Securing the Last Mile of Supply Chain

Podcast Transcript

Will Morris:
Welcome to another Health Amplified, a Cleveland Clinic podcast. This is your host, Will Morris, and with me as always is Dr. Akhil Saklecha. Today, we have a unbelievable guest. She is the chief supply chain and support officer for Cleveland Clinic, managing a budget of over $3.5 billion for 18 hospitals across Northeast Ohio, Florida, and the United States. With us is Simrit Sandhu. Simrit, thank you very much for joining us.

Simrit Sandhu:
It's my pleasure to be here.

Will Morris:
So, obviously, supply chain people are saying, "All right, top of mind, COVID." What has the past five months looked like? And have you slept?

Simrit Sandhu:
Let's start with the best things first. I think my kids finally know what I do for a living. COVID put supply chain on the map. I think we can fully appreciate the fact that most individuals now understand the value of a robust supply chain. I think the last five months brought to light that the supply chain in healthcare is pretty fragile. We've globalized it with probably lack of complete visibility into lines of production, inventories, labor, and raw material arbitrage. And what we faced is probably a 15 to 20 times increase in demand per product and an inability to truly keep up to consumption patterns. So if you were to ask me what the last six months have taught me, it's taught me yes, we absolutely have an ability to reimagine our supply chain, but it's also taught us creativity and innovation in how we as a nation and especially us as Cleveland Clinic, have had to make do and done pretty well.

Will Morris:
And crisis is a wonderful opportunity at times to be innovative. In the reality that we have a fragile system, have you focused on what you need to do for Cleveland Clinic, thoughts about what the state or states need to do to address this, or at the federal level? Where do you think that ultimately the buck stops or is it a shared responsibility throughout?

Simrit Sandhu:
I think eventually the best answer is the shared responsibility you speak about. I think the answer is going to be a public-private partnership. I don't believe the federal sector or private individuals can do this alone. It is going to require a handshake and a true understanding of emergency and pandemic planning and a thoughtful approach to a global, national, and local supply chain. I believe what is going to become very important is the last mile, the last mile that gives you access locally to supplies in a pandemic or an emergency situation. And that security of the last mile is going to come into question.

Simrit Sandhu:
We're going see a lot more, what I would call a reshoring of production, but that's a long conversation in itself. I always question, what are we bringing back? Are we bringing back final production of existing goods? Are we bringing back raw material? Are we bringing back labor? And the arbitrage again is that a peak between raw material, labor, and final production is so complex based on both pure expense and human capital, but also access to raw material and design. Most importantly, I believe that innovation is going to be key. We've spoken as a team before, and we believe that the products of the future are going to distinguish themselves by the nature of their design. The opportunity to redesign a more sustainable supply chain is ahead of us.

Akhil Saklecha:
So I have a question, I guess, more along the line of if we went back in time, when did you first discover that supply chain was going to become an issue? So I imagine we have really good up-to-date systems in tracking, but do you even look back and say that knowing what you know now, do we need to track things globally? Do you need to get feedback from the teams within the clinic that are tracking diseases and their impact on us here to prepare, or do you literally just follow the numbers and the clinic and equipment?

Simrit Sandhu:
So I'll speak to this first at a larger global level and then specific to the pandemic. The reality here is that supply chain is the... The very nature of supply chain is it's a data-driven business. So specifically what we need to do is be able to predict demand and be able to anticipate production and supply. Blockchain is a much used word. Blockchain refers to end-to-end visibility and connectivity of these data sources across the globe. And I believe that that blockchain is spoken about within healthcare too, about blockchaining disease states and data and big data. I think overlaying the concept of a digitalized supply chain is so important. The concept of healthcare is going as well. If we had truly connected our supply data sources across raw material production sites, inventory levels, we would have been probably at a far better rate of being able to deal with pandemic planning and understanding supply levels across the globe.

Simrit Sandhu:
Within the hospital setting, at least at the Cleveland Clinic, one of the innovations we've done is in partnership with Cardinal Health. We have RFID tagged all our products at risk threshold. So we can see by case schedule, by patient type, the supplies that are needed as well as those that live on the shelf. So the good part of the answer is that what you would anticipate as being the more difficult part is done. We are now beginning to track these products to disease states and cases. What you would think would be somewhat of an easier part, which is tracking all these supplies back to origin raw material sources of production does not happen at a very transparent level today.

Will Morris:
Yeah, you get points for dropping the buzz being a blockchain, but there's been a lot in that space. I believe the shipping giant, Maersk, could look at it with IBM years ago and understanding that chain of custody, but at the end of the day, the cost of that, that infrastructure alone made goods and services prohibitive. And so I wonder while we dream of that, at the end of the day, we are now adding costs to every patient visit. Every single time Akhil sees a patient is now wearing a mask which adds costs. Ultimately, do you think we're going to just fall back into what's the cheapest just in time... Do we pay for what we need today as opposed to anticipating the needs of the future? Are we going to be in Groundhog's Day in two years?

Simrit Sandhu:
I wish I had a crystal ball, Will, but what I will tell you is human behavior over the last, at least 50 plus years, is thought as this pattern of globalization and reassuring. This idea of globalization and nationalization. These waves of let's get it cheaper, let's use global minds to make this idea of I need the security of a national supply chain. So I believe the answer has to be a hybrid. I believe we cannot go too far left or right in the equation. Specifically, a global supply chain does work. And it has [crosstalk 00:07:43].

Will Morris:
So, a diversified-

Simrit Sandhu:
A diversified approach is the answer, where global may not mean one country of origin. Global may mean four different geographies and probably picking destination spots for production closer to home. AKA, if we find that the only plant exists, I'm making this up, in Taiwan or China, why not one in Mexico and Latin America, if the labor rates locally are not conducive to production? Having said that, maybe the alternative is robotics. And this all goes under the context of are we willing to pay enough? And can we keep it price competitive? I always talk about redesigning the product altogether.

Simrit Sandhu:
We are a country in love with disposables and plastics. Products that we wear and throw. Everything from the N95 to the surgical masks to the disposable face shield to the glove is use and toss. Yes, we've played with disinfection, but it's disposable primarily. So the question we have to ask ourselves is, for the longer term, are we going to look at sustainability? Are we going to look at redesign? And are we willing to pay more for that redesign?

Akhil Saklecha:
I think you bring up a good point. So when you use the word reassuring, you aren't just talking about domestic, right? You're talking about regional control. And I think it really depends on the relationships we have with those countries that would be able to do either the raw material sourcing or the labor at a cost efficient point. Now there's something political there, but I won't go into that. But how do you see, I think, innovation happening here? You mentioned robotics, but you also mentioned the issues around the fact that we will have to pay more. And the whole issue around sustainability is sustainability, the initial upheaval on costs is really high. And at some point it will plateau out and be affordable. But how do you reconcile innovation with that sustainability and the cost because that money has to come from somewhere?

Simrit Sandhu:
That is the million dollar question, and that's where I think the public-private partnership comes into play. I think specifically, when we get into pandemic planning and we as a country think about the immense capital we put into dealing with this initiative, do we have the appetite for a public-private partnership or a coalition that looks at production of these products for pandemic environments? Are we willing to understand that our differentiation has always been designed? And are we willing to design these products of the future? And if we can, then the design may dictate if raw materials may bring about robotic production, which may be better suited for regional production, but we will have to think differently and we'll have to think together as a nation and globally to understand how we differentiate ourselves from where we find ourselves today.

Simrit Sandhu:
So many paths forward. Everything from making data more visible and production planning, diversification of production, raw material, and labor, but also this idea of rethinking the design and just the public-private partnerships of pandemic planning for the future. The debate goes on. We're talking about a few products, but pharmaceuticals, cleaning supplies, almost everything you needed in a crisis faced the same problem.

Will Morris:
Certainly. Now, innovation certainly is not new to supply chain. Just in the setting of COVID, some of your key initiatives and vision has been coalescing a lot of the supply chain in the power of many to drive down costs, improve value, and actually, diversify and have inventory. Can you explain a little bit about Excelerate? What it was, what it is now, and where you see that going in the future?

Simrit Sandhu:
Excelerate is a supply chain services company that the Cleveland Clinic runs in partnership with Vizient and Ohio Health is a co-owner as well. We have many, many members. And specifically, we are rooted in the concept that if we engage our physicians in value-based decision-making and can manage the supply chain in context of patient care and value to the delivery of care, we can differentiate ourselves, not just by aggregating product to provide it at the lowest cost, but to manage value of that product and its use, and to ensure that we're managing variation and waste. I think most organizations plateau when they understand that the idea of cutting costs is.

Will Morris:
Is a birthday.

Simrit Sandhu:
It has diminishing value at some point.

Will Morris:
Yeah.

Simrit Sandhu:
And you can illustrate value by truly showing that you can reduce variation, eliminate waste, and positively affect outcomes. That conversation is very different than a traditional supply chain conversation. That conversation takes you to a very uncomfortable space, and uncomfortable space where you have to participate in clinical dialogues about what may or may not work in a patient care setting. And I think that Cleveland Clinic has always proven that we can bridge that gap. We can bridge that gap and bring physicians and clinicians into a meaningful dialogue about value. And that value is driven through one factor alone, impact to patient and patient care affordability for the patient, outcome for the patient, and our belief in that what we standardize on is that I think to do for the patient.

Simrit Sandhu:
So a long way of saying that our value in Excelerate comes from standardization, variation reduction, physician engagement, and understanding the concept of supply chain within the concept of the larger service line. So knowing that supply chain is not a standalone function, it is part of the delivery of care. People and staff going to a patient care event and coordinating them to service line is so important.

Will Morris:
And do you see then the natural extension of that is not only kind of, well, driving standardization, best practice, best value, but also then saying, well, actually the market is missing this opportunity. We don't have that. Suppose it's a recyclable face shield or implant or whatever. What's the opportunity to actually then lead an influence manufacturing and actually the procurement and creation of the future devices, implants, pharmaceuticals?

Simrit Sandhu:
So another great question. Aggregated buying power dictates your ability to influence manufacturing. So I think by having the aggregating buying power as well as design experts in our physicians gives us tremendous, tremendous influence. The Cleveland Clinic with its clinical brand name, it's practicing physicians who both preach and practice innovation as yourselves, bring to us tremendous, tremendous abilities to influence manufacturing, because at the end we're the provider user. We use these products. The experts that go into designing these products and the outcomes of these products live within our four walls. And now we have aggregated buying power across 70 plus hospitals. Together, this recipe of both understanding the use, the value, and being large purchases of the product, I believe it gives us an ability to then influence manufacturing and production.

Akhil Saklecha:
So what keeps you up at night when you think about problems that you're facing or that are occurring within supply chain? What are those issues?

Simrit Sandhu:
The biggest problem that keeps me up at night is an inability to demand plan and fully understand supply chain as a science versus reactive buying. So one of the things we have done in the pandemic is really, really focus on what I call utilization management. While most hospitals have tried to do this, I want to illustrate on one example, which talks about we sat down with our practicing physicians, our chief medical officers, our chief of quality in patient safety, and truly started to understand what do safe environments in healthcare and a pandemic mean? What products and categories should we be planning for? What are the quantities that we should be forecasting? And what are the utilization patterns? What are the protocols that we perform to?

Simrit Sandhu:
And it led us very, very early on to qualify our products into very large categories. The concept of category management. Answers became products in question were respiratory. They were the reagents used in labs. They were the cleaning supplies. They were your PPE. They were products that went beyond the gloves and the hand masks or face masks and the gloves. They were products that went into the cleaning sphere. They were products that went into the equipment space. And being able to understand the need and forecast it allowed us to buy it thoughtfully and then vertically align into manufacturing channels to what I would say, capacity plan. Provide that data back to our manufacturers and then ask for allocations on a monthly basis with data.

Simrit Sandhu:
We could now have educated conversations to create what I call a manual blockchain. While a digital blockchain did not exist, what we created was a manual blockchain, taking this data, complying with the data, providing this data all the way down into the supply chain, and then being able to look at this data and dashboards real time and influence both buying, but also utilization. We began to see pockets where N95s would disappear overnight and other hospitals where those N95s would last more than two or three days. And we began to then look at utilization per person. Were they compliant to protocol or not?

Will Morris:
I would definitely be looking at the Marymount emergency room when Dr. Saklecha is on service.

Simrit Sandhu:
I've heard that he uses a lot of N95s.

Akhil Saklecha:
Yeah.

Simrit Sandhu:
So I am going to look in his dashboard.

Will Morris:
Look in his trunk.

Simrit Sandhu:
To ensure he is compliant.

Will Morris:
Look in his trunk.

Akhil Saklecha:
By the way, I have not gotten COVID yet.

Will Morris:
Right, that's great. Well, neither is your hoarding, but that's a different dialogue for next week's podcast. Yeah, no-

Akhil Saklecha:
Sorry, quick question.

Will Morris:
Yes.

Akhil Saklecha:
Can I interrupt?

Will Morris:
Please.

Akhil Saklecha:
Okay.

Will Morris:
Please do.

Akhil Saklecha:
What's the... You mentioned a lot about data, but what's the human capital? So you have a large team. How much emphasis do you put on the value of the team that you have to not only analyze the data, but to be actually thinking ahead of the data?

Simrit Sandhu:
So, I believe that data is a very valuable contributing factor to making intelligent decisions, but those intelligent decisions have to be made by humans at the end. Every day in the actions that they take, we make the data accessible. We manage the data. But having the what I would call the attitude and the aptitude to understand and react to that data lies in our human capital. And that's an investment we've made over a long, long time by sub-specializing our teams into cohorts that do certain types of work. So we have a buying team, we have an inventory management team, we have a materials team, but we also have analytics and center of excellence team that goes across these various stakeholders and teaches them how to read the data, react to the data, understand the data and make decisions on the data.

Simrit Sandhu:
So you're absolutely right. The data while important will not lead to the change unless we teach our human capital to interpret, use, and act on that data and change behavior on data. So a lot of priming has been happening or even our clinicians and hospital leaders now look at this data and understand the value of decision-making, real-time decision-making to protect our supply chain and our caregivers.

Will Morris:
What has been lessons learned or something that at night you're able to reflect back and go, wow, that was something that in all of your years leading this and being a master in this field, that this has been an epiphany for you?

Simrit Sandhu:
One, always follow common sense. We bought a lot of these products in December and January when we saw China go through their peak. So never ever underestimate the idea of pure gut and common sense and this idea that if you can foresee a situation, no amount of data or planning was needed there, pure common sense was needed. The second thing I would tell you, the biggest thing I've learned is separate heroics from sustainable solutions. So we did a lot of heroics. We were phenomenally successful in heroics as were many health systems in the country. And I believe those heroics are on the backs of people like yourselves. Individuals like both of you sitting at this table made us what I would say, survive the pandemic. You're heroics in making a product available.

Simrit Sandhu:
We had to make the workstream... The individuals in this room speaking to me were part of a very large workstream that made product available to us in a pandemic by manufacturing it locally using their design and production partnerships. We had disinfection workstreams. We had industry come together, but what we realized and what I reflect on is a lot of these were heroics. These were things we had to do to make sure we were safe. But the path forward needs to be a sustainable one where we need to choose from these heroics to find paths that we believe protect us in a more sustainable fashion, both from a product availability, design, production perspective, but also this idea of what would be called regional, national, and global solutions. We cannot solve this one hospital at a time. We can not solve this one health system at a time. We need to solve this as an industry, as a nation, as a global partnership together.

Will Morris:
Yeah, I love that perspective. One of the things just watching you and your leadership and how you very calmly navigated this, there was a lot of emotion. There still is around this, and it was easy to get caught up. And I think about, well, the general consumer who is hoarding toilet paper, and there was a lot of fear. I think one of the most powerful lessons learned, at least for me personally, was the dissemination of knowledge and clarity and transparency about what we have, what we don't have, and that we need to be rational with our consumption.

Will Morris:
We need to not drive fear because that would have led to clinicians hoarding and being leery, but transparency, accountability, and that the team is on this. I found the education component. And people now understanding what supply chain is, we take it for granted, things just appear. And now we really have an idea of what it is dependent. And at the end of the day, we all are incumbent on using our most precious and valuable resources very, very judiciously. So I just want to give you and your team an unbelievable kudo for your communication about what, who, and why.

Simrit Sandhu:
And I thank you for that. It took a lot of leadership from all of you. You sat in those leadership forums. I will share this. I'll reflect back on something you said earlier. It is the human capital that makes all the work happen. And I am very, very fortunate that I surround myself with people that understand the need to act in an immersion fashion when they need to, but also to plan thoughtfully ahead when they need to. And that's a very interesting balance to create, right? When we are forging forward in heroics, as we call them, or an emergency, we need the common foresight to be planning for the future because the worst may be still to come. And that mindset has to continue. We sit on a what I would call a very safe supply position today, but that doesn't mean that we do not foresee and plan for a future tomorrow that we may or may not be in a position to react when... That element is where data analytics and clinical partnerships really, really help.

Simrit Sandhu:
What are we not thinking about? What are we not foreseeing? What should we be thinking about that may become what I would call the casualties of the pandemic? What could happen post pandemic? What production are we not doing? Are other products that we've sacrificed to create pandemic products that will show up as shortages three to six months from now, what are the bottlenecks? We've been sterilizing products before the pandemic. Sterilization has long been a bottleneck in this country. What other products may be lagging behind in production because they have been locked simply due to the need to do heroics and react to the current situation? So I think this calm is going to be needed to heartfully think about it's a bubble, right? You squeeze it in one area, it has to explode or expand in another. So, I believe that we have to keep our eyes open with regards to what else is an unintended consequence of this pandemic that we have yet to see.

Will Morris:
That's fantastic.

Akhil Saklecha:
Yeah, actually really good point. I just have one other question. So we have an ability as a healthcare system to really promote diversity within our own organization, as well as within our suppliers. So what efforts are we doing to promote that within our suppliers, both across the full stream, so pharmaceutical, med devices and other suppliers?

Simrit Sandhu:
It's a topic near and dear to my heart. So I'm glad you brought that up. So I have often spoken about the need to create meaningful change and meaningful progress with diverse suppliers and diversity, especially in local communities and the national stage and diversifying to create what I would call local wealth and national wealth. I say that because part of the support services that we run out of my team is a laundry service. And the model we've deployed there is that we bring in... We've partnered with a cooperative that gives people second chance employment opportunities. People with minor felonies or past histories that do not make them, for lack of a better term, hireable in most settings are brought back into the economy and given jobs and they own the cooperative. So they have a chance to create.

Will Morris:
Value.

Simrit Sandhu:
Wealth for themselves and value for themselves. I show that as one example, because I believe that's true meaningful change. But at a larger, larger level, I believe that the pandemic now talks about this larger opportunity of localization and reassuring and national production. And one very large area of opportunity is influencing the people with larger capital, like the large manufacturers to start creating tier two partnerships, to hold them accountable through our buying power and just start healthcare presence to say, "To do business with you, we want to see that you share our vision and our belief in hiring and promoting diverse suppliers."

Simrit Sandhu:
So while they may not be able to make the final drug, could they be your trucking company in a certain state? Could they be an assembler or a compounding agent in a particular environment? So I encourage us to think both big and small. I think when we try to address this topic of diverse suppliers, I don't see a diverse supplier certainly emerging and becoming a multi-billion dollar entity.

Simrit Sandhu:
But what I can see is using all our buying power and our influence to ensure that we create these diverse suppliers in a very, very, what I would call educated way. We find opportunities and employment patterns that are sustainable. And I often tie this to that last mile in the supply chain, that there is a service and a local manufacturing need to almost every large global supply chain. It goes all the way from final assembly of a product, to transportation, to storage. And if we can find means and ways to include diverse suppliers in the supply chain through a buying power, that is absolutely the right thing to do and that's where we're headed.

Will Morris:
Well, I think on that note, I don't know if there's much more to say other than I think your children are tremendously proud of you, not just knowing what you do, but knowing your perspective, both the regional impact on our community, to our patients, to our providers, to Akhil's hoarding, but also to the local dentist who's trying to procure PPE for himself or herself, and the local providers who are protecting themselves and their caregivers. So, you have a tremendous job and a tremendous weight on your shoulder, but you carry it with such confidence, clarity, and passion. It is really exemplary. And so with that, we just wish to say, thank you for joining us. We will continue with this dialogue and partnership because it's just been an absolute blessed journey. So, thank you.

Simrit Sandhu:
I have to say something little in the end.

Will Morris:
Uh-oh.

Simrit Sandhu:
My children say, "Girls can do anything." They're two boys.

Akhil Saklecha:
What a timely comment.

Will Morris:
That is great. Yes. Well, thank you very much. This has been Health Amplified, a Cleveland Clinic podcast.