Today, a substantial number of companies and organisations operating in different industries are focused on improving their service supply chain as its management has emerged as a significant competitive advantage. Giannakis (2011, p.348) links the leading companies in different sectors to effective supply chain management. According to Selviaridis and Norrman (2014, p.154), a supply chain is the informational and physical resources that are needed to deliver a service or a good to the final consumer. It begins with activities in the extraction of raw materials, processing, manufacturing, transportation, and storage. Therefore, supply chains are a crucial part of both local and multinational industries in healthcare, automobile, tourism and hospitality industry, financial services, public services and utilities among other enterprises. In recent years players in the healthcare sector have put more focus and are investing heavily in research for new and efficient supply chain management models for their service and product delivery. Zhou et al. (2011, p.334) state that if the supply chain does not work correctly in the healthcare industry, stakeholders will be deeply affected and the hospital is unable to offer its services. However, an improved system allows a higher quality service to the patients, affordable drug consumption costs, and reduced errors and mistakes in drug administration. This present paper focuses on service supply chain in the healthcare industry and offers recommendations for the improvement of the system through the SCOR model.
Healthcare Service Supply Chain
Hospitals are an important part of the health service supply chain and a number of activities that are directly related to providing healthcare take place in these facilities. There is a diagnosis, intervention, prevention, preparation, rehabilitation, and maintenance activities. Furthermore, there exist several support activities that help in the delivery of the main activities. Meijboom et al. (2011, p.170) list infrastructure, hotel business, human resource management, research and technology development, and supply chain management as some of the support activities. Therefore, the supply chain is one of the critical support happenings that take place to ensure medicine, drugs, and other medical materials required in a care setting arrive at the patient from suppliers and warehouses. Sampson and Spring (2012, p.6) assert that the service supply chain in the health care delivery system is large and complex as it involves multiple stakeholders who are mostly independent such as doctors, employers, insurance companies, hospitals, and regulatory agencies. The objectives and economic structures of these players differ in some ways making the system more complicated. According to Fayezi et al. (2012, p.564), matching the supply to demand in the system is very difficult as the need for services is determined by available treatments, technology, and financial considerations. In addition, the decisions and preferences of one party impact the options that are available to the other stakeholders and the costs of products and services.
The healthcare supply chain begins at the manufacturer of medical products and equipment (RevCycleIntelligence, 2017, online). At this step, there is the production of items before they are transported to a distribution centre. Kleemann and Essig (2013, p.192) explain that a health facility can either purchase inventory directly through the distributor or manufacturer depending on the type of product or equipment required. There are other options such as the signing of a contract between the hospital and a manufacturer through a group purchasing organisation who conduct the transaction on behalf of the institution. The next phase involves sending the medical products to the care centre’s warehouse or drug store where the products are stocked with inventory for patients and care providers. Al-Saa’da et al. (2013, p.47) recommend that the facility must ensure that patients have continuous access to essential products while providers are provided with basic medical products. In the healthcare supply chain, there is involvement of regulatory agencies and healthcare payers who comprise of insurance companies. These firms are responsible for determining whether a medical resource is appropriate for patients and the providers are compensated where they use it on health care consumers.
Figure 1 Source: Smith et al., 2015, p-4
Heath organisations experience challenges of the increased cost of health services and customer dissatisfaction which have forced them to adopt service and product supply chain that meets these demands. Also, the new system adapts to the continuous changes in technology to increase the competitive position of the organisation and improve customer satisfaction.
Supply Chain Operations Reference Model
Lenin (2016, p.137) states that the supply chain operations reference (SCOR) model developed by the supply chain council helps address, improve, and communicate critical supply chain management decisions within and outside an organisation to include customers and suppliers. The framework highlights the business processes that are needed to satisfy the needs and wants of a customer. In addition, SCOR model defines all the relevant processes and makes available a basis for improving the practices. Zhou et al. (2011, p.332) list plan, source, make, deliver, and return to the five main areas that the framework focuses on in the supply chain. The SCOR model gives an idea of how a health care facility can be able to advance its supply chain to satisfy the demands of the customers. The organisation understands how the steps in the model apply to the different suppliers in the chain, the company, and customers.
In the healthcare service supply chain one of the main challenges is the management of the records on medicine and drugs. Therefore, an organisation should utilise the different software solutions that are accessible to inventory management. Furthermore, they should employ available techniques for record control in order to improve their performance. This system emphasises on costs, usage, or sales of medical products and this approach would help in stock keeping to ensure there is no overstocking or understocking. The use of SCOR model allows sharing of information between different players and this allows the healthcare supply chain to be efficient as the demands of the customers are shared easily to the suppliers, manufacturers, and distributors. A healthcare organisation should focus on gaining full control of the transportation costs of medical products and equipment by considering factors such as reliability, flexibility, pricing, and tracking facility before they make agreements with freight forwarders. Fayezi et al. (2011, p.567) state that making a good negotiation with the suppliers can have a considerable impact on the services as there is a significant decrease in the costs. This practice helps in the efforts to control the costs of medical services and products without affecting patient safety and care
Health facilities should also consider lead time variability when they are considering delivery time for medical services and products to their customers. Lenin (2016, p.141) states that this technique helps reduce inconsistency in lead time due to issues such as stock outs among suppliers. The organisations will be able to match the demand and supply of healthcare services and products more efficiently. Finally, another recommendation is implementing a warehouse management system that would help streamline several operations to ensure medical products are available to patients on time.
In conclusion, this article utilises the supply chain operations reference (SCOR) model to help improve the efficiency of a healthcare supply chain. The healthcare sector is facing several challenges as they make efforts to deliver safe and quality care to the patients. The organisations have to adopt a service supply chain that meets the demands of the customers while reducing the cost of health services. This study has provided a number of recommendations that care facilities and providers should employ to optimise their operations and help the organisations attain a competitive advantage over their rivals and achieve higher customer satisfaction levels while making substantial profit margins.