ERP vs. Best-in-Class — What is Best for Managing the Healthcare Supply Chain?

di Vishal Patel

ERP vs. Best-in-Class for Healthcare Supply Chain Management? They both do the same thing, or do they?

Are ERP systems better than best-in-class supply chain solutions for managing healthcare supply chains? What are the pros and cons, and what supply chain strategy will pave the way to higher margins, improved supply chain risk management in healthcare and improved patient care?

When RiseNow’s Matt Stewart hosted a recent panel discussion with Procurement and Supply Chain experts, we joined consultant Michael Wentling, Owner and Principal, Wentling Consulting to answer that specific question and to explore this issue in depth.

In terms of feature vs. function, they appear the same, but are they?

The verdict? Best-in-class solutions come out ahead in all areas — from user experience, to ROI, to features and functionality that help organizations run world-class healthcare supply chain operations.

Why ERP Implementations Fail and will fail for Healthcare Supply Chains

According to Gartner, up to 67% of ERP implementations fail — and as more solutions migrate to the cloud, they predict the failure rate could climb to as much as 90% by 2025. Why? 

According to the experts, there are three common reasons:

1. One size does not fit all: SaaS software is built to meet the requirements of a wide array of users, but in for Healthcare supply chains to function, industry specialization is critical. 
2. Implementation is challenging: Healthcare organizations tend to underestimate what’s involved with successful implementation. They may not consider potential issues of integrations, supplier onboarding, supply chain data management, change management and system optimization, all of which add to complexity and costs.
3. The “how” of using features and functions is unclear: Distracted by the bells and whistles of a feature-rich platform, organizations may not fully understand how to maximize the value of available features. 

Aside from these three common pitfalls, if IT or the business rushes forward with an implementation before fully understanding the needs and concerns of each other, problems inevitably arise. For example, a single-stack approach can lead to low user adoption, because the incumbent sourcing solution, for example,  fails to meet the needs of various business units. 

As a result, point solutions have to be added on to fill the gaps, leading to complexity, integration issues and high overhead. This could be why, according to Forrester, 82% of organizations regret their software selection within 12 months.

In such cases, a better approach is to implement a best-in-class supply chain solution, because the business and IT can find common ground. When key processes, features and functions are integrated into a single suite, there are no integration issues, less IT complexity, and the end-user experience improves. 

What Makes a Supply Chain Solution Best-in-Class?

According to the panelists, there are some key features and functionality that make best-in-class supply chain solutions a better choice for healthcare organizations:

• Guided procure-to-pay compliance: The concept of compliant purchasing in healthcare encompases the front-end user experience. Providing an Amazon-like experience increases user adoption. ERPs tend to be built for the back office, so they lack the consumer-like user experience that leads to high user adoption among suppliers. Adding on a point solution to improve adoption is like putting a bandaid on the problem, but doesnt’ fix the root cause. Additionally, a purpose-built solution will enable you to measure and monitor buyer adherence to compliance purchasing, ensuring your team is taking advantage of preferred items and reaping the rewards of the contracts you have in place. A best-in-class solution may also offer inventory management features to enable you to auto-replenish orders, as well as workflows with client-defined business rules to enforce payment channel buying strategies.
• Sustainable master data management and governance: As much as 55% of projects fail due to data management issues. ERP solutions often lack robust capabilities around managing all of the data attributes for products and vendors, and cannot update them in real time or in an automated fashion. A purpose-built solution can enforce proper governance and standards, automate master data optimization activities, identify product standardization opportunities, and automate category management for strategic sourcing in supply chain.
• Demand planning capabilities. Demand planning is the ability to create forecasts that predict the future need for your products. This capability is not available in any ERP, but a best-in-class supply chain solution will provide dozens of models for you to shape your usage for the future. It may even suggest a best fit based on past trends, and help you work through “what if” scenarios, for example if you’re planning to consolidate or change services. These features are extremely valuable, as they help healthcare organizations get to the next level of inventory and purchasing optimization.
• Efficient warehouse management. Warehouse management in the healthcare industry requires transactional efficiency across order, labor and inventory management every day. In healthcare, procurement must deal with a high volume of serial numbers and expiration dates, and when you’re buying for multiple hospitals, trying to manage that with an ERP system is impossible. Research shows that healthcare organizations who had already moved to using a consolidated service center and best-in-class warehouse management system prior to the pandemic were able to successfully manage demand for PPE. 
• Point-of-use data capture. Best-in-class solutions do a better job of capturing usage data for healthcare products at the time of patient use. This helps to increase visibility and improve charge capture per case, while improving the accuracy of the product-to-patient match and enabling better product data retention.

Total Cost of Ownership, ERP appears to be cheaper, but is it?

In addition to all of these benefits, the total cost of ownership of an ERP-based solution is higher. In fact, 74% of ERP implementations go Over Budget and they take longer to roll out. Upgrades can be disruptive to the rest of the business. By contrast, implementations of best-in-class solutions are typically done on budget due to fixed fees and reduced complexity. Because they’re SaaS-based, they can be implemented in about six months, and upgrades are seamless — you just turn them on to start using them. 

What is the benefit of using a single source to pay solution?

During the webinar, Ivalua’s Zinkand explained how Baylor Scott and White has leveraged the many benefits of the best-in-class approach by implementing Ivalua’s best-in-class Source-to-Pay solution as part of its digital transformation effort. By building a world-class operation, with supply chain resilience built-in, Baylor Scott and White’s procurement organization recouped its initial investment within a year and is on track to save $100 million over three years. 

Best-in-Class Beats Single-Stack

Given all of the benefits of going with a best-in-class supply chain solution over an ERP-based implementation, it’s no surprise that Gartner predicts just 10% of organizations running a cloud-based ERP will leverage their ERP solution for more strategic processes such as e-sourcing, contract management and spend analysis by 2025. It seems that the era of best-in-class supply chain solutions has arrived.

Ivalua is helping leading healthcare organizations transform their supply chains and better align supply chain operations and spending to care delivery models. Organizations stand to reduce operating costs, increase supply chain visibility and automate procurement processes, enabling clinicians to focus on delivering exceptional patient care. Learn more about Ivalua’s healthcare-focused solutions today.