (Supply Chain Leader). They include:

  • Advanced knowledge of all aspects of the supply chain’s four major components:
    • Demand Management
    • Contracting and Acquisition
    • Fulfillment
    • Information Management & Decision Support
  • Intelligence, vision, personal integrity and the ability to “git ‘er done.”

Two years later we wrote:

Today’s Supply Chain Leader must be knowledgeable (or at least conversant) in topics such as:

  • Value Analysis
  • Universal Product Numbers (UPN)
  • Enterprise Resource Planning systems (ERP)
  • RFID (Radio Frequency Identification)
  • Third Party Logistics (3PL)
  • Evidence-Based Decision Making
  • Value-Based Purchasing
  • Technology Planning
  • Demand Matching Protocols and many, many more

The body of each of the articles proceeded toward different ends. The first one was about five people I knew that I would hire if I were a CEO. It was meant to highlight some exceptional people. The other article was aimed at the “5 R’s (now 6) of the excellent organization. That notwithstanding, both articles prefaced their arguments with a list of characteristics that I/we thought were essential for someone wanting to lead a supply chain.

Upon review thirteen to eleven years later, something jumped out at me. My first list of the elements of the supply chain (2007) contained only four categories:

  • Demand Management
  • Contracting and Acquisition
  • Fulfillment
  • Information Management and Decision Support

That list was certainly quite general and far from granular. Two years later, while some operations-related detail had been added (UPNs, ERP, RFID and 3PL, the general thrust still remained focused on product selection, purchasing, decision-making clinical issues (Demand-matching protocols) and clinical technology planning.

What was glaringly absent in the criteria we mentioned was a focus on the cost of operating the supply chain. Over the years, organizations have been able to focus on how much they spend on supplies and medications. Many calculate and track calculate global performance benchmarks such as:

  • Supply/ medication costs per discharge
  • Supply/medication costs per CMI case-mix adjusted patient day
  • Supply cost as % of revenue
  • Supply cost as % of operating costs.

However, little to no attention has been given to developing metrics to measure the costs associated with the operational components of the supply chain such as fulfillment rates, fulfillment efficiency, external and internal distribution costs, costs associated with the real estate and equipment associated with the operation, human resource costs associated with the operations, etc.

In the eleven years since the last of the two previous treatments of the supply chain leadership subject, many notable changes have taken place in the industry that require new and different skill sets from its leadership, including:

  • Continued conflation of the number of hospitals and systems operating in the country. There are more gigantic systems and far fewer stand-alone community hospitals.
  • The de-centralization of healthcare delivery away from a hospital-based approach to a decentralized patient-centric one.
  • The entry of new and diverse players in the distribution arena including and especially Amazon.
  • The portability of healthcare is greatly increasing with the further refinement of the Electronic Health Record (EHR) as well as the idea of seeking boutique care oversees at a far lower cost than in the United States.
  • Continuing constraints on accessibility to care caused by decreased employer-provided care and the rising cost of self-insurance.
  • Shocks to the supply chain caused by pandemics and natural disasters. The need to be responsive ad resilient.
  • The need for new collaborations- often with former competitors.

The changes noted above make it clear that a particular set of characteristics must be present in the supply chain leader of the future. Here is what will be demanded of future leaders:

  • An understanding of where the supply chain fits in the organization at the macro level as well as a deep understanding of how it works at the micro level.
    • The leader must know operational costs in detail.
    • The leader must have a detailed understanding of all elements of the operation under his/her span of control so that he/she can effectively manage those subordinates responsible for overseeing them.
  • The leader must be a Consensus builder and a Team builder. He or she able to identify, select, empower manage and mentor a team of diverse experts- leaders assigned to overseeing the major operational departments within the supply chain. This is an especially important trait. Often, senior leaders hire directors, empower them, then go about doing “the important work” and leave them to their own devices, often finding that they stray off the path or develop their own ideas about how the function they are responsible for should operate. Quite simply, the leader is going to have to know more about more things than previous leaders did.
  • The leader will have to form an initiative to establish measureable performance indicators for each department or function within the supply chain and manage against those indicators.
  • The Supply Chain leader will have to have the clout and the bona fides needed to command the respect of the senior level. Traditionally, SC leaders have reported to either the CFO or the COO, and while they have often struggled to gain C-suite level status. Some have made it, but relatively few compared to industry. The future SC leader will have to come to the job both C-suite-prepared and with a formal supply chain education. Moving up in the organization from the loading dock to the big office will disappear, The position will continue to become more complicated and more extramural. The leader will have to be able to:
    • Forge cross-industry collaborations
    • Forge partnerships with former competitors
    • Understand, advocate for and utilize outside expertise as needed
    • Stay abreast of new and emerging technologies and the utilization of accepted industrial engineering methodologies
    • Stay abreast of national and world affairs and create strategies to successfully handle complications caused by them

There is no doubt that the next decade will witness changes in the manner in which healthcare is rendered in the United States. While it is impossible to predict those changes in discreet detail and total accuracy, the one thing that is obvious is this: the supply chain’s role in the success or failure of the organization will continue to increase in importance…

… and much more will be demanded from its leaders.

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