Exploring Procurement and Supply Chain Advantages in Healthcare — An Air Carrier Analogy

My colleague Tom Finn recently penned a highly thoughtful piece exploring the relevance of airline supply chain chains to healthcare supply chains and strategic procurement decisions within them, which historically, have largely been based on local preference rather than any type of standardization. The post itself really got me thinking about the implications of SKU and parts standardization in general across all of procurement and how despite all the strategic sourcing programs we inevitably deploy across indirect (and MRO) related areas – not to mention direct spend, where such focus is needed in the design engineering stage -- and how such efforts quite often erode as frontline users go back to their old behaviors and suppliers find ways of circumventing the system.

Here's Tom's analogy in the airline industry marketplace:

"Legacy carriers are at an extreme disadvantage when compared to newcomers because they have the added expense and responsibility of managing maintenance and repair for too many different types (manufacturers and models) of various (aging) aircraft they have acquired over time. Not only does each aircraft model have its own replacement part program, but each program requires a different set of maintenance and engineering skills, wear-parts are inspected and validated differently and the maintenance certifications required to even qualify to work on a particular aircraft are unique from model to model, sometimes from year to year."

The newcomers hit the ground with aircraft selected based on a business model that optimizes load capacity while minimizing supply chain expense. The new carriers would ideally like to feature one aircraft, one parts stream, one type of maintenance program executed by one qualified type of maintenance engineer. This allows them to get very tight with one manufacturer with which it can collaborate to further reduce maintenance and replacement costs over time. As said, that's the ideal, but from a risk management perspective, it's not always practical. Based on how routes get allocated and how historically dependable passenger demand across those routes generally are, newcomers can almost back their way into an optimized business model -- loaded with competitive advantage relative to the established guard."

Check out his whole story to understand the lessons learned and key takeaways pertaining to healthcare supply chains if you're interested. But on a more generalized procurement basis, I think Tom's point raises a great question: what are you doing in your job to not only drive to more standardized requirements across as many SKUs as possible, but to implement and manage such programs on an active compliance basis? And like the airlines, make adjustments as needed (e.g., the equivalent of flex -- up or down -- capacity in the form of regional jets) under select situations?

- Jason Busch

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