Portland-based Oregon Health and Science University is undergoing major transformation in its supply chain strategy, with a renewed focus on cost savings, automation and resiliency.
Mike McCaffrey, vice president and chief supply chain officer at OHSU, spoke to Becker’s about how the role of supply chain has evolved at the health system.
Editor’s note: Responses have been lightly edited for clarity and length.
Question: What are some of the current top priorities for supply chain operations at OHSU?
Mike McCaffrey: With our transformation right now, one of our main goals is increasing our capacity to facilitate cost savings for the organization through our strategic sourcing and value analysis teams. We do this by partnering with clinical staff and leaders as well as decision-makers in key service areas across OHSU to drive opportunities. Through these partnerships and with their expertise, we have collectively grown annual savings contributions from $3 million annually to greater than $20 million.
We also have a small effort around AI and automation as another part of our commitment to reduce what we call our “cost to serve.” We’re evaluating automation opportunities across our functional areas and are just beginning to evaluate opportunities for the use of AI to support operations. And we’re prioritizing what automation activities will provide the most value to ensure we are expanding in the right places for the right reasons. Our process automation committee, with stakeholders from supply chain team and IT, is chartered to intake, analyze, develop and execute process automation projects. To date, we have automated three highly complex supply chain processes, and six more are in development. This work allows us to scale our labor effectively and direct our resources to value-add activities.
Another focus is documenting our current productivity levels and matching those up to available benchmarks so that we can set appropriate targets that will help us attain our goal to ensure non-linear growth, a mandate set by leadership at the onset of our transformation.
One other critical area focuses on resiliency. As part of our transformation, we started a resiliency program this past year. An early step in that effort was joining the Healthcare Industry Resilience Collaborative, a nonprofit consortium for patient-centric supply chain resiliency standards and best practices. It has helped us catapult forward given the resources it has developed and the peer community of members that are learning together. HIRC helps us with resources to evaluate item criticality criteria, score our suppliers on whether they have resilient supply chains, and provide guidance on supplier resiliency measurements that we can include in our supplier selection process. Ultimately, our goal is to eliminate the risk of supply outages or shortages that can contribute to patent risk when not properly managed and we all know very well how fragile our global supply chain is.
We’ve also invested in the supply risk solutions tool through our GPO, Vizient, that helps us understand where disruption activities are happening. Say a flood occurs across the country that could impact a manufacturing site; the tool can give us more insight or earlier notice so that we react faster and minimize risk. And we intend to start evaluating some broader tools that would support things like decision support for inventory management and establishing product risk profiles to more proactively address items at risk to avoid low-stock or out-of-stock situations.
Q: Why did OHSU decide to partner with HIRC, and how has that impacted resiliency efforts?
MM: We joined HIRC because it brings our peers together, so we’re not going at this alone, and we’re able to leverage what others are doing. That’s one of the great things about the healthcare industry: We often are very open to sharing best practices.
An example of that is last week’s call talked about systems and tools that are available for various parts of resiliency, and it gave us a realistic picture of what’s out there and what can be done. Otherwise, we would be doing all that work ourselves.
It gives us access to some of the best and the brightest that are doing this, including major suppliers that are doing similar work to understand the environment upstream from a raw material standpoint. It just brings a level of expertise that would take years to create on our own. The fragility of our supply chain is an industry-wide problem, and participating in HIRC allows healthcare providers and suppliers to work collaboratively on solutions together, with perspectives from all sides.
Q: In what ways has the role of supply chain at OHSU evolved in recent years?
MM: It has really exploded. Honestly, we came out of COVID and we realized our teams can create more value.
We were an organization that really prided itself around service levels and that helped us earn deep trust within the organization. And as we came out of COVID, we realized that when we wrap our arms around the end-to-end supply chain operation and put the full concentration of our team on a core supply chain function, we could drive more value for the organization.
Of course this started with PPE during COVID but re-emerged during the recent IV fluid shortage as a result of Hurricane Helene. When we embraced control of the purchasing and inventory management decisions and provided accurate reporting, we could add tremendous value when partnering with clinical leaders who were leaning on us to make critical care pathway decisions based on true supply availability.
Through this work, our teams and the function have really propelled forward. What started with a business case and a strategic plan has resulted in exponential value creation. Support from leadership to bet on us has paid off and the partnerships are growing. We are committed to this work and it shows in our vision which is to bend the cost curve and to ensure that OHSU staff can operate at the top of their profession. We can achieve this by taking supply chain-related work off their plates and committing to doing it very effectively and efficiently.
Q: What trends are you watching in the healthcare supply chain that you think will define the next year or two?
MM: One of them is the use of AI in the supply chain. And I say that because the supply chain is obviously very process oriented, so it appears to be a strong ground for the use of AI. There are opportunities in contracts review, tail spend negotiations and even inventory management. This can help manage workload for staff, allow them to contribute more value-add activities and ultimately contribute to higher engagement.
