tion and was tasked with integrating that into the company. After that, I somewhat serendipitously ended up
as head of materials management there. That’s where
I learned to love what ultimately has become supply
Q What was the supply chain organization like when you joined Kaiser Permanente?
AWhen I came in, I was the first supply chain executive who had
a real supply chain background, and
I was also the only national supply
chain resource. I had two direct
reports: one was the Northern
California director of operations,
and the other was the same for
Southern California. They were
responsible for regional support
functions like the warehouses where
patient records were stored. A true
supply chain function should manage getting products and services
to clinicians from start to finish,
but few of the existing roles or processes focused on that. Much of the
supply chain activity was happening
in the clinical settings, largely by clinicians. There was
no national oversight or coordination; supply chain
management was very decentralized, and there were
no reporting relationships to national. For example,
many of the materials management directors at the
individual medical centers rarely worked together with
other directors, and pretty much never across regions.
We had to change.
Q What changes did you make, and why?
A We realized that we needed to change the organiza- tion and centralize it—really do a reset and create a
full strategy. We also needed the company to recognize
supply chain as a discipline and a profession, which
was not the case before. So we developed a five-year
plan that looked at organizational structure, process,
metrics, and technology.
There were supply chain directors and supply chain
managers at each site. They were good, very dedicated
people, but there had not been a lot of investment in
their education and training in regard to supply chain.
So we rewrote their job descriptions and made them all
the same to start. Then we recruited talent into those
roles and centralized their reporting. In California
alone, there were about 100 of those positions, and 80
to 85 percent of the people we hired came from outside
Kaiser Permanente, and most of
those were from outside health care,
something historically not done.
We created a national team,
including a head of demand planning and of inventory management.
Kaiser Permanente had never managed inventory centrally before. We
connected all the sites and their
inventory together and brought in
a head of supply chain operations
[and] a head of warehousing and
logistics. We also developed and
implemented standard processes for
activities like receiving, ordering,
and cycle counting, and we standardized those across all sites.
We started with four “proof of
concept” sites. ... They defined what
their existing processes were, and then we set up metrics for things like inventory reduction. When we standardized their processes, we blew those measures out
of the water. The improvement in service levels, cycle
time, and inventory reduction gave us credibility with
By the end of this year, we will have a centralized
supply chain organization in all regions, and we’ll have
standardized what they do. That includes technology;
we now have a single instance ERP (enterprise resource
planning) system—we used to have seven or eight—
and we have a single item master. Our electronic
medical record system is now integrated with our ERP
system, so clinicians scan items as they use them, connecting usage with patients and outcomes. We then use
the product usage to manage our inventories by statistically setting our safety-stock levels and decrementing
actual inventory. What we are building is an overall
national shared service that encompasses the execution
of what we call “buy to pay”—everything from sourc-