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Creating a Demand Driven Healthcare Value Chain

A few thoughts & questions to stimulate thinking for a

Demand Driven Model for Healthcare:

  • Need to provide downstream visibility to improve efficiencies and reduce costs
  • Need to capture tracking information throughout the distribution channels
  • Need to provide more insights on delivering value to clients (draw the entire value chain closer to the client)
  • Manufacturing need to improve their efficiencies
  • Distributors need to better understand demand and how to respond to it
  • Need to create joint value with our trading partners
  • Pressure from the retail pharmacy chain to drive max efficiency in mfg’s delivery
  • Mfg’s need better data management, need to better understand customer demand and react with more agility to meet  customer demand
  • Mfg’s are pushing for direct distribution system (looking to unlock the data from distributors)
  • Moving away from speculative model to more of a predictive model for demand planning
  • Cost & profit, data & accuracy are all at disjointed cross-roads between the members across the value chain (mis-aligned objectives)
  • Basic distrust between the various partners (discussions always require lawyers…need to move past this)
  • Time to evolve the healthcare value chain

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  • Need to develop a value chain view by all parties with a focus on the customer
  • Same evolution took place years ago in CPG industry and now look at the level of cooperation that exists
  • Look at how the CPG partners have aligned their Cost, profit, data & accuracy of information.
  • Need to connect the demand side with the sales & operations planning across value chain members
  • Begin thinking Outside => In (start from customer and work backwards)
  • Companies will need to improve collaboration amongst themselves
  • Companies are paying more attention to the transactional instead of strategic aspects of collaboration
  • Information sharing is key !
  • Mfg’s are becoming much more sophisticated at delivering services
  • Distributors are moving towards more of an information brokering capability
  • Look at Annheiser-Busch and their advanced information mgmt capability
  • P&G and Pepsi are also tier 1 models to emulate
  • Inability to predict demand impacts perfect order performance, capacity utilization & supply chain costs
  • Need to look at value chain using Outside-In metrics to measure performance
  • Deep intelligence provides an ability to create demand using anticipatory capabilities
  • Hospitals modeling their supply chains after the CPG retailers (grocery chains)…

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  • Where do you think your company is in the Healthcare Value Chain Maturity level ?
  • Are you jointly moving (orchestrating & collaborating) markets with the members of your value chain or are you on the other end where you are reacting to your market & distribution channels (silo model of information exchange) ?
  • Need to move focus from Products to Services to achieve a more consistent balance
  • Need to leverage data and downstream information (from distributors) so you can determine how to optimize your percentage of perfect orders (migration to category management ???)
  • When do you focus on our customers as part of our future end customer ??  (requires collaboration with our downstream partners).
  • How often do you forecast demand ?  (monthly, weekly, daily) ?
  • Again, reference the CPG model which does an excellent job of demand forecasting.  Need for more real-time data to provide On Demand forecasting and supply chain management.
  • How quickly do you need to “sense” demand changes ?
  • Need to focus outwardly and move away from your inward focus.
  • Perfect Order Rate is Directly Proportional to your ability to reduce the time lag in forecasting & reacting to Demand (where reacting = agility).

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  • Establish downstream repositories for Sales Data to create insights
  • Establish collaboration and sharing of inventory and distribution data
  • Are you willing to pay more money for the additional data (and associated services) from the downstream value chain members ?
  • Need to re-purpose the monies for ERP to address Sales & Operations planning
  • Need to re-purpose these monies for aggregation & analytics to support Sales & operations planning
  • Need to leverage the key metric of S&OP driving success of new product launches + Supply Chain Efficiencies (a.k.a. Demand Planning).
  • Need to drive joint value creation across the company and eventually across the value chain.  S&OP are the right team to drive this value creation.
  • Again, let’s shift the focus from Inside out to Outside in (ERP isn’t the driver…its’ the Customer !)