The relationship had barely moved past the honeymoon stage when healthcare leaders and the nation’s supply chain began to see the early rumblings of disruption and the immediate impact of illness throughout the country. There’s little doubt that a pandemic could challenge any customer-distributor relationship, but in the healthcare industry, with its supply chain facing serious instability, even the best of bonds was tested.

This is why many systems—and healthcare companies like Medline—continue to demand more from these partnerships, going beyond the transactional to something more cutting edge: a value-based program that, once scaled, could benefit all of healthcare supply chain by its example. The more there is a shift from “wash, rinse, repeat” to partnerships that are more proactive, where each side has something to gain and something to lose from the relationship, the more positive the impact to the healthcare supply chain as a whole.

Traditionally, most distribution agreements are not necessarily two-way streets, where each party has equal say at the table—whether it be from processes, KPIs, visions of future strategy, etc. They’re usually more “cut and dry,” according to Nick Trzeciak, Administrative Director of Supply Chain Logistics at Stanford Medicine. From the beginning, it was clear that Medline and Stanford Medicine would challenge the status quo, looking at ways they could work together to leverage RFID and best in class processes to partnering together on Stanford’s new facility opening—which was the first challenge in their immediate line of sight in early 2019.

The Stanford Medicine System consists of several hospitals including, Stanford Health Care, Stanford Children’s Hospital, Stanford Valley Care, and other affiliations and partners. The challenges Stanford was initially trying to overcome were those of reliability and sourcing—finding a relationship with a supplier that they felt would be more of a partnership. In January 2019, Stanford made a decision to transition away from their prime distribution supplier—a decision they did not take lightly, primarily due to the opening of the new hospital later that same year. By spring of 2019, Stanford had a formal kickoff and transition, with Medline as their new distributor partner. With the new hospital opening later that year, the immediate challenge became outfitting 824,000 square feet of new building. In a period of six months, Stanford developed an operating and business relationship from a workflow perspective, while stocking and ensuring the new building was outfitted with all the necessary medical supplies for patient care.

This all was an incredible challenge on its own, but even the beginning transition period was a bit unheard of in the industry—switching to an entirely new supplier and distribution partner in under 90 days. And while most of 2019 was focused on the new transition and the new hospital, everyone was excited for new initiatives for 2020. Yet two months into the calendar year and three months since the new hospital opened, the pandemic hit.

As Amanda Chawla, Chief Supply Chain Officer, at Stanford Medicine states, the entirety of 2020 became a dedicated response to the pandemic. Initiating changes to advance their supply chain and partnership had to be put on the back burner and really did not start to materialize until the latter half of the year, where Stanford and Medline implemented changes to address two critical areas:

1. Price accuracy and price assurance:
   1. For a system, having the correct contract pricing on both ends is instrumental in the foundational reliability of a distribution relationship. This involves:
      1. Verifying Stanford’s and Medline’s system communications
      2. Analyzing workflow improvements to Stanford’s procure-to-pay initiative
2. Improving product availability:
   1. The core focus of improving reliability in shortage management depends on having the proper processes in place:
      1. Managing day-to-day activities, such as:
         1. Overseeing the prioritization of backorders, recalls and how other market disruptions are handled
         2. Addressing cross-functionally across teams to determine product alternatives and/or other options

The strategy of clinically involved product substitutions is a key resiliency point for many systems during the pandemic, as most facilities or larger organizations did not have clinically equivalent substitution lists. Rolando Pansoy, Category Manager, Resiliency Team, Stanford Medicine, notes that Medline became an integral part of the substitution task force during the pandemic, helping to approve, by nearly 17%, substitutions for items that were impossible to get with the disruption in the supply chain. Because of this, Stanford was able to pivot quickly and source those alternate items directly through the manufacturers. In addition, freight costs also significantly dropped by 5%, because rather than reacting to the disruption, Medline was able to feed information to Stanford proactively about items that could be shipped direct from manufacturer—cutting out the middleman.

As Stanford moves toward being a more clinically integrated supply chain, clinicians play an important role, along with Stanford’s supply chain leaders and Medline, to provide clear direction on functional product equivalence and doing this as best practice, rather than as a quick-fix solution when a disruption is already underway. The decision making that comes within a more clinically integrated supply chain often requires intricate knowledge that historically has been lacking with typical supplier relationships. What Medline has done is to utilize several specialty sales force teams which work with local team members to help bring clinical expertise and supply chain knowledge to the clinicians and supply chain professionals at Stanford. This offers additional support with a myriad of staff clinicians who operate with the mission of bridging clinical gaps and are versed communicating product features and differences. This knowledge guides organizations through product conversions, which in turn helps to change the status quo. Product alternatives can be chosen with the reassurance that clinicians will get the right products, even if their chosen or legacy items are experiencing shortages.

The pandemic hit everyone in unexpected ways, and in Stanford’s case, it has prohibited them from hitting industry standard fill rates. However, they believe they’re in a much better position than they would otherwise be due to the transparency in their relationship with Medline. With respect to price assurance, they believe that their overall price assurance model has been managed very effectively between the Stanford and the Medline teams. And the proof of this lies in the data. Chawla mentions that their price assurance goal was around 97%, and when she last checked, they were around 97.6% with continued improvements every time she checks. Stanford owes this improvement to both the master data/analytics team and purchasing team that work on the “procure-to-pay” efforts.

What has also been streamlined are the so-called “hunting and gathering” processes that took so much time in the past. Now, through RFID-based technologies such as Helios, partners like Medline can provide real-time information to their partners. As the technology becomes more reliable and provides systems with visibility, they are able to better understand and collectively see the inventory value real time—where it is and where it’s moving and transacting throughout the supply chain from the point of distribution. Moving forward, Stanford would like to discover how RFID could initiate distribution inventory visibility at Medline to automated receiving at the point the product hits the Stanford deck and quality checks. As things come in, how does Stanford expedite that timeframe or what they call “dock to stock” or “door to floor”—getting products immediately where they need to go without having smaller stops within the process to help really ramp up operations overall?

Stanford’s use of this technology allows them to change and transform the way they operate within the hospital and provider footprint. The goal would be to increase the visibility upstream from distribution procurement to delivery to the provider. Everyone in the industry continues to talk in depth about data visibility, reliability and transparency. Helios and other technology platforms provide Stanford the unique opportunity to test the potential of what is possible.

Overall, the Medline-Stanford partnership has produced greater efficiencies in how Stanford orders and manages inventory, shortages and product substitutions. As Chawla notes, “The ability to be nimble, to engage in a way that truly transforms the way we operate, has been a core tenet.” There have been improvements on the procurement and payment side; and the price accuracy program that was part of the initial contractual effort has improved from an accuracy rate of 75% to around 97%, with continued growth.

Initially, some of Stanford’s goals with Medline revolved around stabilizing fill rates, revitalizing LUM programs, increasing price accuracy, focusing on product substitutions, and improving reliability in transparency and communication. But some of the goals also focused on integrating processes, including courier services and leveraging third-party logistics (3PL) strategies. Regardless of the program, a key concern was how Stanford would continue to have a better line of sight over everything. Both parties came to the table to develop an operational and strategic partnership.

With any partnership, there is a progression in development: “storming, forming, norming,” as Trzeciak likes to call it. He notes that Stanford and Medline have passed the initial storming, and the forming marks a new relationship; now they are in the “norming” stage.

Up to this point, Stanford, like many healthcare supply chains, has functioned in a very reactive way to the pandemic that has persisted and disrupted supply chain. Going forward, they’ve adopted the belief that everything they are working toward is about changing the healthcare supply chain for the better and as a whole—not just at Stanford. Most supply chains across the country still operate on an antiquated model with people picking things and moving things manually, and lacking reporting, transparency and inventory holding—all without even knowing what substitutions are in place. Many systems were caught completely off guard, and their distribution partners and other vendors weren’t ready for that type of impact.

Whether the relationship involves something as massive as outfitting an entirely new facility, dealing with the day-to-day challenges of a pandemic or providing overall supply chain solutions for everyday operational support, the basis of every good partnership is reliability and transparency. Do I have a reliable and transparent partner, so that my clinicians have the right tools and time-saving measures to care for patients? For Stanford, Medline’s role must, first and foremost, encompass that “reliability + transparency” in a larger, more uncertain industry. Not only should they be providing the right products, but doing so in a timely way that showcases their commitment to the needs of the clinicians, to the quality of the product—in a way that minimizes any disruptions—so that clinicians can continue to provide the best patient care.