How Allina jumped 12 spots in Gartner's supply ranking

After securing a win, Tom Lubotsky, supply chain vice president of Minneapolis-based Allina Health, is looking at the auto and retail industries to inspire new metrics. 

In December, Gartner's annual ranking of 25 healthcare supply chain teams named Allina Health No. 8. The previous year, it was No. 20; the 12-spot leap was the biggest improvement on the 2023 list.

Mr. Lubotsky told Becker's he felt "delighted" by the recognition but said the achievement also highlighted "new avenues" for growth. 

"Last year, we spent a lot of time on what other industries like auto and retail already do; it's a measurement called 'on time, in full,' or OTIF," he said. "This year, we are actually going to isolate a couple different suppliers that represent a high level of spend at Allina and look at those OTIF rates. [Then] we'll begin to say, 'What's the level of improvement we need to work on together to make sure that 'on time, in full' rate improves?'"

Currently, that rate is 72% across all of Allina's suppliers. His goal is to increase that closer to 95%.

As Allina chugs along with five-year goals and manages about 300 back orders daily, Mr. Lubotsky listed four reasons for the achievement on Gartner's ranking:

1. Environmental, social and corporate governance

Allina's supply chain team is focused on driving down waste and greenhouse gas emissions, plus increasing its spending with diverse suppliers. The system's progress in long-term goals helped bump Allina in Gartner's ranking, since the research and consulting firm increased the ESG metric's weight from 5% to 10%.

Its goals by 2027 are to spend $100 million with diverse, local suppliers. In 2023, that figure was $23 million, Mr. Lubotsky said, and 2024's goal is $45 million. 

For sustainability, Allina plans to decrease its greenhouse emissions by 50% before 2028. To keep pace, this year's objective is to reduce emissions by at least 7% and use 6% less energy. 

2. Stamping out clinical variation

Most health systems' supply chain departments are working to minimize clinical variation, and Allina was at first stumped on how to quickly multiply one-on-one conversations with physicians about their individual spend and the system's preferred supplier agreements. 

Then came DOCSI, a startup software company founded by a former Allina Health surgeon. DOCSI's product, named after the company, collects and visualizes data on operating room device spend. From there, it personalizes a dashboard for each physician and sends the information to physicians' phones. 

"It really helped us tremendously transform the one-on-one discussions to addressing many many surgeons all at the same time," Mr. Lubotsky said. "That saved us millions of dollars."

3. Strengthening relations with suppliers

Another project is stronger relationships with suppliers, which is tracked through four stages: transaction, collaborative, strategic, integrated. 

"We have an inherent belief that bigger value can be brought forward by our relationship management development model with our suppliers," Mr. Lubotsky said, adding the importance of transactional efficiency with Allina's two main suppliers, Medtronic and Owens & Minor. 

4. Operating model and talent management goals

Within the next 60 days, a new governance structure will be deployed as Mr. Lubotsky proposes a "spend under control for non-labor" operating model. 

"My team doesn't necessarily do all the contracting across all of Allina — there are other segments that do that," he said. "We want to bring that all under central process standardization so we have a clear approach and management around that spend."

Non-labor spend currently accounts for 33% of the system's net operating revenues, and that percentage will likely grow, according to Mr. Lubotsky.

Another goal is talent management and engagement, including mastering demand management.

"In other industries today, this is commonplace. You tell your suppliers, 'How much am I going to be needing of your goods over the next three years?' Healthcare doesn't do that," Mr. Lubotsky said, laughing. "We never have."

Copyright © 2024 Becker's Healthcare. All Rights Reserved. Privacy Policy. Cookie Policy. Linking and Reprinting Policy.


Featured Whitepapers

Featured Webinars