Part 2: Unlocking critical capabilities in supply chain through an operating model transformation
In Part 1 of our series, we looked at how supply chain is rapidly becoming a key strategic function across the health care provider ecosystem. Today, we discuss unlocking critical capabilities in the supply chain through an operating model transformation.
Only 38 percent of executives say they are very or extremely confident that their supply chain organization has the capabilities it needs today.[i] This fact is garnering significant attention in the health care sector, as more business leaders begin to understand the strategic significance of supply chain as a powerful way to impact the bottom line and prepare for the Future of Work. As a result, savvy supply chain executives should be focused on developing high-performing, adaptable teams to be able to create and deliver more-advanced supply chain capabilities and drive value. This often requires reorganizing the function from the top down through an operating model transformation, which we loosely define as ensuring the right skills, in the right place, in the right amounts, at the right time. Basically, you can’t drive innovative and leading-edge approaches through ineffective decision rights, structures that are dated, and a view of supply chain that is merely transactional.
To provide executives with an overview of what a supply chain operating model transformation might entail, this post touches on three topics: (1) supply chain capabilities needed in the future, (2) operating model components that should be considered in times of transformation, and (3) the factors that can make a supply chain transformation achieve the expected results.
Supply Chain Capabilities of the Future That Need to Be Developed Today
Much has been written about the Future of Work, but few supply chain organizations are actively preparing themselves. There are a number of game-changing capabilities, outlined below, that supply chain leaders should be building into their organizations now to align with disruptive industry trends.
- Adaptable Organization: With the rate of disruption in the health care ecosystem becoming exponential, it has never been more important for supply chain to adapt quickly moving forward. Becoming an “Adaptable Organization” is a fundamental shift in operating philosophy. It moves organizational structures from a traditional hierarchical model to a network of teams, allowing organizations to respond more rapidly to market needs. Supply chain analysts organized in an “analyst pool,” for example, could be flexibly deployed according to strategic priorities and in this way accelerate the execution of supply chain strategy.
- Digital Affinity: With the advent of cloud-based enterprise resource planning (ERP) applications (e.g., Workday, Infor CloudSuite, Oracle Cloud) and the continuous addition of emerging technologies (e.g., Artificial Intelligence, Robotic Process Automation), digital skills are rapidly becoming a core rather than a peripheral component of supply chain. New capabilities are required to not only implement digital solutions but also, more importantly, to maximize their value and integrate them into the complex supply chain network. Examples of these capabilities include a center of excellence for automation, artificial intelligence, programming, and adaptability.
- Service & Process Excellence: In today’s consumer-based market, patient care and service delivery models need to be reimagined. Starting with predictive demand planning and more intuitive user journeys, the patient experience needs to be newly envisioned and grounded in innovative, streamlined processes. As such, technology-driven process optimization, design thinking, and patient experience design are just a few examples of capabilities leading-edge supply chain executives are developing. Additionally, as care shifts from the acute setting to ambulatory, retail, and the home, supply chain service delivery should evolve from a monolithic supply chain structure to one that is more adaptable, responsive, and multidimensional.
- Robust Value Analysis: On the minds of many CEOs and clinical leaders is how to “improve the quality of care.” For supply chain, this means improving patient outcomes and reducing unnecessary clinical variation, which in turn could reduce cost. Value Analysis is at the forefront of driving this effort, requiring the ability to balance agility and making quick, data-driven (and often system-level) decisions with more strategic physician engagement. Effective Value Analysis requires a unique skill set, with the ability to influence behavior, tell compelling stories through data, and have executive presence.
- People & Change Leadership: At a time when many providers are lacking the supply chain capabilities they need, while the expectations of supply chain are growing rapidly, people and change leadership have never been more important! A collaborative, strategic, and proactive leadership team with a diverse set of skills and an ability to navigate ambiguity is needed in order to tackle the problems of today and to facilitate the changes needed to prepare their organization’s supply chain for the future.
Operating Model Components
To effectively activate the capabilities mentioned above and prepare for the Future of Work, the following operating model facets should be considered:
- Vision and strategy for supply chain should be part of and aligned to wider corporate strategy and should guide how supply chain functions are organized across people, process and technology dimensions. It is essential that the vision is communicated within and beyond supply chain and that stakeholders, including clinical and non-clinical leadership, are aligned and bought in.
- Capabilities in supply chain should be based on the supply chain vision aligned to the overall system strategy, and provide the skills necessary to achieve that vision. Leading practice should be considered in defining the forward-looking capabilities to ensure that the function sets up itself and its people for success.
- (Network-based) organizational design organizes the capabilities needed into a logical, network-based structure. It considers how many organizational networks should be in the department, how the various networks work together, and what level of resources should be dedicated to each network.
- Decision rights guide which roles are accountable or responsible for a decision scenario and/or action, and who should provide input and be informed. Refined decision rights enhance the
“adaptability” of supply chain and enable it to respond more quickly to changing demands. Changing decision rights, however, can be challenging. But decisions are what moves businesses forward—changing structure alone will not get the job done.
- Job descriptions should be standardized where possible to reduce administrative burden and enable HR in recruitment, compensation, succession planning, career pathing, and training and education initiatives.
- Talent strategies can help ensure that the benefits of a strategically aligned operating model can be realized. Shifting from one operating model to another may also include redeployment of existing resources, which requires diligent and thoughtful planning, communication, change management, and training. Supply chains have historically not focused on clearly defining career paths and attracting top talent as a “destination” function, but that is changing, and a continued emphasis on providing a path to the C-suite for supply chain is critical.
Transformation Success Factors
Operating model transformations in supply chain are complex and can fall short of expectations due to the intricate nature of supply chain networks and the large number of operating model components that need to be considered. However, actionable steps can be taken to improve the likelihood of success, maximize transformation benefits, and enhance the speed at which the intended benefits are realized. Examples of these include:
- Generating buy-in and confidence among leaders and involving stakeholders in decision-making processes across various organizational levels (e.g., corporate, regional, facility) within supply chain and beyond (e.g., finance, human resources, physician community).
- Establishing a cross-functional team early that continuously improves supply chain. This should bring together resources from HR, legal, finance, clinical areas, communication, change management, and supply chain to create a coordinated effort.
- Viewing operating model redesign as part of a larger supply chain transformation. Sustainable success in supply chain cannot be achieved through an operating model transformation alone. Supply chain processes and technologies should also be optimized, and each of these components should be continually assessed and iterative improvements made.
- Enabling staff through change management and training. Communication, training, leadership alignment, culture/behavior change, and data-driven tracking of user adoption levels are all critical to sustaining the value added through the transformation. The most effective transformations communicate effectively how the changes will improve the experience of the organization’s supply chain customers.
- Change leadership. Leaders need to energize, empower, and connect their team. They should co-create the mission with their team, cultivate the skills needed for change, and build collaboration networks to ensure continuous improvement.
In conclusion, it is clear that supply chain functions need to reimagine their operating models to set themselves up for sustainable success and prepare for the Future of Work. New and more advanced capabilities are needed, and they need to be established across several operating model components and through strategic and thoughtful change management. For further information on the Future of Work in Supply Chain, please read our upcoming article: “The Future of Work and Why Healthcare Provider Supply Chain Executives Cannot Ignore It.”
[i] Deloitte (2015) Supply Chain Talent of the Future: Findings from the third annual supply chain survey, accessed on September 13th, 2019 at: https://www2.deloitte.com/content/dam/Deloitte/us/Documents/strategy/us-operations-supply-chain-talent-of-the-future-042815.pdf