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MANAGING HEALTH CARE SUPPLY CHAIN: TRENDS, ISSUES, AND

SOLUTIONS FROM A LOGISTICS PERSPECTIVE

Charu Chandra

Swatantra K. Kachhal

Industrial and Manufacturing Systems Engineering Department

University of Michigan Dearborn4901 Evergreen Road

Dearborn, Michigan 48128-1491

Abstract

The U.S. healthcare industry is a large enterpriseaccounting for over 14.1% of the national economic outputin 2001. It has been under pressure for cost containmentand providing quality health care services to consumers. Itsrecord of investing heavily on development ofsophisticated drugs and diagnostic systems does not match

that of technologies to manage its day-to-day operations.In order to achieve improved performance, healthcaresupply chain must be efficient and integrated. The driverfor this integration is logistics and supply chainmanagement. This paper describes trends, issues and somesolutions for logistics management for Health Care SupplyChain with concepts drawn from Industrial Engineering,and Operations Research disciplines applied to specificdomains. A healthcare supply chain template utilizing E-commerce strategy is presented. Use of simulation,optimization, and information sharing techniques aredemonstrated to optimize purchasing and inventorypolicies.

(Keywords: Health Care Supply Chain, Health CareLogistics, e-Health Care)

1. Introduction

The US healthcare industry accounted for 14.1%of the U.S. economic output in 2001 (URL:(http://www.cdc.gov/nchs/data/hus/tables/2003/03hus112.pdf). Various studies of this industry point to lack orfailure of basic quality-control procedures, andmisalignment among consumer needs, payers and provider

services, as primary causes for building waste into industrymanagement practices.

Pressures on the industry have fostered innovation in thedesign of services and organizations. Most of theinnovations have targeted cost reductions in key functions,including logistics. The industry must find a flexibledelivery enterprise that has substantial capital and is

capable of efficient operations. This means effectivemanagement of a broad range of processes with diversemeasures, from medical outcomes to cost of tissue paper.Healthcare sector of US economy faces several challenges,such as cost containment, outdated informationmanagement systems, and mergers and/or acquisitions.

The need to cut costs and compete has led to mergers andacquisitions in healthcare industry. Such consolidations

have created new organizations made up of very differententities which are not as integrated as they should be. Dueto competition, it has become imperative that enterprisesseamlessly and efficiently provide and manage services(including purchase and delivery of supplies to the finaluser) across entities and continuum of care, both now andin the future.

The principal participants in the US healthcare supplychain include: manufacturers (drugs, medical equipment,and hospital medical supplies), distributors, medicalservice providers, medical groups, insurance companies,government agencies (such as, Health and Human

Services), employers, government regulators, and users ofhealthcare services.

This paper describes trends, issues and some solutions forlogistics management in Health Care Supply Chain withconcepts drawn from Industrial Engineering (IE), andOperations Research (OR) disciplines applied to specificdomains. A healthcare supply chain model utilizing E-commerce strategy is presented. Use of simulation,optimization, and information sharing techniques aredemonstrated to optimize purchasing and inventorypolicies.

The rest of the paper is organized as follows. Section 2lays the foundation of supply chain as a business strategy,describing concepts, key issues and approaches to problemsolving in supply chain management. Section 3 makes thecase for a Health Care supply chain emphasizing the needfor it, strategic drivers, key issues and opportunities thatexist for it to be a viable alternative for businesses. An E-Health Care supply chain model is presented in Section 4.The rationale behind this model and its various


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components is described. Section 5 presents amethodology for applying IE and OR techniques topotential Health Care supply chain problems using theproposed model. The paper concludes with suggestions ofpossible problem areas where the proposed framework canbe suitably applied as a future task, described in Section 6.

2. Supply Chain Management: Concepts, Key

Issues, and Approaches to Problem Solving

Supply chain has been defined as a system ofsuppliers, manufacturers, distributors, retailers, andcustomers where material typically flows downstreamfrom suppliers to customers (except for reverse logistics)and information flow in both directions. Supply chainmanagement involves managing a connected series ofactivities, which is concerned with planning, coordinating,and controlling movement of material, parts, and finishedgoods from supplier to customer. For this to occur,material, financial, and information flows are managed asdecisions are made at strategic, tactical, and operationallevels throughout the supply chain. Supply ChainManagement issues span a large spectrum of a firmsactivities, at these levels (Simchi-Levi et al., 2003). Table1 summarizes decisions made at these levels.

Table 1. Decision-Making levels in Supply Chain.Decision-

Making

Level

Timeline Type of Decision Made

Strategic 5 to 10 years Investment on plants andcapacities.

Introduction of new products.Creation of a logistics network.

Tactical 3 months to 2years Inventory policies to use.Procurement policies to beimplemented.

Transportation strategies to beadopted.

Operational Day-to-Day Scheduling of resources.Routing of raw materials andfinished products.

Solicitation of bids and quotations.

The above decisions are made in order to address some ofthe following common issues facing the supply chainmanagement activity:

Distribution Network Configuration. This issue deals with

selection of warehouse locations and capacities,determining production level for each product at eachplant, and finalizing transportation flows between plantsand warehouses so as to maximize production,transportation and inventory costs. It is a complexoptimization problem dealing with network flows andcapacity utilizations. This issue relates to healthcare

related manufacturers and suppliers in a healthcare supplychain.

Inventory Control. This issue deals with stocking levels atvarious levels in the supply chain. Demands from level-to-level are considered in making this decision. This is adecision problem, solution to which involves usingforecasting, inventory management, and simulation and

optimization algorithms. Healthcare providers, suppliers aswell as manufacturers deal with this issue in a healthcaresupply chain.

Supply Contracts. This issue deals with setting uprelationships between suppliers and buyers in the supplychain through establishments of supply contracts thatspecify prices, discounts, rebates, delivery lead times,quality, returns, etc. etc. This approach differs fromtraditional approaches because its central focus is onminimizing the impact of decision made at not just onelevel in the supply chain, but on all its players. This is adecision problem, solution to which could range from a

simple Linear Programming problem to a complex GameTheory algorithm. A healthcare provider will be setting upthese contracts with a distributor or directly with amanufacturer.

Distribution Strategies. This issue deals with decisionspertaining to movement of goods in the supply chain.Among the strategies available are direct shipment, cross-docking involving transshipments and load consolidation.The objective is to minimize warehousing (storage) andtransportation costs. Solutions to this problem involveNetwork Algorithm utilizing Linear, and Non-Linearprogramming techniques in deterministic and stochastic

environments. A healthcare provider will have to makedecisions about warehousing or direct shipment to point ofusages of various supplies.

Supply Chain Integration and Strategic Partnering. One ofthe key issues in managing supply chain is its integration.Information sharing and joint (or collaborative) operationalplanning are basic ingredients to solve this issue.Implementation of Collaborative Planning, Forecastingand Replenishment (CPFR) as carried out by Wal-Martretail stores in their supply chain, aided by informationsharing through common software platforms such as theEnterprise Resource Planning (ERP) are viable strategies.In a healthcare supply chain, it would mean CPFR amongthe healthcare provider, supplier and the manufacturer ofhealthcare related items.

Outsourcing and Procurement Strategies. An importantissue to consider is what to manufacture internally andwhat to buy from outside sources. One of the problems tobe dealt in making these decisions is identifying risksassociated with these decisions and minimizing them.


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Another issue to consider is the impact of Internet onprocurement strategies and what channels to utilize (publicor private portals) when dealing with trading partners. Inarriving at the decision whether to outsource or buy,various optimization models may be utilized to balancerisk and payoffs. Once this decision has been made, use ofappropriate information technology component such as,Internet portals, and procurement software plays a key role

in these decisions. An example of this issue in healthcaresupply chain may be the decision to prepare the meals forinpatients in house versus delivering meals alreadyprepared in the centralized kitchen of a catering company.

Information Technology and Decision Support Systems.One of the major issues in supply chain management is thelack of information for decision-making. Informationtechnology plays the vital role in enabling decision-makingthroughout the supply chain. Some of the key ingredientsof information technology in supply chain are use ofInternet and Web-based service portals, integratedinformation / knowledge within ERP software, and

decision-support systems that utilize proven algorithms forvarious strategic, tactical and planning problems inspecific industry domains.

Customer Value. Supply chain must be measured by itsability to deliver value to the end customer, the patient.This may be in the form of price, quality, service levels,and perceived value. Solutions based on Statistics and ORcan be employed to measure quality of product, andreduction of lead time to enhance service rates.

3. Health Care Supply Chain: The Need,

Drivers, Issues, and Opportunities

Why supply chain management for Health Care

Industry? There are a number of reasons why Health Careindustry needs to look at how they manage their supplychain. The main ones -- cost and risk. According toBradley (2000), how well or badly the health care supplychain is managed is a major factor in health care costs.During the mid 1990s, the Efficient Healthcare ConsumerResponse (EHCR) (EHCR, 2000) performed its own majorsupply chain study. They found out that the health caresupply chain inefficiencies contributed $11 billion (or48%) out of the total annual costs of $23 billion. Their

report described that the health care supply chain wascentered around distributors, resulting in little contactbetween manufacturers and hospital materials managers.Contract negotiations tended to be adversarial. Providersachieved lower costs, but these costs were not driven outof the system, just pushed lower in the supply chain. Theyencouraged the health care industry to adopt the concept ofcollaborative planning, forecasting and replenishment

(CPFR), used by retail chains such as, Wal-Mart. Themain idea is to avoid excess inventory through accurateforecasting, utilizing one commonly agreed to demanddata among various supply chain partners (Anonymous,2000).

Health Care Supply Chain Drivers. The factors that aredriving the call for efficiency in health care supply chain

are based on common business sense realizing thatconsidering the size of the industry, even small-scaleefficiencies can have potentially large dollar impact. Someof the key drivers are described below (URL:http://www.cisco.com/warp/public/779/ibs/solutions/supply/vertical/).

Fragmented supplier base.With 26,000 medicalsuppliers, managing vendor relationship costssignificant time and money for the buyer. The goalshould be to consolidate purchases so as to buymajority of products from one source.

Reduced government subsidieshave created the

necessity to control costs. In addition, the HealthInsurance Portability and Accountability Act of 1996(HIPAA) regulations have created the urgency forproviders to address security and electronictransactions issues, resulting in additional cost ofdoing business.

Supply chain inefficiencies. As mentioned earlier,according to the Efficient Health Care ConsumerResponse (EHCR) study, approximately $23 billion isspent on the U.S. health care supply chain annually.Streamlining the ordering process and reducingnumber of supplier relationships can eliminateapproximately $11 billion in costs.

Managing core competencies. An efficient supplychain frees up time for health care professionals tofocus on their core competency of delivering qualitypatient care.

Internet based purchasing. This enables supplierconsolidation, reduced ordering costs, and a commonpurchasing platform for hospital networks.

Common data standards. Adopt and promote uniformindustry data standards for supply chain transactionsover the Internet. The formation of "E-StandardsWork Group" is an industry wide initiative for thispurpose (URL:http://www.neoforma.com/corp/news_and_events/press_room/2000/estandards.html).

Standardization of product purchases in the supplychain. Standardization of hospital supplies for theirimpact on (a) purchase volume, (b) ordering andtracking, (c) storage space, (d) resource allocation, and(e) economies of scale through group purchasingpower (Vermond, 2000).


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Integrated Supply Chain Process: Key Issues and

Opportunities. There is now a greater awareness in theHealth Care industry that there are significant payoffsthrough efficient management of the health care supplychain, whose processes incur avoidable costs in followingareas (URL:http://www.oha.com/oha/perspec.nsf/0/3d488bb0d512a8ea85256abf005cce2e?OpenDocument):

Transportation from a production plant to a regionaldistribution center;

Distribution center operations;

Outbound freight;

Wholesale distributors receiving and warehousingoperations;

Wholesaler distributors mark-up for informationprocessing and customer service;

Transportation to the care provider; and

Inventory.

Integrated supply chain processes would transform thisdisjoint string of activities into streamlined, cost effectiveprocesses characterized by substantial standardization,integration, and optimal service placement (Brennan,1998). In order to successfully integrate the supply chainprocesses, five supply chain management areas need to bemet or exceeded, as per the results of study published byPricewaterhouse Coopers (URL: www.eMarketer.com),and summarized in Table 2.

Table 2. Supply Chain Management Applications andPotential Savings for Health Care in the US, 2000 (as a %of procurement costs)

Supply Chain

ManagementArea

Potential Benefits Percent of

ProcurementCost

Demandmanagement

Minimized duplication,planning system, demand-driven ordering (clinicalguidelines, etc.)

2% to 4%

Ordermanagement

Consolidated purchasing,paperless order management(EDI, Internet)

2.5% to 4%

Suppliermanagement

Supplier consolidation,optimal direct-from-manufacturer implementation,compliance with GPOagreements

0.5% to 2%

Logisticsmanagement

Consolidated service center,integrated transport network,capacity utilization

0.5% to 2%

Inventorymanagement

Automated point-of-servicedistribution, replenishment,non-stock items, reduction inSKUs

0.5% to 1.5%

Overall cost-savings from Supply Chain Management 6% to 13.5%

Source: Pricewaterhouse Coopers, 2000

(URL: http://www.emarketer.com/images/chart_pdfs/020001-021000/020410.pdf)

For the Health Care Supply Chain, these supply chainmanagement areas are elaborated below:

Demand Management. Managing consumption of clinicalresources is key to controlling demand and reducing thenumber of supplies that move through the supply chainprocess. Three practices need to be implemented in thisregard: 1) demand needs to be forecast and a plan

implemented to facilitate fulfillment of supplies on aperiodic basis, 2) standardization of supplies so as todeliver them as a single unit of inventory, and 3)development of clinical guidelines to define supplyrequirements for key patient groupings.

Order Management. Initiating effective order managementpractices:

Establishing standard order management processes.

E-procurement through Web or electronic datainterchange.

Implementation of electronic product numbering and

tracking process.

Supplier Management.Some of the key ingredients of aneffective supplier management process are as follows:

Reducing the number of suppliers that provide productto the healthcare system.

Establishing and participating in group purchasingcontracts to take advantage of discounts and rebates.

Logistics Management. Integrated logistics managementthat exploits efficiencies offered by consolidation ofshipments, utilization of service centers and transportation

network, and cross-docking in transportation of goods.

Inventory Management. Reducing the storage space,minimizing stock keeping units and their stocking levels,and maximizing inventory turnover rates can achieveintegrated management savings. One of the key enabler ofthis policy is reducing variability among common productsthrough standardization initiatives.

4. E-Health Care Supply Chain: Business

Trends, Initiatives, and Model

E-Healthcare can be described as the transition ofhealthcare business and patient-related processes andtransactions into the Internet-delivered electronicinformation superhighway. The concept of e-health as itevolves, refers to the use of Web-enabled systems andprocesses to accomplish some combination of followingobjectives: cut costs or increase revenues, streamlineoperations, improve patient or member satisfaction, and


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contribute to the enhancement of medical care (Bose,2003).

According to a study published by Forrester Research, theInternet healthcare industry in the U.S. will become a $370billion business by 2004. Firms will organize around ahealthcare e-business network that will serve consumers,providers, distribution chains and payers (Dembeck, 2000).

According to this study, Eight percent of retail healthsales will move online. Health e-tailers such as Rx.comand Vitamins.com will experience retail growth to $22billion in 2004. The real growth in e-healthcare, however,will be in the business-to-business segment, which thestudy predicts will soar to $348 billion in 2004. As onlinebusiness trade gains momentum, 17 percent healthcarebusiness transactions will move online by 2004.Forresters analysis of the consumer e-Commercehealthcare market projects healthy growth in on-line tradefor -- non-medication health and beauty aids, over-the-counter non-prescription drugs, natural health cures, andprescription drugs.

According to this study, both large institutions and smallmedical practices will turn to Net players, such asEmbion.com, Medicalbuyer.com and Medibuy.com tosimplify procurement of medical supplies, thereby drivingInternet efficiencies into the distribution chain. As a result,the study predicts that cost-conscious hospitals will move24 percent of their purchasing online by 2004. Meanwhile,as more doctors get connected to healthcare networks, 12percent of private practices will conduct their procurementonline by 2004.

E-Health Care initiatives. In the healthcare industry, web-

enabled applications under development include productsfor: claims handling; physician practice managementsystems; online prescriptions; and electronic clinical andfinancial data interchange for hospitals, physicians,pharmacies, managed care organizations and commercialand hospital laboratories. Other applications include:patient-centered systems; solutions for chronically illpatients; finance and accounting programs for hospitalsand other health agencies; medical supply purchasing;health and medical web portals; managed care organizationprovider directories; health promotion and diseaseprevention; provider credentialing; risk management; casemanagement; and practice management.

The move to Internet-based programs and services shouldresult in savings for employers, insurers, managed careorganizations and government-sponsored programsbecause of the significant cost-saving opportunities, suchas better price comparisons, lower inventory costs, andmore efficient health system-wide communications, patientinformation management and billing and claims handling(Nugent 2000).

There are a number of companies engaged in e-healthcareefforts - AmericasDoctor.com, Health-Central.com, TheHealth Network, MedicalRecord.com, PlanetRx.com,Shared Medical Systems, etc. Hospital-sponsored Websites, e-mail and discussion groups are becoming part ofhealth care organizations Information Technology (IT)functions.

E-Health Care Supply Chain Model. The emergence ofdigital business value chains in the healthcare industry willlead to a trend for its supply chain management. Thetechnology that is already available to integrate Web front-end interactions with back-office systems include,packaged Web modules, middleware and tools to buildcustomized transaction systems, Web-based EDI, Web-based electronic marketplaces, and many electroniccatalogs. This type of network connection allows theconsumer to go directly to the system of choice to design,configure, and arrange for shipment or availability of thefinal product or service of choice. This ability is the resultof an Extranet, linking partners in supply chain to

necessary information on-line. An Intranet is used to linktechnologies, business processes, and organizationalconstituencies into a network that can display its offeringsto consumers over the Internet.

Figure 1 depicts a representative model of US e-HealthcareSupply Chain proposed in Kumar and Chandra (2001),showing linkages and flow (material and information)between various business entities. The principalparticipants in the US healthcare supply chain include:manufacturers (drugs, medical equipment, and hospitalmedical supplies), distributors, medical service providers,medical groups, insurance companies, government

agencies (such as, Health and Human Services),employers, government regulators, and users of healthcareservices.

5. Implementing the E-Health Care Model:

An IE/OR Perspective

For improving supply chain effectiveness, a decisionsupport system that integrates information technology withIndustrial Engineering and Operations Research techniquesis described below. It is built upon a generic methodologyproposed by Chandra and Grabis (2002), which

emphasizes commonality of general structure of problems(such as identified in Table 2) across various industrydomains. The unique differences that are, however, foundin specific problem for a particular industry (for exampleHealth Care supply chain) can be represented byparameters that uniquely set it apart from other problems(in other industry domains).


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Manufacturers

Medical EquipmentManufacturers

PharmaceuticalsCompanies

DistributorsG

Medical Equipment

- Prosthetic Devices- Artificial Body Parts- Wheel Chairs- CT Scanners- Laboratory Equipment- ...

Pharmaceuticals

Health CareProviders

Health CareProfessionals- Doctors, Nurses,Respiratory Thera-pists, Dietitians,

MedicalTechnologists,...

Health Care Facilities- Hospitals- Proprietary Clinics- Nursing Homes- Hospices- Same-day-surgery

Centers- Urgent Care Centers

GPatients

Public andPrivatePayer

Systerms

G & S

InsuranceCompanies

$

$

$

e-Commerce (using Internet/Intranet/Extranet)

$ $ $

Medicare Medicaid Employers

GovernmentRegulatoryAgencies

Legend:

G - Goods S - Services I - Information & Directives $ - Payments/ Reimbursements

Enforce Health Care RegulationsOn Manufacturers / Distributors /

Health Care Providers

US Congress Food & Drug

Administration National Institute of

Health ...

Figure 1: A Representative U.S. e-Health Care Supply Chain Model (Source: Kumar and Chandra, 2001)

General approach.The decision support system consistsof two integral parts information support system anddecision modeling system. The methodology consists of anumber of consecutive tasks including definition of thesupply chain management problem, generation ofalternative supply chain configurations, decision modeling

and final decision making as depicted in Figure 2. Themain tools utilized in order to accomplish these tasks aresupply chain process model, modeling database, decisionmodeling system and supply chain knowledge library. Themodeling methodology is built around a unifiedrepresentation of the supply chain modeling problem. Thisrepresentation can be transformed in a number of differentformats suitable for accomplishing different modeling

tasks. An implementation of the decision support system isdeveloped on the basis of standard specialized softwaretools. An Enterprise Resource Planning software (SAP/R3,developed by SAP Inc., Germany) provides data storagesupport. ARIS (developed by IDS-Scheer Inc., Germany)is used in process modeling. MS Excel (developed by

Microsoft Inc., USA) is used as a core component of thedecision model. It invokes packages such as LINGO(developed by LINDO Systems, USA) and ProMODEL(developed by Pro Model Inc., USA) for solving ofspecific Linear Programming and Simulation modelingtasks, respectively.


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For the Health Care industry, a supply chain managementproblem may pertain to supplier selection, demandmanagement, order management, inventory control issuesetc., as described in an earlier Section. Alternative supplychain configurations may identify a supply chainrepresentation that recognizes availability of alternativehealth care suppliers, based on criteria such as lower cost,quality, material specifications, etc. A decision model will

comprise of a problem representation, problem-solvingalgorithm(s) and parameters associated with the specificproblem under study. A process model for a selectedhealth care supply chain configuration will explicitlydefine processes (or activities) for all business entities suchas, manufacturers of medical supplies, componentmanufacturers, wholesalers/distributors, health careproviders, and patients (along with their characteristicscaptured as attributes and associated variables andparameters), from supply to demand stages. A health caresupply chain knowledge library will represent theknowledge captured for supply chain configurationsspecific to a problem domain. This knowledge can be

reused when problems with similar features areencountered in the future.

The unified representation of the supply chain problemassures data integrity. Modeling results are stored in thesupply chain modeling database and are available to aidsolving supply chain modeling problems with similarpoperties. Sharing of the modeling database over theInternet provides supply chain members with access todata. Utilization of generic decision models reducesmodeling resource requirements and allows directcomparison of multiple configurations.

Informal description

of supply chain

modeling problem

Supply chain

kernel

Development of

supply chain

process model

Process

model

Conversion

process model

into data base

format

Supply chain

modeling data

base

Generation of

tentative supply

chain

configurations

Suppliers data

base

Tentative supply

chain

configurations

Supply chain

decision modeling

Supply chain modeling

problem definition

Final decision

making

Final decision

Supply chain

modeling data

base

Modeling

results

Supply chain

knowledge

library

Figure 2. The proposed modeling methodology (Source:Chandra and Grabis, 2002).

5.1. Modeling methodology

The proposed methodology systematicallyevaluates a specific problem by designing, modeling, andanalyzing it according to its context in relation to the totalenterprise represented by a supply chain entity. The step-by-step problem evaluation adopted in this methodology isdescribed below.

Process model & modeling database. An initial state ofmodeling is either a current supply chain, which should bereconfigured, or a product or service specification, forwhich a supply chain is needed. The initial state generallyis described in an informal manner. A supply chain kernelprovides the template describing data requirements for theformal supply chain problem definition. Supply chainmodels are developed using the kernel data. Developmentof a supply chain process model is the next step of supplychain modeling. The process model provides an exhaustiverepresentation of the general supply chain managementproblem. It provides input data for other supply chain

models. Therefore, construction of the process modelfollows a set of rules elaborated to provide a consistent andgeneralized representation of the supply chain (Chandraand Marukyan 2002), which can be transformed in otherrequired data processing formats. The process modeldescribes the initial supply chain management problemreferred to as the base configuration. The process modeldevelopment is accompanied by creation of a supply chainmodeling database. This database is used to store anddisseminate the definition of the supply chain modelingproblem and modeling results. The database is createdusing a template of the standardized supply chainmodeling database model (Chandra and Chilov 2001). The

database is created using data extracted from the processmodel.

Tentative configurations. The proposed supply chainmodeling methodology is primarily aimed at dealing witha class of problems involving supply chainreconfiguration. This includes evaluation of alternativesupply chain configurations generated using informationfrom the suppliers database. Tentative configurations arestored in the supply chain modeling database, where theyare identified as alternative configurations to the baseconfiguration.

Decision modeling.Selected tentative supply chainconfigurations are evaluated using the decision modelingsystem. The decision modeling system emulatesconsequences of adoption of particular supply chainconfiguration and management policies. Each tentativeconfiguration representing the supply chain modelingproblem is retrieved from the decision modeling database.The relational representation of the supply chain modelingproblem is transformed into a format readable by decision


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model components. This format uses incidence matrices torepresent the supply chain modeling problem. Asimulation model is a major part of the decision modelingsystem. The simulation model is designed using thegeneric modeling approach (Chandra et al. 2000, andChandra and Grabis 2001), which is particularly wellsuited to deal with modeling of variety of supply chainconfigurations. Each configuration is evaluated under a

number of different scenarios. A scenario describesdifferent supply chain management policies,environmental and system parameters. Obtained results arestored in the database.

Decision making & knowledge accumulation. After thedecision modeling process is completed with all tentativesupply chain configurations, the modeling database storesa large number of alternative solutions to the initial supplychain management problem. A management problem is tofind a decision to be implemented. The problem isexacerbated by the fact that not all factors can beadequately represented in models and several solutions

may yield similar performances. This decision making canbe assisted by utilization of an enterprise knowledgelibrary.

If the decision modeling process is repeated routinely, thenenterprise level supply chain modeling knowledge isaccumulated in the modeling database. This accumulatedknowledge is used to create the knowledge library, whichstores information about management problems solved,alternative configurations considered, obtained modelingresults, implemented decisions and implementationappraisal. The decision implementation appraisal is thecrucial step to assure usability of accumulated knowledge.

New decisions can be matched to stored decisions andthose which are likely to yield unsatisfactoryimplementation results, can be filtered out using theappraisal criterion. The knowledge library is built utilizingthe concept of supply chain ontology described in Chandraand Tumanyan (2002).

6. Conclusions

This paper has provided a comprehensivediscussion on various aspects surrounding the need,efficacy, design, modeling, and implementation of a

Health Care Supply Chain. It has been proposed that theHealth Care industry can achieve efficiency in theiroperations through adoption of technologies, standards andpractices, and proven models and methodologiesdeveloped in the IE/OR fields which have beensuccessfully applied in many diverse industries formanaging supply chain logistics. The model andmethodology proposed in this paper should be validatedwith specific problems encountered in the Health Care

industry in managing supply chain logistics. It is the nextlogical step planned to extend this research.

References

Anonymous (2000). "Study: E-commerce will improvelogistics."Hospital Materials Management, 25(11): 2.

Bose, R. (2003). "Knowledge management-enabled healthcare management systems: capabilities, infrastructure, enddecision-support."Expert Systems with Applications, 24:59-71.

Bradley, P. (2000). "Taking on the health care supplychain."MSI: 50.

Brennan, C. D. (1998). "Integrating the healthcare supplychain."Healthcare Financial Management, 52(1): 31.

Chandra, C., and Chilov, N. (2001). Object-Oriented Data

Model for Supply Chain Configuration Management,Proceedings: Tenth Annual Industrial EngineeringResearch Conference(IERC), May 20-22, Dallas, Texas.

Chandra, C., and Grabis, J. (2002). "Modeling FloatingSupply Chains,"Proceedings: Eleventh Annual Industrial

Engineering Research Conference (IERC), May 19-22,Orlando, Florida.

Chandra, C. and Grabis, J. (2001). Reconfiguration ofmulti-stage production systems to support productcustomization using generic simulation models,

Proceedings: Sixth Annual International Conference on

Industrial Engineering, Marley, R. et al. (eds.), November18-20, San-Francisco, California, 9 pages.

Chandra, C., and Marukyan, R. (2002). "ElaboratingProcess Models for Supply Chain Reconfiguration,"

Proceedings: Eleventh Annual Industrial Engineering

Research Conference (IERC), May 19-22, Orlando,Florida.

Chandra, C., Nastasi, A. J., Norris, T. L., and Tag, P.(2000). Enterprise Modeling for Capacity Management inSupply Chain Simulation,Proceedings: Ninth Industrial

Engineering Research Conference(IERC), May 21 - 24,

Cleveland, Ohio.

Chandra, C. and Tumanyan, A. (2002). "Supply ChainReconfiguration: Designing Information Support withSystem Taxonomy Principles,"Proceedings: Eleventh

Annual Industrial Engineering Research Conference

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Dembeck, C. (2000). Online Healthcare Expected ToReach $370B by 2004,E-Commerce Times, (January 4),pp. 1-2.

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http://www.emarketer.com/images/chart_pdfs/020001-021000/020410.pdf)

Supply Chain Management Vertical Solutions (URL:http://www.cisco.com/warp/public/779/ibs/solutions/supply/vertical/)

Biographical Sketch

Charu Chandra is an Associate Professor in Industrial andManufacturing Systems Engineering at the University ofMichigan-Dearborn. He is involved in research in SupplyChain Management, and Enterprise Integration issues inlarge complex systems. His Ph. D. degree is in IndustrialEngineering and Operations Research from the ArizonaState University. He is a Senior Member of Institute ofIndustrial Engineers.

Swatantra K. Kachhal is Professor and Chair in Industrialand Manufacturing Systems Engineering at the University

of Michigan-Dearborn. He is involved in research inOperational issues in healthcare systems. His Ph. D degreeis in Industrial Engineering and Operations Research fromthe University of Minnesota. He is the current President ofSociety for Health Systems, a Fellow of Institute ofIndustrial Engineers, and a Senior Member of HIMSS. Hehas been a frequent presenter at SHS and HIMSS.

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