I interviewed Ashok Muttin who discussed How the Healthcare Supply Chain Lags Other Industries and How It Can Be Improved?
It’s great to speak with you again, Ashok. This is the second interview we’re doing today. The second topic is how the health care supply chain lags other industries and how it can be improved. My first question is: How does the health care supply chain differ from other industries?
Dustin, it’s good to speak to you again, and thanks for the opportunity. If you really look at supply chain in the health care area and if you look at the supply chain in other areas; let’s just take Apple as an example. Everyone agrees that Steve Jobs was a visionary and he brought us all those products that revolutionized the way we listen to music, communicate, so on and so forth. Obviously, Jony Ive’s design capabilities for Apple products. If you really look at it, it’s Tim Cook who was the COO and the head of supply chain at that point in time who really made sure that the products that were designed by Jony Ive got manufactured to the highest standards that Apple was expecting, they reached the shelves in time, and they reached the hands of the consumers at a price point that they could afford or they aspired to buy. If you didn’t look at the amount of importance that’s given to the supply chain in other industries, health care has lagged tremendously behind in terms of the people, the process, or the technology.
Obviously, there is a difference between a supply chain in a manufacturing organization as a supply chain in the health care in the sense that in health care, there is a human element involved, so one has to be very careful about the decision that one makes; it’s not just replacing one nuts and bolts with other nuts and bolts. Having said that, health care has continuously underinvested in all of the three departments: the people the process, and the technology. As a result of which, they have left a tremendous opportunity on the table. Considering that 30 or 40 percent of the hospitals’ spend is in the materials, there is a great opportunity for health care to invest and take the right approach so that hospitals are being profitable, and, by being profitable, they can serve a larger portion of the people, and, hopefully, the savings that they generate can actually be passed down to the recipient so it can become a win-win situation.
What are the challenges and what can they do better?
The health care industry is facing a tremendous amount of challenges, as you can see, there are a lot of structural changes that are happening, new rules and regulations that are coming in, Obama Care act, pay-for-performance. All of these things have created a huge challenge for health care. My personal opinion is that we’re going to see more changes happening in the health care area in the next 5 years compared to the past 20 years. What they could do is look at it not as a challenge or stumbling block, but look at it as an opportunity to range any of their processes and look at how the supply chain is being managed, use some of the best practices from other industries, and be able to deliver the required cost savings, as well as enhance the patient experience.
Why do you think they’re in the mess they’re in now?
Well, a variety of reasons. To be honest, * (4:48—unclear) supply chain has not been the co-competency in the health care area. The majority, as it should rightly be, that all the emphasis has been on the hiring the best physicians, hiring the best doctors, getting the best equipment in place so that we in the United States provide the best patient outcome to those who need it. As a result of which, somehow, the supply chain has taken a backseat. Also, there has been a lot of consolidation in the past couple years. When a merger or requisition activity happens, you end up with a lot of different processes, you end up with a lot of different technology, and so on and so forth. That obviously adds up to the care.
There are a couple of things I personally feel that supply chain could have done better. They should have been in the driver’s seat instead of being in the passenger’s seat. They could have taken control of the supply chain and managed it with the best resources, bring about the intelligence within behavior and use that intelligence to be able to actually guide how one goes about generating the cost savings in supply chain. That’s an area that I personally feel could have been done better. The last one is, somehow, the closed-mindedness of the supply chain committee themselves to a lot of newer technologies that are there, be that SAS, be that intelligence. If they were to invest in some of these things, I feel the returns could be phenomenal.
Can you talk about the future? What is the way forward for the health care supply chain?
I would think the future for health care is bright, and like a lot of people who think only that the gloomy days are ahead of us, there are obviously certain challenges that we need to keep in mind. Here in the United States, there are more and more Baby Boomers who are being added to the system, as a result of which, we will see our costs are going to continue to rise. What do you do to overcome some of this and be the supply chain of the future? One is that we should be able to embrace your technologies, your ways of thinking even though some of the things might sound different. The second thing I think is the GPO model has run its course. They have to look beyond that; they have to look beyond the GPOs and becoming self-sustaining and be able to run their own destiny. Definitely, I think some strategic investments in technology—be that big data analysis technologies that are way beyond what they have today, and if they were to invest in some of these things, they are basically creating an equal system, an equal system of supply chain which mirrors more of some of the leading examples that you have: Wal-Mart, Apple, we have General Electric, you have Procter & Gamble. These are all the companies that have created that reason, and I think by supply chain, by risking and taking already-concrete course, can become as cutting-edge or as forward-leading as some of those companies that I mentioned to you.
Thanks, Ashok, for sharing again this great topic.
Thanks alot, Dustin. Thanks for having me. It’s a pleasure.
About Ashok Muttin
Purpose Driven Entrepreneur Reinventing Healthcare Supply Chain