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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We provide comprehensive planning and design services to develop world-class facilities and highly effective support services operations. Our capabilities in hospital supply chain consulting include applied industrial engineering, lean methodologies, systems thinking, and operations research to enable improved patient care and staff satisfaction. We are proud to have worked with over 100 hospitals, including 18 of the top 22 in the US, utilizing diverse design strategies, post-construction implementation, and change management.
Taking The Supply Chain Pulse
The Lean Advantage: How One Leader Transformed Three Different Supply Chains
What happens when military precision meets corporate efficiency in healthcare? In this eye-opening conversation, Chico Manning, Assistant Vice President of Enterprise Supply Chain at PIH Health and 2024 Bellwether League Future Famer Award recipient, takes us through his remarkable journey across three distinct supply chain environments.
Manning's foundation in logistics began with seven years as a Marine Corps officer handling what he calls "the three B's: beans, bullets, and band-aids." This military experience taught him the fundamental principles of getting exactly what's needed precisely where and when it's required—sometimes literally carried on the backs of those being supported.
His subsequent fifteen-year career at PepsiCo revealed the transformative power of Lean Six Sigma in a profit-driven environment. Manning shares the fascinating story of his most successful project, which made sales teams accountable for unsold product waste and saved the company hundreds of millions of dollars globally. What was once considered a "sacred cow" that couldn't be changed became a cornerstone of PepsiCo's improved forecasting approach.
The most revealing segment comes when Manning describes his shock upon entering healthcare in 2016. He discovered supply chains "generations behind" other industries, with basic concepts like demand forecasting virtually nonexistent. Instead of data-driven systems, he found manual processes where individuals physically walked through storage areas to determine what needed to be ordered—essentially guesswork rather than analytics.
The conversation takes an especially relevant turn as Manning explains how his team has expanded Lean Six Sigma beyond supply chain to all aspects of PIH Health's operations, preparing the organization for healthcare's mounting financial pressures. With approximately 60% of patient revenue coming from potentially vulnerable Medicare and Medicaid sources, Manning's approach of "strengthening the dam before it breaks" offers a blueprint for healthcare organizations facing similar challenges.
What makes this episode particularly valuable is Manning's emphasis that these methodologies can be scaled to healthcare organizations of any size while maintaining quality standards and regulatory compliance. His passion for supply chain excellence shines through in his closing thought: "No matter what organization you're part of, if you're a supply chain professional, know you are as important as whatever they're selling or whatever service they're providing."
Hello and welcome to another episode of Taking the Supply Chain Pulse. I'm Megan from St Onge Company and I'm excited to introduce this week's guest, chico Manning. He's the Assistant Vice President of Enterprise Supply Chain at PIH Health. Chico brings a wealth of experience in supply chain logistics, which made him a natural fit for today's conversation. And now here's your host, fred Krantz.
Speaker 3:Chico welcome.
Speaker 1:Yeah, thank you, Fred. I've been looking forward to this conversation for a little while. Thank you for having me as a guest today.
Speaker 3:Yep, chico is a 2024 recipient of the Future Famer Award for the Bellwether League, which means two things he's a young guy and he's on the way up. But I discovered in doing some research today and doing the math that Chico may not be all that young because he spent seven years in the US Marine Corps, or as we Navy corpsmen used to like to call it, among Uncle Sam's misguided children. I love it. Among Uncle Sam's misguided children, I love it. And after that he spent 15 years with PepsiCo. And then he got into health care. And when Chico was giving his acceptance speech last year at the Bellwether League or maybe it was during the panel, I forgot he was not part of a panel discussion he told about how aghast he was when he made his entry into the health care supply chain, coming from the supply chain he had been with before, and I of course at that time thought, oh yeah, pepsico.
Speaker 3:But then I found out that Chico and his role in the Marine Corps and, by the way, chico is a graduate of the US Naval Academy. So, chico, you're the real deal, brother. That's good. He had been a logistics officer for a Marine Corps battalion too, and so Chico has got a unique perspective of three different types of supply chain activity from three different levels of expertise. In my opinion, the greatest supply chain expertise, certainly in logistics and transportation, is the US military. It can't be topped with what we did in Vietnam we save people because of logistics as much as because of medical capabilities. Number two he was with PepsiCo, a large, internationally known, successful industrial retail company in the United States. And then, third, he has been with PIH Health for let's see how many years 2016 to the present my ninth year, yep. So tell us a little bit about what did you learn as a logistics person with the Marine Corps? Yeah, no beautiful intro.
Speaker 1:I appreciate that I'm going to have to plagiarize that next time I go to an event. But yeah, starting early on, as you mentioned, you know, cutting my teeth in the military logistics realm, right, cutting my teeth in the military logistics realm, right, as you mentioned. Um, there was the, the three, the three b's beans, bullets and band-aids right, and it goes back to the korean war, vietnam war days. You, you got to keep people fed, you got to keep them in the fight. That's the bullets one and the beans ones was keeping fed and and we know it's inevitable and during combat and wartime people are going to be injured. Do you have the Band-Aids or, as we're talking about, the medical supplies to keep them in the fight or to take care of them after the fight?
Speaker 1:So I learned that early on. Right, those are the priorities. So, really, military logistics taught me how to make sure that you got what you needed where you needed at the precise time. To make sure that you got what you needed where you needed at the precise time, right. And remember, in the military, it could be truck, it could be air, it could be ship, it could be on the backs of the very people that we are supporting. So I learned early on the logistics and you said it outstandingly Logistics is right before the fancy word of supply chain or material management, as healthcare used to go. Really logistics right to understand how to get something from one place to the other and in in the right hands at the right moment. That's what military logistics is all about, so hopefully that answers your question there.
Speaker 3:yeah, I think it was. Uh, I think it was general marshall, but I'm not sure. George catlett Marshall, who saved the world with the Marshall Plan after World War II and who was in charge of everything in World War II, said that amateurs think about strategy, professionals think about logistics. And it may have been someone else, but it seems appropriate for him, and I know that when it got down to the personal level, when we were on operations, since we corpsmen didn't have enough to carry around, they would always have me carrying a couple of Laws, rockets and a pocket full of hand grenades, you know, just extra, because I could, just in case and you know, you didn't know that you could be blown to smithereens with a misstep there. Anyway, so after you got out of the Marine Corps, you went to work for PepsiCo. Tell us what your responsibilities were at PepsiCo and what you learned from that supply chain.
Speaker 1:Yeah, so my transition out of the military, from the beans, bullets and band-aids and then cutting my teeth there to it then you go and remember that's a not-for-profit logistics operation, right, we all know that the government. And then I move into probably the most profit-focused supply chain in the world. And so how do I caveat that? Right, pepsico is a high profile, high dollar, multi-international, multi-billion dollar organization. And when I got into PepsiCo supply chain it was called sales operations. So think about that. Right, they already identified you as sales operations. And so what I learned is PepsiCo is a revenue-driven company and, as anybody that's studied, p&l and for-profit revenue has all the priority. And then sales operations, which is what I was part of early on in my 15-year career you were to support the revenue-generating sales of the organization.
Speaker 1:Then what happened at PepsiCo and what I'd like to highlight today is about mid-career, about year eight, nine for me PepsiCo started moving into. Well, we can't just be a sales-focused operation. We got to look at the entire P&L what's important? The top number. The bottom number is just as important. So we started to adopt Lean Six Sigma process improvement methodology and we started to apply that first in sales operations. Right, they were very receptive to these kinds of concepts.
Speaker 1:Manufacturing was the other component and, as anybody that has studied lean knows that manufacturing fits well with lean. And once we started and I was part of this we got the sales operations and we got the manufacturing arms of pepsico really bought in and we showed what lean could do. Then we moved into sales and then we what pepsico did a great job about year 10, year 11 of my career is company-wide, organization-wide. They got everybody speaking the lean language and what PepsiCo saw was a multi-billion dollar company that was grinding out sales and we know those margins are getting tight even as we speak. Right, People have choice. They have less money. They're going to choose wisely, so you've got to be more efficient with your dollars and Pepsi.
Speaker 1:During the last five years of my company, it put them in position today to be competitive and so and that's the lean approach to all things sales, sales and manufacturing. So really kind of me learning the for-profit world, me seeing the maturation of an organization, pepsico, that was called Sales Operations, which today is called the PepsiCo Global Supply Chain Team, which kind of shows you how they look at it. It's no longer just support sales, it's we want to get the whole business. And I'll highlight this one fact Ind newey, the ceo that was there when I was there and she's since retired she challenged the organization for 1 billion dollars of verifiable productivity.
Speaker 1:That was impossible in 2001 when I joined the company, because we were a sales focused organization. You couldn't sell enough product to generate that kind of profit. So she took that lean approach across the entire organization, established a full-time black belt team which I was part of and led for the West Coast, and we achieved $1 billion of cost avoidance to productivity in year one and, I'm proud to say, every one of the four subsequent years I was with them before I transitioned to healthcare. So it works and that was a big takeaway from my experience my 15-year career at PepsiCo.
Speaker 3:Okay, so let's talk a little bit about. Lean is about analyzing functions, operations, in great detail, really getting to the nitty-gritty of how things work and how you do your work. And the ultimate goal I'm simplifying and I'm probably wrong, so correct me is to eliminate the muda, the waste that is in the system. So tell us about some of the types of projects that your team worked on that resulted in operational improvements and savings. Yeah, at PepsiCo or healthcare.
Speaker 1:I can do either one PepsiCo.
Speaker 3:We'll get to healthcare, yeah.
Speaker 1:So I'll share the project I'm most famous for. So remember I told you about the sales team. So up until the Black Belt project that we call Total Zone Waste, the sales team would be able to for any of our major PepsiCo holidays. You can imagine where people buy a lot of chips the Super Bowl, memorial Day, july 4th right, these are what we call PepsiCo holidays. Before the lean approach, a sales leader, an organization, could say and tell manufacturing I want 120% of what my demand forecast says, because I'm going to force it, I'll sell it, I'll sell it to the market. But what they weren't held accountable for was what happened three weeks, four weeks after every major holiday. You notice on every PepsiCo product there's a freshness date. Well, the stuff that didn't sell we threw away. We call that unsaleables.
Speaker 1:Up until my project, who was accountable for unsaleables Manufacturing? I, with statistical analysis and the lean approach, showed the organization that the unsaleables what didn't sell and we credited the market for which was basically waste. To PepsiCo I said that should be on the salesperson's criteria for bonuses, everything, or they won't properly forecast. So to simplify things, we put that in place. We made the sales function care about unsaleables at the tail end and not just push billions of dollars a product because they weren't held accountable for what didn't sell. And when we did it, what do you think happened? The forecast came down. Sales weren't hurt. We still sold Remember it was the actual number sold, taken off the shelf, taken home. The unsaleables number almost disappeared that project from the moment we wrote it out and that was one of my first projects as a black belt in 2010,.
Speaker 1:I basically traveled all of North America, all of North America, and I'm talking Central America, canada, overseas, dubai, india, uk, russia, with translators. We roll this project globally. It is still today the most successful project in PepsiCo lean history and PepsiCo keeps a tracker of projects that do well. And this project is well within the hundreds of millions of dollars of cost avoidance right. We sale or credit less unsaleables today than we did before this project was done. So that's just a black and white example of what the power of Lean Sigma, applied properly, with the right stakeholders and organizational buy-in, can do. So you're talking a multi-billion dollar Fortune 35 company, several hundred million dollars over several years. That's hard to combine and that's a clear example of what I was able to provide, but really what the Lean methodology was able to provide to that organization.
Speaker 3:Well, it must have been great to be a salesperson in those early days. I could tell you in manufacturing give me 30% more. You'd make it and I'd sell 10% of it, and then you'd get in trouble for the 20% that was left over.
Speaker 1:Yeah, and you hit it right on the head. It was great for them, but what we proved was it could still be great for them, right? Because making less didn't mean you sold less. It meant their demand forecast was more accurate than they believed and they understood the back end. If we had unsaleables, it would hurt the company, so it should hurt all of us. So we became a better company at forecasting and manufacturing, did what they always did. They manufactured to the forecast and then we distributed supply chain and supported the sales team.
Speaker 1:I will tell you, some of the biggest hand raisers now at PepsiCo are sales executives, who might forget who was part of that project, but definitely today. Their lives are better today because they are delivering sales targets and, on the back end, because they are delivering sales targets and, on the back end, delivering the targets around waste too, and so they're happier all across all functions manufacturing, supply chain and, obviously, sales. We used to call that the sacred cow. I remember when I first started that project I had a sales guy who said, hey, I'm part of this project, but FYI, this is a sacred cow. You can't tell a sales person not to order a lot of product. That'll never change. And lo and behold, this project changed it, and today nobody does that, and so that is my one legacy I'm proud of at PepsiCo is we are better forecasters and believers in the forecast than we were before that project.
Speaker 3:So that now we'll start to start to get into health care. That was an aspect of health care demand planning that I'm sure you came into health care with all this experience and all this deep Six Sigma stuff and your black belts and everything. You say, oh, these guys are going to be ready to pick this up and they're already doing it. What did you find when you got there?
Speaker 1:Yeah, I was shocked, right, Because, remember, I had no experience in health care other than what I saw on TV, right, and so I'm coming into health care and I'm realizing why they hired me, because I remember during the interview they were really focused on the last five years of my PepsiCo tenure and they were really focused on the lean projects and success. And so, and I remember asking them, why hey, why are you recruiting me for this project? And they transparently said we need someone from the outside who's lived in this environment, because where our supply chain is headed, we want to make sure that we head there. So when we do get to the right scale and complexity, we've done what you've experienced and done at PepsiCo. So, to answer your question, so when I got to healthcare on my first day, I noticed right away I said, wow, where's your distribution center? Oh, we don't have one. I go. So how does your product come in? Okay, it comes on this truck or these trucks every day. Ok, how do you determine what comes on that product? Oh, we have this guy who walks around and he looks at locations. And, ok, how does he? How do we know that that location is the right size, the right product in the location and at the right frequency to order. And then, once it comes here, what's driving that? And I remember the first week I asked can you show me your demand forecast? And they looked at me like I was speaking French. They go demand forecast. Hey, can you show me? Like how do you know what to order? Like what if he gets hit by a bus and I have to place the order? What do I use? Well then you would just walk around the warehouse and I go what guess? And so I quickly learned that and remember this was my organization specific.
Speaker 1:But I started to learn as I spent years in healthcare. It's a little bit more common than I probably anticipated. That made people realize is we were probably a couple of generations behind. Where I knew supply chain was already at in 2016. Granted, pepsico and the rest of the world, but there were some principles and supply chain processes. I was like, wow, we can apply this to healthcare. And so what the organization has done a great job during my tenure is one understand why they brought me in, understand the methodology and the approach. Allow me to grow a team of black belts Right and and and. Granted, they're LSS black belts, but they're really business analytics Right. And so what started as supply chain specific working on supply chain projects? Because they said, hey, show us what you can do in your function. And we did.
Speaker 1:Over the first half of my nine years at PI Health I was able to show them, with the approach of lean, how to optimize the supply chain function. And then COVID happened and there was a couple of years where, as we all know, supply chain was highlighted right and many organizations suffered more during COVID than ours. And I remember I was asked a question by a board member hey, how is it that the healthcare organization down the street or where my cousin works at isn't experiencing what we're experiencing? We have the right products at the right price point, even with all of these global pandemic logistics supply chain issues. Why are we different? And I explained to them it's because we've set up our supply chain to be ready for this through process analysis, root cause analysis and process optimization through lean. And I will tell you once COVID happened.
Speaker 1:On the outset of when COVID ended, I was basically given the keys to this approach and now we do it organizational wide right. What started in supply chain and kind of got validated during the 18 months of the pandemic. Now we're seeing and my team is growing and applying this approach to all aspects of PIH business and clinical and non-clinical processes. So really we are on the cusp of really doing what Toyota did, what PepsiCo did at the heights of their lean approach. I'm so excited that we are on the cusp of really doing that resources-wise, capability-wise and organizational support-wise at PIH and we're right in the middle of that and we're so excited.
Speaker 1:What we're working on and what we're going to be working on and the company will benefit and I'm hoping a podcast like this. As I interact with my peers and people say, hey, what's going on there? I hope this spreads right, as you mentioned. So when our industry is seen as one that has kind of figured this out and it's not uncommon, it's more common. So that is my industry pitch to this is, if you're listening to this, this is definitely something that I think we all understand. But hey, if we can get this to the right point, our industry is going to be better for it.
Speaker 3:Yep, now I want to be respectful when I say this. Okay, but PIH is not a large IDN. It is not large in the sense of Cleveland Clinic large or Kaiser Permanente large. It's a smaller IDN, a smaller system. Number one One. Number two you're in an intensely regulated and high cost state as far as just to open the door to any business. And number three you've got to have competition all around, all around you that want to horn in on your, on your patient mix area and everything else.
Speaker 3:Right Is what you're doing, the way to remain viable, yeah.
Speaker 2:And how is it working?
Speaker 3:out? How is it working out? How are your operations doing as a?
Speaker 1:hospital yeah great yeah.
Speaker 1:And I love the way you framed it up. And yes, there are smaller health systems, standalone hospitals, that are smaller than us. There's health systems like us we're right at the $2 billion market cap right. And then there's, as you mentioned, the Cleveland clinics of the world, the Kaiser's Right. What's great about the Lean Six Sigma approach and the strategy and application within health care is you can scale it at every level, right. The approach doesn't change, right. What I love about the Dominican approach, the business analytics that we tie to it. If you stay true to the approach, it works at a standalone surgery center all the way up to the great big Cleveland Clinic or even a Kaiser Right, because it's that core approach and competency that you apply, whether it's one hospital or 400 hospitals. And I would tell you, you're right, it's the most condensed and competitive market in the country, for sure, and we service, directly or indirectly, almost 3 million of the 10 million lives in the LA County service area, right. So when you look at PIH, we have Kaiser all around us, we have Hope to the south of us, we have Cedars downtown and west of us, but when you're talking 10 million lives in the LA County area, there is opportunity for all of us, you know, right, the bigger ones to us, the smaller ones to us and definitely us to better optimize our clinical operations. Right, because, as you mentioned and you said it, the margins are getting tighter and tighter and even in the negative range for some. We know that there's some legislation and there's different administration in play and we all fight for that Medicaid, medicare business. Right, because it's so prevalent in our area of operation. So what's going to happen when, maybe, that payment goes down or goes away? Right, and now we're going to be more reliant on how do we stay profitable, gosh? Do we have the right mix of the commercial payers? Right, gosh? Do we have the right mix of the commercial payers? Right? So you're going to anyway, if you're not focused on now, you're going to be eventually asking someone like me hey, how do I avoid cost? How do I save money?
Speaker 1:And then I want to add on this one piece you mentioned it's great we're regulated environment. What we've been able to do at piH Health is we're proud of the fact that we have not diminished or taken away any quality standards or regulatory compliance standards and we still delivered financially all of our projects. So to date, knock on wood. We've been able to coexist with the highly regulated, high expectations of quality. We have the same, if not better, quality outcomes. And what are we doing different than 10 years ago, before I got here? We have a better bottom line and anybody can look online in the public information and they can see that. My organization for sure can back up the work we've been doing and that's coming from some of this process where obviously our revenues grow. But it's that partnership. Together we're really in a great spot right now.
Speaker 3:Yeah, I don't know what your patient mix is, but I think that nationally, about 60% of the patient mix is Medicare Medicaid and 30% is private insurance and the other 10% is self-pay or no pay. And with the attacks on Medicaid especially being put out there, that means that that 60% you know the biggest blob of money that you're getting is going to be impacted and it's going to be really a tremendous threat to many organizations. And you're already on. You're doing the right things, brother, that's good yeah.
Speaker 1:Yeah, no, and and and you're. You're absolutely correct. You have to be who's ready for when the dam breaks those that were strengthening that that dam, and those that knew eventually that could happen, the ones that wait, that just tread water or say, hey, we're going to focus on other things when that dam breaks. If it does, they're going to get swallowed up. I'm trying to position this organization to be as strong as possible. We are strengthening that dam because we know the water we're holding back.
Speaker 1:It's changing, as you just mentioned right, and so we want to be able to weather the most extreme outcome of that the dam bursting or we want to be able to weather, hey, we got to be stronger here because healthcare is so critical to the population, to the country. It's recession-proof, as you know right. There will always be jobs in healthcare, but we got to be smarter about how we spend our money. We got to be smart about how we take care and use that money and, ultimately, we got to be better, collectively and aggregately, to make sure we keep up with the clinical needs and outcomes and the regulations. They'll always be there within our industry. That is the one thing I tell my PepsiCo military peers and network. The one thing in health care that we don't have that complexity in the United States I came from is it's highly regulated. It's highly regulated.
Speaker 3:Well, chico, it's been great having you on the show. You know, the one thing that I tell people this that there was one rule of thumb that I learned from the Marine Corps the way you judge people is this what I want this person to be in a fighting hole with me when things were happening.
Speaker 1:And.
Speaker 3:I'll tell you what, brother, I'd be happy to be there with you.
Speaker 1:Likewise 100%. And you're right, you can't make that call when you meet someone. And I feel that same way about you and you know where your heart's at. I love this podcast and where my heart's at when we were part of the Marine Corps or Navy, when I was part of PepsiCo, it was always about the greater good, right and supply chain.
Speaker 1:And I tell young folks this when I'm asked to mentor them or talk to them. I tell my kids this what I love about supply chain like why supply chain right? And I tell them, no matter what organization you have, no matter what they're selling or what they're doing, there's someone like me, at a different level or bigger or smaller, that's in their organization. That's in their organization. So, no matter what organization you're part of, if you're a supply chain professional, know you are as important as whatever they're selling or whatever service they're providing. And so that's what I love about my time in the Marine Corps as important.
Speaker 1:As you said it right, we had to make sure that the beans, bullets and band-aids were there and sometimes carried on the back. Pepsico hey, we're not going to be PepsiCo tomorrow unless we're better amongst the whole P&L and healthcare. My organization is specifically VAL and I'm hoping for the broader function and I know there are folks out there that are doing what we're talking about today and probably even better in some areas, because I'm always looking out to learn is just to make a better healthcare supply chain and it's podcasts like this the Bellwether Foundation for that great honorary distinction. It just helps me, gives me more opportunity to really talk about what I love and what I wake up and really run to work hoping to do.
Speaker 3:Well, chico, you certainly are into what you do, and that's great. I think if I were out there in a small to medium-sized supply chain, I would be listening to what you were talking about and if I wasn't already doing it, I'd call you up and find out what I needed to do to go about getting started. So thanks for being on the podcast. It's been a pleasure having you here and we'll see you again soon. Take care, god bless and simplify.
Speaker 2:That's all we have for today. As always, don't forget to subscribe and connect with us online, where you can find all of our episodes. If you have a topic you'd like to discuss or would like to be a guest on the show, you can reach out to Fred directly at fcrans at stongecom. Thanks for tuning in.
