Taking The Supply Chain Pulse
St. Onge’s Healthcare Hall of Famer and industry icon, Fred Crans, chats with leaders from all areas of healthcare to discuss the issues of today's- threats, challenges and emerging trends and technologies in a lighthearted and engaging manner.
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Taking The Supply Chain Pulse
From Me to We: Reimagining Healthcare Supply Chain Partnerships
Healthcare supply chain leaders have largely reverted to pre-COVID practices despite ongoing vulnerabilities, while simultaneously lacking the strategic sourcing skills and upstream visibility needed to build true resilience. Dr. Randy Bradley, from the University of Tennessee's Haslam College of Business, explains why healthcare organizations remain dangerously unprepared for emerging threats like sophisticated cargo theft syndicates and global container shortages.
• Healthcare organizations have returned to pre-COVID practices despite talking about resilience
• Most healthcare entities still have no greater visibility into their upstream supply chain than before the pandemic
• Critical shortage of strategic sourcing professionals versus simple buyers who only execute existing contracts
• Suppliers openly admit health systems sign contracts with unfavorable terms they don't even recognize
• Cargo theft at record levels with sophisticated crime syndicates altering electronic bills of lading
• Automation increasingly necessary not because it replaces workers but because workers aren't available
• Healthcare must shift from "what's in it for me" to "what's in it for we" through integrated negotiations
If you have a topic you'd like to discuss or want to be a guest, you can reach out to Fred directly at fcrans@stonge.com.
This is Joe with St Onge Company here to introduce another episode of Taking the Supply Chain Pulse with your host, Fred Krantz. This week, our guest is Dr Randy Bradley talking with Fred on location from the Haslam College of Business at the University of Tennessee in Knoxville. Let's get started, as Dr Bradley shares his expanded knowledge of supply chain inside and out of healthcare.
Speaker 2:Dr Bradley has been on our podcast before and we're so happy to have you back. Thanks for inviting me down, Randy, and thanks for joining us.
Speaker 3:Always a pleasure, Fred.
Speaker 2:Dr Bradley has got expertise not just in the health care supply chain but beyond the health care supply chain into the greater world, and I can think of no time since I've been in health care that things are in such a state of flux as they are today. So I wanted to ask you, Randy, if you could please, you know, give us like the top three things that you think we need to be concerned about in the supply chain, whether it's in health care or not in health care, and we'll talk about those one at a time.
Speaker 3:Yeah, I'm going to start with one that's not so much a megatrend as much as it is something that I'm seeing at an individual level, which is leaders in health care supply chains tend to have reverted back to practices pre-COVID. That's one of the greatest things we've got to get our arms around as we move forward, and we sort of predicted that this was going to happen. Right, all of a sudden, we could use anything, we could substitute, alternative products. Substitutes were easy to identify and we could sell that to our clinicians, but now we've reverted back to. Even when there are opportunities to reduce the cost.
Speaker 3:We're not interested in doing that, because that creates more work, and that's concerning to me when I hear leaders keep saying that supply chain resilience is a mega trend. We've got to do that, and I and I take a step back and I always wonder what does that really mean? As we've talked about this before, which is resilience, is different than agility, because what I think about resilience, what it means, is not only can I adapt to the changing circumstances, but I come out better as a result of them, because I develop capabilities. I'm not seeing that. What I'm seeing is we're bragging about the fact that we survived and that we think things are normal. Yet our old habits seem to seem to come to the forefront. That's the first thing Go ahead.
Speaker 2:And you're just sort of jumping on my old bad way. Because another few things about that dynamic is that every time there's a big crisis out there, we health care supplying folks and I was one of those guys for a long time break our arms, patting ourselves on the back for how I used to say that we operate on the principle of miraculous intervention. We can wait until things get really terrible and save the day at the end, and then we spend a couple years congratulating ourselves. Helen Reddy once said there could be no such thing as a financially successful male prostitute, because he would spend all of his profits calling up his buddies to tell him how great he was. And that's what we've done in healthcare.
Speaker 2:The other side of that is that the healthcare leadership once again always very thin margins in health care to begin with, right, and as soon as a crisis is passed, they drive you back to the old ways Right. They drive you back to getting stuff for the lowest price instead of figuring demand and cost and all that stuff. So you're right. So anything more about that particular thing?
Speaker 3:Yeah, it is, and it's concerning because we're in this time now where we start looking at the potential implication of tariffs and what that's going to mean.
Speaker 3:We look at the congestions that we're seeing in terms of maritime freight.
Speaker 3:Yeah, we believe there's capacity now.
Speaker 3:We believe there will continue to be capacity, but what we don't realize is, with the dynamics in terms of the geopolitical issues, what that capacity is going to mean is this what good is it to have space on the ships if I don't have containers to put on a ship?
Speaker 3:So we're heading back towards a situation where containers are going to be a shortage because of the routes that the steam ship liners are having to take, which means it takes longer to get a product from point A to point B, which means, when you're ready to ship now from point B to point C, you don't have anything to put it on. So it doesn't matter if I got space on my ship if you don't have a container to put on a ship. That's another thing that I don't think we're talking enough about in terms of health care supply chain, because when you think about most of our suppliers, they're multinational, they're not just servicing the US market, they're tensions around the world that are going to affect what we're trying to do, which is going to affect the delivery of care, because it's going to affect the availability of products that we need to perform those services.
Speaker 2:Yeah, and you're talking about a group of people that when I ask where you ask them, where does your stuff come from, they say, oh, it comes in on the cardinal truck. I mean, that's, that's the extent of their knowledge of where the product comes from.
Speaker 3:Right, Because if we go back to COVID, one of the things we had hoped we would have learned which is this we talk about supply chain visibility I believe that most health care organizations still have no greater visibility into their upstream supply chain partners as they did pre-COVID, Even though they didn't realize that was part of the Achilles heel is that we didn't know where stuff was coming from. We didn't know where it was coming and therefore we had no alternative routes or means to get us there. And the whole notion of reshoring, nearshoring and onshore has not manifested in ways that we thought it would have been. But then look at the disasters we've had around the US. So even if you had onshore, brought things closer to base, you still had disruptions that were not prepared for. And it comes back to me One fundamental thing we don't practice risk management.
Speaker 2:Right.
Speaker 3:We believe that we've got to have an emergency response team at ERT, but that's for things that we have already thought about, but now we're ready to execute. And then when I talk about companies who say, yeah, we've got a disaster recovery plan, but we hadn't updated in 10 years, then how, how viable is that particular plan? So again, it's to me it's basic business concepts that we seem to have not mastered that are now filtering over into how we execute and organize our supply chain operations.
Speaker 2:Yeah, I was talking to somebody last week who I had to actually I can't tell you who it was, but I had to edit the podcast because this person went off on someone. Oh wow, and I'm going to try to genericize this as much as I can, but he said we didn't have a problem during this most recent crisis because, after we figured that we were working with a company who decided to build its manufacturing facilities on the top of a hill on an island that is constantly hit by hurricanes, we decided to go to an alternative vendor and, when you think about that, that same company decided well geez, nobody in North Carolina ever gets hit by dramatic storms, does it? So you're right, even the manufacturers, right? Nobody in North Carolina ever gets hit by dramatic storms, does it?
Speaker 1:So you're right Even the manufacturers.
Speaker 2:There's a term in industry and I think you're probably very familiar with this. It's called a plan for every part. In healthcare we have too many parts. We have 60,000 SKUs compared to much less in a manufacturing thing. But they know their parts are important, so they create alternative plans.
Speaker 1:They know the sourcing.
Speaker 2:they know everything about it. We know virtually nothing about our stuff where it comes from. We do know how much we pay for it, cause that's where we think we are, you know great.
Speaker 3:But it goes back to a conversation you and I've had before, which is because we outsource so many of the core aspects of a supply chain, then we just forget about it. It's like the George Foreman commercial we set it and we forget it until it doesn't work. And so when you talk about this whole thing about alternative sources of supply, alternative avenues to get distribution channels to get things to us, we tend not to think about that in healthcare. Or if we think about it, we don't act on it. And I sit around and I say, well, why could that be? Is it that either we don't know or we don't know how to do it? And I think it may be more of the latter.
Speaker 3:I think we know it's important, but I don't think we know how to do it and we're not willing to go get the help where we can. So what we'd rather do is we toss it over the wall to someone else. And one thing I've learned with very successful companies is this you never outsource your core competency. But yet in health care we have done it, because we thought that our core competency is in the delivery of health care. But what health care is there to deliver if you don't have products if you don't have materials. So your core competency actually is not in the skilled hands of those who provide the care. It's in the skilled hands of those who get the tools you need to provide the care.
Speaker 3:And we've lost sight of that.
Speaker 2:Yep, Absolutely. You hit the nail on the head. So what you're also saying is I don't know if this is one of your top three things, but we have a shortage of people with key skills.
Speaker 3:Yes, yes, that's exactly it. You know, we talked about this earlier. Strategic sourcing is something that is fundamental to what we do in a health care organization, but yet what we do is we hire buyers. Buyers are only executing contracts that have been put in place. They're not part of the negotiation, they're not part of the vendor selection and then, as a result, we tend not to have great assurances of supply terms in those contracts. So what do I care as a supplier, if I don't meet your quota, if I don't meet what I promised I would give you, what's the recourse? What's your recourse? You have nowhere else to go and because, if you think about it, we got this tight, tightly wound ball of yarn and the reality is is no matter which string you pull is ultimately going to lead back to the same place? You're going to keep coming back to me. If not for that, you're going to come back to me for something else and I'm going to nickel and dime you.
Speaker 3:I had one one leader in the organization. He told me this. He said we have contracts with health systems that are not, that have terms in it that are not favorable to the health system. He said, and the sad part is they don't know it, but yet they put the terms in. He said I didn't even put those terms. Yeah, they did. But I look at them and I'm saying it's not favorable to them. But it's not in my best interest to tell the health system that your CFO is messing this up or that your buyer is messing this up. He said if you're not smart enough to know it, we're wise enough to take your money.
Speaker 2:Yeah.
Speaker 3:And that's where we find ourselves. And yet we want to complain about the cost of health care. And yet we are mostly we are really a contributing factor to that.
Speaker 2:Sure, Absolutely so. Would that be one of your top three things? The shortage of people?
Speaker 3:with key skill sets. That's definitely one, but it's broader than that, because, really, what we're still continuing to see is the shortage of labor. I don't know if you notice what? About two and a half weeks ago, there was an article that came out in Fortune and what it said is why employers are firing Gen Z and part of the reason. You look at it at first, I'm always hesitant when I see this, because I think sometimes we make a generation of homogenous entity, which I don't believe that they are, but they were. What they did is they said.
Speaker 3:Here are things that we see that are problematic. Concerning one, there's a tendency that they don't have initiative. The other thing is they want to be told everything to do. And the third thing is they're not hard workers. Now, I don't know how you define hard work in that capacity, but when I see these this is not about hard skills, these are soft things To me I interpret this as they don't know how to be a professional, they're lacking when it comes to emotional intelligence and when it comes to critical thinking and problem solving they're subpar.
Speaker 3:That's what how I interpret those things. And so that's a much bigger issue, because what we expect that we're doing as academic institutions. I need to be doing more than giving you a body. I need to be giving you an asset, I need to give you a capability, which means I've got to understand where your pain points and friction points are, where your knowledge gaps are, and then provide you a base of supply of talent that helps to shore up those knowledge gaps. And so I think we in academia we've got to take a step back and say we focus so much on the hard skills and nuts and bolts of supply chain and maybe we got to focus on what does it mean to be a professional? Because if I can't be a professional, you don't care about what I'm capable of doing.
Speaker 2:And if I'm the you that you're giving the asset to, I have a responsibility too, because they're like, at any given point, uh, there are five generations present right in the workplace, and every one of those five generations has different, different values, different ethos, different whatever right, and my responsibility as the employer is to know, uh, the general makeup of the folks that I'm hiring and and try to channel their behavior and their understanding to a point that serves our organization best, which means that I have to adapt to them not just them adapting to me.
Speaker 2:Is that fair?
Speaker 3:That's fair, fred, because I love the fact that if organizations who focus on development of their talent because if I'm developing you, I'm not teaching you to do your job better for me. I'm trying to figure out what you want to achieve and help putting you in line to do that, and you thereby will do better work for me. But what I oftentimes see is I want to help you do your job better, because that's what I need from you, and I could care less about what you want to achieve as a professional. That's a that's a wrong way to do it, because you know what you're doing is you're training your competitors talent. Yeah, because they are going to leave you and go to a place that will invest in them, and so we we got to overcome that.
Speaker 3:The third thing that I would say is we're starting to see more and more is this emphasis on cyber issues and incidents. I think oftentimes we look at that too close to home. We think about that in terms of stolen passwords, we think about that in terms of malware, but one of the things that I've been harping about now for at least a couple of years is we've got to look at cargo theft. Cargo theft is at the highest it has ever been and unfortunately, quarter over quarter, year over year, is escalating, and sometimes it's happening in your distribution centers, happening in warehouse, it's happening in parking lots, it's happening at truck stops. We're seeing trains being pilferage, we're seeing trucks being hijacked, and it's not just an individual who has an opportunity that they're taking advantage of.
Speaker 3:These are crime syndicates that we see going across the country, but unfortunately, if we look more global, they're happening before they get to you. So if you figure out OK, I can't go through this particular rate, so let me come around through Mexico. Figure out okay, I can't go through this particular range, so let me come around through Mexico. Guess what. It's happening there as well, because these syndicates understand the rerouting of supply chains better than the people who are waiting for the supplies, and so they've set up mechanisms to be able to hijack. I give one example of where I demonstrate an electronic bill of lading, how it was fully altered to the point where nobody even recognized it. Trailer number was changed. Why was the trailer number change? Because they took the whole thing and then they took the whole thing and then they put it on a different trailer that they put on to take to you, and it has about less than 25 percent of what was initially on. There is what's going to be delivered, and you're going to think it's right, because the bill of lading said that.
Speaker 3:Because imagine because exactly all of that happened? Because I stole your email credentials. Yeah, I don't want to read your email, I care less about that. What I want to know is what's coming and when.
Speaker 2:Yeah.
Speaker 3:And that's what we're beginning to see. So cargo thefts are extremely creative, but yet in the health care supply chain we're not looking at that. Why? Because I've outsourced that. That's my distributors problem. No, it's not, it's your problem, it's your stuff. But who do I call?
Speaker 2:Cardinal. You know, and that's. There is still too much of that. In fact, we were talking earlier today. Many of the distributors are forging partnerships with IDNs, health care systems, to build them a distribution center to do whatever. It's like any other thing, it's creating slavery in a different way. Right right, once they've done that, they own you. Different way Right, right, once they've done that, they own you. And and we're not taking even places that have renowned as health care organizations.
Speaker 3:Right.
Speaker 2:Don't have that, their supply chain doesn't operate that way.
Speaker 3:So why would I go invest in setting up something, from an infrastructure standpoint, where I don't have the expertise to run it? I don't see McDonald's going to set up something that they outsource to someone else to do for them but that's healthcare. We become accustomed to doing that and now we have situations where certain suppliers who could get product to you but have decided they're not going to go through a distribution model, all of a sudden now you can't buy from them because your systems aren't set up to have a direct from supplier. Again, things that we thought we would have learned from COVID and put mechanisms in place to divert that, but we haven't and we've gone back to happy-go-lucky.
Speaker 2:Immediately. Yeah, that's over. Yeah, exactly. You know, there used to be three things that supply chain did every day, the three number one things that you did. Number one you showed up for work on time. Number two you went home on time At 431, no one was around, Okay. And number three you hoped not to get yelled at.
Speaker 1:That was it.
Speaker 2:That was the whole three things and many places still have that mentality out there. Yeah, so just in the elephant in the room. What about the disruption? We can't. Oh, we're going to throw tariffs on folks so we can manufacture at home. Oh, my goodness, are the people at home going to? First off, do we have the capacity to manufacture? That's number one. Number two those people at home ain't going to work for $2.25 an hour.
Speaker 3:Exactly.
Speaker 2:That's why we sent the stuff there in the first place, right? So I hear all these simplistic solutions that sound good to people who aren't paying attention out there. What are your feelings about the possible impacts of all that?
Speaker 3:So I'm going to say this one, and this is sort of my disclaimer I'm not an economist, I'm not a politician, I'm just reading the tea leaves. Yeah, and here's what the tea leaves tell me we don't have the infrastructure domestically to support bringing back all manufacturing. We don't even have the. When I say infrastructure, we don't have the human capital. You say, what do you mean? We don't have human capital.
Speaker 3:If we look at our workforce, the vast majority of our workforce is past or at retirement age. Those people aren't going to work. When you look in the middle, they're not necessarily interested in doing the things that you want them to do. And then, when you look at the lower end, we've got a smaller pool coming in, but we don't have enough bodies. We talk about China, we talk about Japan and their labor challenges because of policies they had in place. We didn't even have those policies that constrain the amount of children you can have.
Speaker 3:But what we, what we do have is we have a work, we have a, we have a population that is unwilling to work, and that's the biggest challenge when we talk about labor shortages.
Speaker 3:We can't produce what we don't have, and I say that from a university standpoint. I always tell people if you want better cookies, give me better chocolates, but I can't make any chocolate chip cookies if I have no chocolate chips. And that's the problem that we've got to address, not just in health care, it's across the board. If you look at our trends, you look at the death rate compared to the birth rate At best we are flat, which means we're not growing. So when you create more capacity, that has to be fulfilled with human talent. We don't have it, and so while organizations push back on automation, they push back on digitalization, saying it is going to take jobs from people. Let me help you. We don't have people doing the jobs, so organizations have no choice but to automate. I'm not taking somebody's job. I'm trying to backfill a job that was never filled because no one wants it, or I should say, very few people want it.
Speaker 2:Well, this has been an uplifting conversation to say, very few people want it.
Speaker 3:Wow, this has been an uplifting conversation.
Speaker 2:Well, you said challenging. You didn't ask me for solutions. We're almost at the end of our time frame, Dr Bradley. Could you offer us at least some hopeful advice for the future before we call it a day here?
Speaker 3:Absolutely. Here's my thing. Imagine the constraints you have didn't exist. What would your supply chain look like? What would your organization look like? What would your delivery model, both product and service delivery? What would that look like?
Speaker 3:If you can dream that and start building towards that, we won't be in the same place in five years. But yet we go back to COVID, right, that was almost five years ago now and yet I would say we're not even in the same place. We're in worse shape. Oh yeah and so. But the thing is we did not. We talked about reimagining the supply chain. We did. We just reimagine how we want it to work.
Speaker 3:We haven't reimagined our supply chains, because when we do, we tend to say, well, we can't do that because of this, I'll challenge every leader to do this. We can do it. If we can do that, if we do this, let's start looking for solutions rather than looking for reasons why it can't work, why it won't work, and I believe we have the capacity to do that. But you know what, fred? It's not going to be one organization, it's going to be a partnership. It's going to be an ecosystem relying on our vendors and suppliers to brainstorm and think with us. No one entity is going to solve this. It's going to be a community, collectively, that advances us.
Speaker 2:Yeah, it's there. I heard the phrase last week. We'll end with this Distributive negotiations versus integrative or integrated negotiations, and distributive negotiations is a win-lose situation, which healthcare has always been I'd love to partner with you as long as I get a better deal than you do and integrated or integrative negotiation is something that working together to benefit everyone.
Speaker 3:It's a what's in it for we versus a what's in it for me.
Speaker 2:That's the whole thing.
Speaker 3:We call that the vested sourcing. One of my good friends, Kate Patasic, is an expert globally in that particular space. They should check out her stuff.
Speaker 2:I will, and you know. Ultimately, dr Bradley, it all gets down to. On this earth, we need to learn the difference between me and we. That's right If we can get to that point, we'll be okay. I agree, dr Bradley. Thank you so much for taking time out to, first off, have me down here to Knoxville this is great. I love being down here and number two, sharing your wisdom with us again, and we'll see you folks next time. On Taking the Supply Chain Pulse.
Speaker 1:And that's it for this week's episode. Thanks for joining and don't forget to subscribe to the show. If you have a topic you'd like to discuss or want to be a guest, you can reach out to Fred directly at fcrans. That's F-C-R-A-N-S at stonge, s-t-o-n-g-e dot com. See you next time.
