Hey there, Healthcare Supply Chain leader, I need your help. It involves benchmarking supply chain metrics, and it involves you. It doesn’t cost anything, and I promise you will learn something — and maybe teach something — in the process.
Developing and actively optimizing supply chain metrics across a health system is hard work. Benchmarking supply chain metrics is harder. Both are valuable and interrelated in a lot of ways. Focusing on health system metrics across your network and seeking constant improvement is usually the optimal way to go. We have written extensively and used our Hierarchy of Metrics shown below to help guide health systems.
That’s great. But leaders still want to know how they are doing compared with other health systems. The purpose of this blog is to share some insights from my four-year journey on health system supply chain metrics along with a call to action to engage in this important work with me in the “Drive for 30” submissions this fall.
Measuring Yourself with Other Health Systems
One of my first research notes at Gartner opened with this quote from the movie Caddyshack on golf and people’s desire for measurement.
In many ways, this is the situation in benchmarking health system supply chains today. Over the past four years, the main challenges have been two things. One, the specific definitions of a metric — strokes versus height in this example. Second, the ability to keep score with systems and data collection limitations getting in the way of even measuring end-to-end metrics at all. Often the data in end-to-end supply chain metrics comes from several different sources that may not be fully in supply chain’s control and must be extrapolated. The devil is absolutely in the details on these end-to-end, self-reported benchmarks and a process (including quality control) must be followed to get comparable data.
What we have also learned is that benchmarking is a highly valuable exercise. The health systems that lean into it learn a lot from the process and the results. Last year, during the height of Omicron and Delta surges, we had 16 health systems submit a streamlined six benchmarked metrics. We learned that these metrics could be calculated with consistency by most health systems. These benchmarks are shown below.
These benchmarks are designed to be end-to-end. They are not pricing benchmarks or transactional efficiency benchmarks available from GPOs or other vendors. These benchmarks are selected to get a macro view of supply chain scope and efficiency enabling trade-offs between cost of supply chain with total cost of patient care, capital intensity (inventory) and operational expenses. Over time, we intend to add a few benchmarks going deeper on service levels (hard for health systems to provide across even med-surg, med device and pharmaceuticals today) and logistics/operations personnel.
Our main lessons shared with the participants this year, with their own individual detailed reports, were that fully loaded supply chain expenses averaged around 36% of the operating budget of health systems. Inventory levels hovered around 46 days (up 50% from pre-pandemic levels). And operating costs of supply chain (people, space, technology to run a supply chain) represented around 2% of the total cost of supply chain. Within these simple three metrics, there is a lot to support better strategic planning and trade-offs in supply chain. It is the rare CEO, or even CFO, of a health system that can talk to these metrics – often underestimating the total cost of supply chain and inventory investment and over-estimating the operations cost of supply chain. Knowledge is power.
The bottom line is that metrics matter. Most health systems can get better at managing their own metrics to support the value supply chain delivers. Benchmarking is another level. By leaning into this project this fall, you can join other leaders seeking comparative numbers on these six key metrics that can help guide you on how you stack up while helping the industry as well.
If interested in this, please email me at eric.odaffer@gartner.com and we will get you rolling. No cost to participate — give your data and get a report back on your performance compared to your peers. We are looking for data from now until Oct. 31.
Eric O’Daffer
VP Analyst
Gartner Supply Chain
eric.odaffer@gartner.com
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