Increased pressures from healthcare reform and rapidly rising material costs are factors driving healthcare organizations to give greater priority to their supply chains. Most important, however, is the contribution that supply chain management can make to patient safety.

"In healthcare, your supply chain impacts life or death," says John Black, vice president-supply chain at ROI, the award-winning supply chain division of Sisters of Mercy Healthcare System, which operates hospitals and clinics in a seven-state area encompassing Arkansas, Kansas, Louisiana, Mississippi, Missouri, Oklahoma and Texas. "That is what energizes me about working in the healthcare supply chain space. I can help physicians and clinicians by making their jobs easier and I can actually help improve patient safety."

Sisters of Mercy pioneered the use of bar-coded medications in hospitals that are scanned at bedside, along with the patient's wristband, to ensure that the patient is getting the right medication in the right amount. As part of that effort, ROI created a repackaging center at its DC so that medications purchased in bulk can be broken down into individual units and bar-coded.

In addition to patient safety, supply chains help in cost containment efforts, says Black. Material costs in the healthcare segment are rising dramatically, he says, noting that an important study by the Strategic Marketplace Initiative suggests that material costs are rising twice as fast as labor costs. "In a service-oriented sector like healthcare, that is a very, very scary statistic," he says. "It means that at some point between 2020 and 2040 material costs will be higher than labor costs. That is a projection that gets the attention of healthcare executives and solutions are starting to be deployed."

One of the solutions that Black believes will have widespread implications is the adoption of unique identifiers for each product, similar to the universal product code prevalent in the consumer market. The same standards body that oversees the UPC program has a healthcare task force that is working on doing the same for healthcare products. "We believe that getting a common, universal number for all products is the future of the healthcare supply chain," Black says.

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