What Healthcare Supply Chain Can Learn from Steve Jobs and Apple
The iconic apple that represents its company’s namesake probably conjures up images of sleek computers and technologically advanced phones and tablets, many of which have been instituted in healthcare to improve patient monitoring and services. But the Silicon Valley staple known for innovation and design in technology has developed other innovations that can be arguably more useful in healthcare. Apple may offer cool products with unrivaled ease-of-use, but it is their supply chain strategy that is second to none.
Apple, Inc. has been number one in Gartner’s supply chain ranking for six consecutive years. The Gartner Supply Chain Top 25 identifies the companies that demonstrate best practices in demand-driven supply chain, and Apple continues to rise to the top as a leader in supply chain excellence. It wasn’t always that way, but when Steve Jobs returned to Apple in 1997 he knew that streamlined, accessible supply chain was the key to putting products in the hands of enthusiastic consumers. So Jobs made bold decisions, buying up air space so that products could be flown rather than shipped from Asia to the US just in time for Christmas. Though it may have been an expensive move, the immediacy ensured that every product delivered was new, a measure that has led to Apple’s cutting-edge reputation.
The fall-out was a new approach to supply chain, in which nothing sits on a shelf long enough to become old. Apple requests detailed quotes from manufacturers, and requires specific quantities from its suppliers. Devices are monitored as they are shipped, and once in stores, demand can be monitored hourly, allowing for daily adjustments of production forecasts. Apple’s supply chain runs like a well-oiled machine, and it’s not by accident.
When Steve Jobs was searching for a new CEO, he sought out Tim Cook. Perhaps unknown to average tech consumers, Cook spent 12 years at IBM before Jobs brought him to Apple in 1998. As the newly minted Senior Vice President for Worldwide operations, Cook was tasked with cleaning up Apple’s supply chain. He closed factories and manufacturers around the world, selecting fewer locations to focus on and monitor. The result was reduced inventory levels, streamlined supply chain, and increased efficiency, which all helped to improve Apple’s margins.
Sound familiar? Supply chain management is key to every industry, but is often undervalued in healthcare organizations. A well-organized supply chain can help reduce hospital expenses and improve patient care and safety. Some lessons from Apple’s supply chain leadership can offer insight into getting the most out of your supply chain strategy.
One of the best known stories about Apple’s supply chain is that of the green light. When Mac users have their webcam turned on, a small green light indicates the camera is in use. But when Apple designers first approached the manufacturing team to request such a light, they were told it was impossible – light can’t shine through metal, and they didn’t have any way to make a hole small enough to be invisible to the eye. Apple designers felt the light was a useful feature for consumers, so they consulted a laser manufacturer, and ended up buying hundreds of the needed laser machines.
The strength of Apple’s supply chain in this example is that they started with the user and worked backwards to integrate the supply chain. While hospitals might not be as concerned with innovating such tech details, they should still take notice of the overall approach. A hospital’s supply chain must be based on the patients it ultimately serves in order to be effective. Practically, this translates to knowing, for example, with what frequency surgeries are performed, and having in stock the necessary amount of supplies. Surgeries delayed because of missing or unavailable stock can represent huge costs to a hospital.
Another lesson to be taken from the same example is to make the impossible possible. When the designers originally approached the manufacturing team, there was no way to make their design a reality, so they went outside of the company to find another team that could do it. Similarly, crusaders for supply chain improvements may be met on all levels, including doctors, nurses and managers, by dissuasive arguments such as “This is how it’s always been done.” Don’t accept claims of impossibility and when necessary, seek resources from outside consulting teams that can help make your operational goals a reality.
Current CEO Tim Cook’s work both under Steve Jobs and as his successor can also provide insight into successful supply chain strategy. When Jobs hired Cook in 1998, Cook was faced with a disorganized supply chain, with stock spread across many locations. As Sam Oliver of Apple Insider explains, “When Cook initially took over Apple’s supply chain, he cut down the number of component suppliers from 100 to 24, forcing companies to compete for Apple’s business. He also shut down 10 of the 19 Apple warehouses to limit overstocking, and by September of 1998 inventory was down from a month to only six days.”
Such model streamlining is especially relevant for hospitals. When inventory is spread throughout every department for extended periods of time, overstocking occurs and inventory turns are very low. To prevent these costly issues, inventory should be located in just a few central places, where it can be easily managed. Doctors and nurses should also be advised not to “stockpile” their own supplies, as this can become expensive. Multiple storage locations also allows for stock to go unused and expire. For Apple, slow inventory turns may have just meant more money tied up in unsold stock and less of a perceived desirability of product; for hospitals, slow inventory can mean wasted funds on stock that passes both its expiration and return dates. When storage is centralized and well-monitored, expirations can be prevented and unused stock returned on time, saving on shipping and reordering costs and cutting down on waste.
Since taking over the role of CEO, Cook has continued to focus on supply chain, and Apple has continued to be a role model in the field. Cook’s leadership has yielded steady increases in profits and stock value, demonstrating the importance of supply chain to improving revenue. Following Apple’s example, your hospital’s supply chain can also become an example of operational excellence.
To learn more about VIE Healthcare’s supply chain consulting services, visit www.viehealthcare.com
Amanda graduated from Loyola University Maryland in 2012 with a BS in Biology and writing, and is currently pursuing her MPH at Drexel University. She writes about public health and healthcare.