Healthcare Matters

While SAP’s acquisition of Ariba last week was big news for the software industry in general, it was not a headliner for Supply Chain Management (SCM) professionals in healthcare. There won’t be any major SCM process innovations forthcoming as a result of this deal. At least none that will be meaningful to healthcare. Ironically, when it comes to SCM software, these big integration plays are usually a step backward.

Lora Cecere, a former VP of Aberdeen and founder of Supply Chain Insights, eloquently refers to the general problem as the “Supply Chain Management Software Circle Jerk.” Regardless of what she calls it, her point is spot on.

When you read through the cycle presented below, it’s text book from a software development/release point of view. But it’s quick sand for SCM practitioners desperate to get their hands on the latest and greatest solutions. “Software company executives talk about big data, cloud, social, mobile and advancements in predictive analytics and then show the next version of Customer Relationship Management (CRM).” Lora refers to it as “bait and switch.” Of course, her point is that the big players talk a good game, yet routinely fail to deliver.

Circle Jerk:  A group discussion or activity between like-minded individuals that validates mutual biases or goals in a non-confrontational environment. 

Over at SpendMatters, Jason Busch recently posted a piece entitled:  “Unilever and Beyond –The Rise of Purpose-Built Procurement Applications.”  Jason talks about an emerging trend that describes how SCM professionals are starting to pay closer attention to “purpose-built procurement applications.” SCM professionals have learned about the inherent compromises of a multipurpose platform and/or the limitations of an enterprise system’s “sourcing module” and are starting to look at best in class point solutions and/or highly tailored custom solutions — or a combination of all the above (platforms, point solutions and custom solutions). They’re seeking advantage in the market through solutions that leverage what’s competitively different about their operation and more precisely serves the strategies of management.

I’ve gone ahead and cross posted excerpts of Jason’s story (below) because what’s going on in SCM practice at companies like Unilever is directly applicable to providers in healthcare. In the following example that Jason talks about –sourcing and managing transportation– I couldn’t help but see the parallel challenges faced by provider SCM professionals who desire to competitively source and manage their PPI on a direct contract basis.

If we look back at the history of spend management tools in the past decade, we’ve seen a constant march to sameness from providers. Far too many vendors have been racing in a functional parity derby, jockeying their applications horses to a type of sameness designed to be the 80% solution.

Of course, one of the problems in healthcare is that 80% of the spend categories may only represent 20% of the spend.

Some organizations are pushing their SCM departments to move in more advanced directions to build what I’ll call “purpose built applications”. I had the chance to listen in on a Unilever presentation earlier this year concerning their transportation management center, which got me thinking about the potential for more companies to demand purpose-built solutions that aren’t designed for the masses, but rather more advanced needs and requirements, many of which are often customer specific.

These are precisely the kinds of solutions that are the bread and butter of companies like BravoSolution. BravoSolution is not alone (Iasta, Procurian, CombineNet, The Advisory Board are all players), but BravoSolution was the solution provider in the Unilever example and it is now building these same kinds of sophisticated solutions for GPOs and major providers in healthcare.

Unilever identified that transportation spend would be a strategic category for their procurement and operations teams to manage more effectively. It represented not only a large spend area, but was “critical to good customer service” while enabling sales support, promotions and broader supply chain efficiency. The biggest challenge in the area historically, from a sourcing perspective, was certainly savings erosion. For one, awarded carriers often would not accept tendered loads and non-compliant carriers were often used. There was also a lack of savings because they had no consistent means of tracking compliance. Moreover, Unilever was always fighting a moving target — new lanes would emerge overtime as partners changed their networks, volumes would also shift based on production changes as well as demand, new business units would introduce additional complexity and new geographies would bring expanded challenges.

The example cited above might as well be a physician preference item (PPI). In short, there is no reason for healthcare SCM professionals to follow the same learning curve experience of other industries. For PPI, investing in purpose-built procurement applications, category-specific track and trace solutions, etc., is where healthcare professionals can escape the shackles of enterprise class mediocrity. A well designed purpose-built application could be fully integrated with all the other requisite best in class applications (e.g. track and trace, contract management, P2P, etc.) that are logically part of any comprehensive solution.

Enterprise systems have not served up adequate SCM capability. Best in breed application vendors have been the industry’s source of innovation. With computing environments getting increasingly “cloudy,” providers will continue to have numerous powerful SCM software options that promise a quick ROI.

—Tom Finn