Research

Trust: The steel in effective health sector supply chains

 Trust — or the lack of trust — between suppliers and providers is an issue that has increasingly strained the health sector supply chain. “The recent healthcare policy changes have put increasing pressure on all stakeholders in the health sector supply chain,” explains Natalia Wilson, co-director of the Health Sector Supply Chain Research Consortium at the W. P. Carey School of Business. “Money is tighter, quality expectations are higher. Suppliers and providers see that they have to work together. But how?”

2014-05-01

Trust -- or, more specifically, a lack of trust -- between suppliers and providers is an issue that has increasingly strained the health sector supply chain. “Trust has been a top conversation. We know there is an issue with a lack of trust between suppliers and providers, but how do we move toward better, most trust-centric relationships?” That question was posed by Eugene Schneller, co-director of the Health Sector Supply Chain Research Consortium (HSRC-ASU), a research group within the W. P. Carey School of Business. And it was addressed by the consortium co-director Natalia Wilson at the 2014 HSRC-ASU Annual Research Dissemination Conference. “The recent healthcare policy changes have put increasing pressure on all stakeholders in the health sector supply chain,” explained Wilson. “Money is tighter, quality expectations are higher. Suppliers and providers see that they have to work together. But how?” One important part of the answer: It comes back to trust. “Research has shown trust to be a key component of the buyer-seller relationship in the non-healthcare supply chain,” Wilson said. “When suppliers and providers have trust, it adds value for both parties. Trust enables the sharing of resources, knowledge, and information; allows for mutual learning; reduces uncertainty; and can lead to competitive advantage. In health care this should ultimately support improved outcomes.” So what factors build trust in the supplier-provider relationship? Answering that question was the impetus behind Project Trust, a multiphase study on building provider-supplier relationships in the health sector supply chain. The project aims to identify facilitators and barriers, as well as the organizational benefits, of good relationships. To begin, researchers developed a provider survey and a supplier survey that would home in on facilitators and barriers to good relationships. The survey centers on six facilitator factors - trust, information sharing, dedicated resources, commitment, contracting and collaboration - that were hypothesized to ultimately impact an organization’s performance. Four barrier factors - economic, clinical, dependency, and organizational performance were also explored.

Keys to a good relationship -- the suppliers’ perspective

The W. P. Carey School Project Trust team sent the survey to about 5,000 healthcare suppliers -- manufacturers of general medical and surgical supplies, pharmaceuticals, capital equipment, laboratory equipment, and physician preference items (PPIs). When asked the extent to which each facilitator factor supports a good relationship with their customers, suppliers ranked collaboration -- activities like meeting with the customer on a regular basis; jointly addressing quality, costs, and safety; and mutual goal setting -- the highest. Suppliers also reported that commitment, trust, and contracting facilitate a good relationship with their customers to a significant extent. Not all factors seemed to matter as much. “It is interesting to see the areas that were not reported to significantly facilitate a good relationship,” Wilson said. “Suppliers reported that activities like the customer providing product performance data or contractual clauses that support risk sharing only facilitate the relationship to some extent.” When asked about the impact of a good relationship with their customers -- “what these factors do for your organization” -- suppliers ranked clinical value, responsiveness, service effectiveness, cost efficiency, and financial viability as the most significant outcomes. In contrast, suppliers reported that a good relationship impacts demand planning and inventory reduction only to some extent. When asked about barriers to a good relationship with their customers, suppliers said the most significant barriers are “customers not recognizing that value is about more than price” and “customers not recognizing the contributions that products make to clinical outcomes.” Other potential barrier factors that respondents report as less significant include vendor management policies, senior leadership support, new models of care, and physicians in leadership roles. “We hear anecdotally that those are barriers to good relationships, but they didn’t come out as such in the survey,” Wilson said.

Keys to a good relationship -- the providers’ perspective

The W. P. Carey School Project Trust team also administered the survey (only slightly modified) to health sector providers -- individual hospitals, hospital systems/integrated delivery networks, and alternative care sites. When asked to what extent each facilitator factor supports a good relationship with suppliers, providers’ responses were very much in line with suppliers’ responses. Providers ranked trust -- supplier keeps commitments, works for the best interests of the relationship, wants your organization to succeed, and keeps your best interests in mind -- most highly. Commitment, contracting, and collaboration were also reported to facilitate a good relationship with suppliers to a significant extent. As was the case in the supplier survey, providers ranked dedicated resources as the factor that supports a good relationship to the smallest extent. Providers also said that information sharing -- supplier provides product performance and utilization data, advance notice of changes, and clinical evidence and economic bases for product choice -- supports a good relationship with suppliers only to some extent. When asked about the impact of a good relationship with their suppliers, providers -- like suppliers -- ranked responsiveness, cost efficiency, service effectiveness, and financial viability as the most significant impacts to the organization. Providers also ranked meeting the organization’s mission as a significant impact of a good provider-supplier relationship. When asked about barriers to a good relationship with their suppliers, providers cited lack of price transparency and physician preference for supplier product as top barriers. Like suppliers, providers described price/value misalignment as a barrier to good relationships. Wilson explained, “One of the barriers reported by providers was that the supplier doesn’t recognize the importance of price in consideration of value; the supplier says that the customer doesn’t recognize that value is more than price.”

Improving the supplier-provider relationship

While the consortium team has only begun their analysis of the survey data, Wilson sees a number of interesting comparisons between what suppliers report as significant facilitators and barriers, and what providers do. “Both the suppliers and the providers listed the same facilitator factors (though in different order) as impacting a good relationship to a significant extent,” she explained. Barriers, on the other hand, were very different between suppliers and providers. Wilson said, “There is clinical/economic tension that seems to be underlying a lot of these issues.” The reported outcomes of good supplier-provider relationships were similar for both suppliers and providers. Wilson explained, “When we look at organizational impact of having a good relationship, the same benefits topped the list for suppliers and providers -- responsiveness, clinical value, cost effectiveness, service efficiency, and financial viability.” So the benefits of good relationships between healthcare suppliers and providers -- benefits that accrue to suppliers, providers, and patients -- are clear. And now, with Wilson and her Project Trust team diving deeper into the data, the path to those good relationships will be clearer too.

Health Sector Supply Chain & Strategic Management Supply Chain