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Archives for July 2010

Transforming the Health Care Industry’s Supply Chain

By Herb Shields | 07/23/2010 | 2:17 PM

Last evening I attended a very interesting panel discussion presented by the Consulting Roundtable of the University of Chicago Booth School of Business.  Most of the Roundtable programs are open to anyone who is interested.  Health care being a hot topic, this session was well attended by many health care professionals, and industry suppliers and consultants.

 

What I heard had much to do with the supply chain and business processes in the health care industry and that is why I thought that DC Velocity’s blog readers might also be interested.  Several big supply chain related themes emerged:

 

  • If the panelists fairly represent the thinking within health care, they are focused more on preparing for change that they characterized as inevitable, rather than trying to undo the law that was passed.  It seems to me that the health care industry is at a similar point in improving its competitiveness as the consumer goods industry was in the 80’s when Wal-Mart began to force a lot of fundamental re-thinking, process improvement, and cost reduction.
  • Consolidation has begun with respect to hospitals, physicians’ practices, and related care providers and this will continue.  However, the health care management, payments, etc. systems are fragmented and non-compatible; so at some point, for better integrated and more portable health care, more unified standards are probably going to be legislated.
  • From an Information Technology perspective, there are too many different systems and few with an end-to-end solution.  Here’s a quote from Jay Anderson, VP Quality & Operations, Northwestern Memorial Hospital – “We don’t know how to provide care in a connected world.”  Transparency of information through the health care process is and will be a challenge.
  • The health care legislation that was passed defined the reform that will occur related to heath insurance.  Payment reform and care reform have yet to be defined.
  • “Consumers expect a retail-like experience when dealing with health care providers.”  This is a statement made by Elyse Forkosh Cutler, VP Strategic Planning and Network Development, Advocate Health Care.
  • Suppliers to hospitals and other care providers will have to find ways to lower costs.  How will pharmaceutical companies and other suppliers react?
  • Physicians will likely be paid less for many services.  What will be the result?

 

As the last two points indicate, there are many unanswered questions on this subject.  It will be interesting to see how it plays out since all of us are consumers of health care services.

 

If any reader is interested in more information, I will be happy to try and respond.  Here is a link to the Consultant’s Roundtable home page http://www.chicagobooth.edu/alumni/roundtable/consulting/

Wal Mart - Dominant in the U.S. and Growing in Chicago

By Herb Shields | 07/06/2010 | 5:37 PM

 

Wal Mart was in the headlines twice in Chicago last week.  Locally, the City Council of Chicago approved the second Wal Mart store within the city limits.  The store will be built on an abandoned industrial site on the south side of Chicago.  This decision was made after several years of resistance from labor unions and others who felt that Wal Mart did not pay its workers enough and was anti-union.  The need for jobs and the desire to bring a modern store with grocery and household staples to areas of the city that had no major retailers finally prevailed.

 

The first Wal Mart in Chicago was opened several years ago.  It sits on the site of a factory that originally produced cans when it was owned by Continental Can and then was bought by Helene Curtis. Helene Curtis used the building as a warehouse and then a factory producing anti-perspirant products sold to Wal Mart and other retailers. Since I spent almost 12 years working just down the block at another Helene Curtis facility, I am very familiar with this Wal Mart’s neighborhood.  Other major retailers have joined Wal Mart – there is a Home Depot, CVS, Menard’s, and an Aldi grocery within a few city blocks.  The expectation is that the next Wal Mart will attract other retailers in similar fashion.

 

The second headline last week was that Wal Mart continues to dominate the list of top retailers in the U.S.  The National Retail Federation reported that Wal Mart had 2009 sales in the U.S. of $304.9 billion followed by Kroger at $76.7 billion, and Target at $63.4 billion.  Wal Mart generated almost as much revenue as the next 5 retailers on the list.  It does not take much of a crystal ball to imagine Wal Mart achieving $1 billion a day later in this decade.

 

Wal Mart has become 30 – 40% of almost every category of consumer goods that it sells.  I worked for three different marketers of consumer goods through the 80’s and 90’s and witnessed how they adapted to Wal Mart’s approach to supply chain management and pricing philosophy.  I cannot say that I agree with everything that Wal Mart does, but the resulting dominance is impressive.  Every consumer products supply chain is more efficient and delivers lower cost products as a result of Wal Mart’s leadership.  Especially in the current economy, consumers vote with their wallet. This makes competing with Wal Mart that much tougher.

 

We have all heard some version of this saying:  “Nothing goes up forever.”  If you look back several decades at the list of the leading companies in the U.S., there have been lots of changes and missing names.  What innovation in retailing might drive a competitor to challenge Wal Mart in terms of scale?  Let me know if you have an answer.

The opinions expressed herein are those solely of the participants, and do not necessarily represent the views of Agile Business Media, LLC., its properties or its employees.

About Herb Shields

Herb Shields

Herb Shields has run Chicago-based HCS Consulting since 2000, helping clients across multiple industries and in higher education improve their supply chain strategy and execution. Shields has more than 30 years as an operations executive for capital equipment, automotive, electrical machinery and consumer products companies. As vice president of materials management at consumer goods company Helene Curtis, Shields led the supply chain organization that helped Helene Curtis win "Vendor of the Year" awards from Wal-Mart Stores and Target Corp. Shields has a B.S. degree in Electrical Engineering from Clarkson University and did graduate work in business at Bowling Green State University.



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