The headlines are impossible to miss as havoc in the financial markets and the spiraling economic mess have unfolded. Daily, we hear of Fortune 500 companies that are struggling to stay afloat and many on Main Street that have already succumbed.
In a recent Fortune Small Business/Zogby International poll of business owners, many respondents said their businesses had gone downhill in the past four years. So how does this economic crisis threaten the stability of your organization’s supply chain? What happens when your stable corporation depends on a single essential supplier to keep your operations running?
And how do you best prepare for future supplier disruptions?
Oakland, in Northern California, is the headquarters of Kaiser Permanente. More than 60 years ago, Henry J. Kaiser and Dr. Sidney R. Garfield first articulated their commitment to total health and their vision for high-quality, affordable health care for working men, women, and their families.
Today, Kaiser Permanente is the nation’s largest not-for-profit integrated healthcare delivery system with 159,766 employees and 14,087 physicians.
One day during a casual conversation, a Kaiser Permanente employee learned of the deteriorating financial situation of a company we’ll call ABC Linen. Tightening market conditions had put pressure on ABC, and it was struggling to maintain cash-flow and remain liquid and viable. ABC was embroiled in bankruptcy proceedings within about 10 days of Kaiser Permanente learning of ABC’s financial situation.
Kaiser Permanente and ABC Linen had recently completed transition of 60 percent of Kaiser Permanente’s laundry needs from another linen services provider to ABC. The transition had gone smoothly, and ABC was ramped up to handle linen and laundry processing responsibility for more than 40 clinics and medical office buildings in Northern California.
Upon learning of ABC’s situation, Kaiser Permanente launched an immediate campaign to secure alternative linen service.
Kaiser Permanente’s Northern California Regional Emergency Operations Center was put on alert and remained poised to fully activate if the situation demanded more rigorous attention to allocating and redistributing of linen services throughout the organization.
Throughout the response, several key players including materials, laundry specialists, facilities staff, legal (internal/external), sourcing, and suppliers worked closely together to coordinate the Kaiser Permanente response. All actions were undertaken with a high degree of urgency to identify options, communicate, and mobilize, never losing sight of members and patients. The goal was to ensure that service would not be interrupted.
Luck is not a Strategy
A lucky tip-off immediately acted on allowed Kaiser Permanente to successfully respond and put a plan in motion. Without a pre-identified “plan B” no validated alternatives and no standard risk assessment plan to monitor the health of critical suppliers, Kaiser Permanente’s options in the marketplace were limited, and it was sent scurrying to find a solution with little time to assess the viability of our choices. But we were well ahead of other linen users in the region.
Kaiser Permanente has since designed a program to allow for systematic early warning. It is a way to identify alternative suppliers and assess their viability ahead of time utilizing up-to-date intelligence. They use a pre-set approach to assessing, ranking, and creating countermeasures to vendors’ and suppliers’ risks scenarios. Once a risk to a supplier is deemed real, a cross functional team will convene to flesh out a “plan B” a transition plan, dependencies, and a team to manage the process.
The objective is to ensure a flexibly resilient organization can respond in any number of situations when disaster or any event threatens operations. Preparation helps employees work collaboratively and efficiently. Well exercised methodologies and contingencies allow for rapid transition.
Ken Mudge is the executive director of non-medical sourcing within procurement and supply at Kaiser Permanente. Mudge’s team has responsibility to provide assurance of supply for a number of patient/member facing goods and services, including linen and laundry, among others.
Skip Skivington is the vice president of operations within procurement and supply at Kaiser Permanente. One of Skivington‘s chief responsibilities is to direct Kaiser Permanente’s healthcare continuity management program which ensures planning for and coordinated responses to disaster situations.
Cheryl LaTouche is the manager of business continuity management within procurement and supply at Kaiser Permanente. LaTouche and her team of business continuity consultants manage Kaiser Permanente’s national business continuity management program which ensures planning for and coordinated responses to disaster situations.