Pressure to save costs in the supply chain is driving some Integrated Delivery Networks (IDNs) and Regional Purchasing Coalitions (RPCs) in the provider space to consider managing their own distribution of supplies through a consolidated services center (CSC). Although cutting out “the middle man” seems intuitive, Sedlak's Fred Crans notes in a two-part series in Healthcare Purchasing News that there are a multitude of inputs that must be considered before deciding to move forward with a multi-million dollar investment.
In the April issue, Fred explores the need for healthcare organizations to understand their purpose, operations/management structure, functions, and objectives for internalizing distribution. He also gained insight from a group of Supply Chain industry experts in healthcare to walk through many factors involved in the decision-making process. Among these considerations is whether subject matter experts exist within the organization who can achieve the same cost effectiveness of an existing third-party provider, and whether the business model is sustainable over the long term.
“My belief is that it is a hard model to replicate given the years of experience that Cardinal, McKesson, Owens & Minor, etc., for example, have spent fine-tuning a low-margin business,” says Jim Francis, chair of Supply Chain Management and chief supply chain officer at the Mayo Clinic. “The primary reason we have a distribution center is our main location is in Rochester, MN, and it is there for inventory management reasons/disaster and business continuity, not that we are experts in running a distribution center.”
Read the article here: http://digital.hpnonline.com/editions/z38o/0A148ky/1704-HPN/html/index.html?page=68
Read part 2 of the article here: http://digital.hpnonline.com/editions/z38o/0A148ky/1705-HPN/html/index.html?page=78