DEI and Supplier Diversity in Healthcare Supply Chain Management

• Kara L. Nadeau, Healthcare Industry Contributor

What does diversity, equity and inclusion (DEI) mean for healthcare supply chains? Explore known challenges as well as benefits to incorporating DEI considerations into strategic planning and how this could help shape a more resilient and socially responsible supply chain landscape.

Across industries, nearly half of supply chain organizations report having formal diversity, equity, and inclusion (DEI) business objectives, reported Gartner earlier this year.

There has been growing talk around supplier diversification as a resilience strategy since the pandemic prompted health systems, hospitals and their supply chain management professionals to rethink all aspects of the procurement process, from sourcing practices to logistics. Additionally, greater attention paid to the community public health impact of hospitals has spurred examination of supply chain's role in social responsibility.

Has the healthcare industry made progress in its efforts to identify business relationships outside of their standard channels by diversifying sources of medical supplies, and if so, what challenges have healthcare systems had to overcome and what benefits have they derived from their efforts? We explore answers to these questions in this article.

Table of contents

1. About DEI in healthcare supply chains
2. Challenges associated with DEI initiatives
3. The benefits of pursuing supplier diversity
4. Strategies for successful DEI programs

The Importance of Diversity and Equity in Healthcare

Diversity, equity and inclusion in supply chains involves integrating principles of diversity, equity, and inclusion into procurement processes, vendor relationships and overall supply chain management to promote fairness, innovation and community engagement.

"When a company invests in inclusive procurement and intentionally seeks to foster economic growth in a community, it helps to address the underlying factors affecting health equity."

Forging a Path to Health Equity Through Supplier Diversity (2024),

National Minority Supplier Development Council 

Looking at the big picture of diversity and social responsibility in hospital supply chain, the concept of equitable and inclusive operations that incorporate greater diversity of individuals and organizations aligns with the industry's efforts to engage in social responsibility, better serve their communities, improve population health and promote more sustainable supply chain practices.

For example, supply chain professionals that provide equal opportunities for local diverse-owned businesses to compete for supply and service contracts can contribute to improved public health and well being through economic investment in the community. When medical facilities support local businesses, this can spur the generation of more jobs, potentially those that provide employer sponsored health plans to employees, which in turn improves care access, including preventative care and treatment.

“I have seen health systems recognize the link between health equity, DEI programs, and the overall cost of healthcare in recent years, and how supply chain plays a significant role," said GHX President and CEO Tina Vatanka Murphy in a recent Healthcare Purchasing News interview. "Today, more healthcare organizations are actively seeking to engage a diverse range of suppliers, partners, and stakeholders from underrepresented groups."

Some examples of health systems and hospitals that are engaged in supply chain DEI efforts include:

1. NYC Health + Hospitals' Vendor Diversity Program, which leverages scoring preferences for Minority and Women-Owned Business Enterprises (MWBEs)
2. Cleveland Clinic's Diversity Equity Inclusion (DEI) Supplier Accelerator, which support local businesses and owned by traditionally under-represented entrepreneurs, including members of the LGBTQ+ community, minorities, veterans and women.
3. Trinity Health's Supplier Diversity Program, which seeks out proposals from women/minority business enterprises, veteran-owned and other disadvantaged business enterprise suppliers.

Challenges to Achieving Diversity and Equity

Achieving DEI goals remains complex however. There are a number of barriers facing supply chain professionals when it comes to diversifying their supplier base and engaging with local businesses/communities and measuring progress toward DEI goals:

• Capacity: Some healthcare leaders say it is a challenge to find certified diverse suppliers with the critical capacity to meet their organization's needs according to EY. Roadblocks can include fewer human resources than a larger supplier, limited logistics capabilities, lack of operational efficiency, inability to scale services to meet demand, less access to raw materials, etc.
• Measurement: Some health systems have limited data on their diverse supplier bases, as noted by Korn Ferry analysts. They likely know their total number of diverse suppliers, but lack details on ownership designations (e.g., which businesses were run by women, minorities, veterans or LGBTQ+ individuals). Lack of visibility challenges DEI program management, including the ability to track progress with specific diversity goals.
• Insurance requirements: Health system and hospital finance departments criteria for suppliers’ insurance could exceed what the target DEI businesses have in place. While a large business in health care supply chain is accustomed to complying with healthcare providers for insurance, requisitioning practices, payment terms, and more, a smaller business might not have the resources to meet these requirements.
• Not knowing where to start: A Gartner survey revealed that three-quarters of supply chain management organizations report focusing on some dimension of diversity. However, only 40% are working on specific DEI initiatives and many are struggling to determine which initiatives to fund and which will have the most impact.
• Perceived costs: As SMI points out, "It is often a false assumption that supplier diversity will add costs to an organization." Even if a diverse healthcare supplier has proven ability to support sustainability, streamline logistics and supply management, or provide an essential serve to local communities, if the costs (or perceived costs) of doing business with them are higher, it can be harder to gain buy-in from executive leadership.

Benefits of Enhancing Diversity in Supply Chains

Healthcare providers with a broader supplier base can improve supply chain resilience, access a wider range businesses and supplies and reduce costs by increasing supplier competition for contracted medical supplies. When they do so with DEI in mind, they have a unique opportunity to benefit their local communities too.

Improving Healthcare Outcomes and Costs through Diverse Partnerships

Contrary to the assumption that diversifying suppliers can add costs, there are real-world examples of positive financial results too. Theresa Harrison of EY shared an example of a health system that cut costs and improved patient care and experience simultaneously by switching to a diverse supplier.

According to Harrison, the hospital was "spending a fortune on wheelchairs" sourced from a "large kind of multinational, non-diverse owned company" because the tires consistently suffered damage and had to be changed. The hospital switched to a local, diverse-owned wheelchair supplier that understood the physical grounds around the hospital and provided a different type of wheelchair to meet the terrain demands and patient needs. No longer having to frequently pay for replacement tires, the hospital lowered its costs, and patients had the benefit of reliable wheelchairs.

Fostering Innovation and Excellence

“Supplier diversity enhances the supply chain by bringing greater innovation and by driving greater value through cost reductions, competitive contract terms and conditions, and improved service,” said Timothy Martin, Manager, Contracting, Laboratory & Supplier Diversity for CHRISTUS Health.

One example of innovation in the realm of supplier diversity is MightyWell, with began with co-owner Emily Levy's challenging experiences with medical supplies and living with PICC lines and an implanted chest port. The MightyWell team "believed the standard of care deserved a transformation - one that prioritizes patients and equips them to be informed advocates."

Since creating their first prototype of the PICCPerfect PICC Line Cover in 2014, Mighty Well has helped thousands of patients upgrade their medical supplies, making it easier to advance their recovery with strength, resilience, and a positive outlook.

Strengthening Community Relationships and Social Responsibility

“We spend over $3.5 billion a year, and we’re going to spend that regardless. So why not spend it in our communities and make a bigger impact with those dollars by creating jobs and supporting economic stability? As an institution, we can make sure that our patients are not only physically healthy, but economically healthy as well," said Cleveland Clinic’s Supplier Diversity Director Berlon Hamilton.

For example, Trinity Health's DEI and supplier diversity programs are having a measurable impact on their community, minority-owned suppliers and further afield. In 2023, they spent $431M with diverse vendors as Tier 1 spend, advancing on Gartner Healthcare Supply Chain Top 25 ranking to 11th place in 2022.

Within the framework of Trinity Health's DEI program, Holy Cross Health in Maryland, launched employment and career development programs, as well as a food bank that has provided fresh fruit and vegetables for over 1,000 colleagues in need.

Strategies for Promoting Diversity and Equity

Whether the goal is to positively impact public health, support sustainability goals, boost supply chain efficiency by sourcing locally, or some other objective, here are some essential aspects of effective DEI program management. You may also want to read this compelling article that provides clear guidance on how to make ESG a priority for healthcare supply chains.

Conduct a Supply Chain Diversity Audit

Before getting started, perhaps the most constructive place to start is by auditing your current operations through the lens of diversity. One challenge that many providers face is that lack of data on their supplier base, including which suppliers fall into the DEI category (often set at the threshold of 51% owned, operated, and controlled by minority group members). By understanding where you stand, you can determine the best path forwards.

Set Clear Goals

It is particularly helpful to align supply chain DEI efforts with organization-wide objectives. For example, if the organization has prioritized sustainability, set goals to engage with diverse suppliers that employ sustainable practices of their own, such as the sourcing of sustainable raw materials for supply production or use of electric vehicles in their logistics fleets.

Get Leadership Buy-in

To gain buy-in for DEI investments, it is critical to demonstrate potential ROI, whether it is the ability to reduce costs, contribute to the economic growth of communities, access better quality supplies, or support sustainability by shortening the length of supply chain and its impact on the environment. Use data and real-world examples to illustrate your goals and expected outcomes to demonstrate the value of the initiative.

Change Management

Gaining traction when executing a DEI initiatives requires effective change management. Education and training is critical, not only for supply chain staff, but also clinicians and other stakeholders. By demonstrating the benefits of supplier diversity will help them understand the reasons behind procurement changes.

Continuous Monitoring to Improve Processes

Accurate data and actionable analytics are key to monitoring DEI initiatives in supply chain management and measuring improvement. GHX's Marlin Doner offered this advice:

"Establish your baseline and set a meaningful target for improvement. What percentage of supply spend does your organization want to align with ESG goals – 5%, 10%, 20% of spend? To make your work measurable, put in place a mechanism for tracking progress toward the ESG purchasing volume target and reporting on your impact."

GHX Marketplace features artificial intelligence (AI), including machine learning and patented Smart Search technology, to support supply chain management leaders in meeting their DEI goals, including directed buying toward preferred sources and products.

FAQs about Diversity in Health Care Supply Chain Management

Q: Why is diversity and equity important in health care supply chains?

A: By providing equal opportunities for diverse suppliers and fostering partnerships with local businesses, healthcare organizations can enhance supply chain resilience, improve patient care outcomes, and contribute to economic growth within their communities.

Q: How can healthcare organizations assess their supply chain diversity?

A: Healthcare organizations can assess their supply chain diversity by conducting a comprehensive audit to understand the current scope of diverse suppliers and identify areas for improvement.

Q: How do diverse supply chains impact health care outcomes and patient care?

A: Broadening the supplier base enhances supply chain resilience, access to a wider range of businesses and supplies, and reduces costs through increased competition for contracted medical supplies, ultimately benefiting patient care.

Q: What challenges might hospitals face in improving supply chain diversity and how can these be overcome?

A: Hospitals may face challenges in gaining leadership and stakeholder buy-in, finding diverse suppliers with sufficient capacity, and overcoming existing vendor requirements that may exceed what DEI businesses have in place. They can help overcome these challenges by presenting examples of DEI initiative success from other healthcare organizations, implementing effective change management strategies, including education and training, phasing in smaller suppliers with limited capacity, and streamlining procurement processes and requirements.

Sources

1. Gartner Survey Finds 49% of Supply Chain Organizations Have Formal DEI Objectives, January 25, 2024, Gartner, https://www.gartner.com/en/newsroom/press-releases/2024-01-25-gartner-survey-finds-49-percent-of-supply-chain-organizations-have-formal-dei-objectives
2. Supplier diversity: What to know and where to go, JP Morgan, August 25, 2023, https://www.jpmorgan.com/insights/corporate-responsibility/diversity-equity-and-inclusion/supplier-diversity-definition-benefits-and-important-resources
3. Forging a Path to Health Equity Through Supplier Diversity, National Minority Supplier Development Council, January 22, 2024, https://nmsdc.org/blog/forging-a-path-to-health-equity-through-supplier-diversity/
4. Vendor Diversity Program, NYC Health + Hospitals, https://www.nychealthandhospitals.org/doing-business-with-us/vendor-diversity-program/
5. Cleveland Clinic and University Hospitals Continue Collaboration to Support Economic Opportunity for Local Suppliers, Cleveland Clinic, September 12, 2023, https://newsroom.clevelandclinic.org/2023/09/12/cleveland-clinic-and-university-hospitals-continue-collaboration-to-support-economic-opportunity-for-local-suppliers/
6. Diversity, Equity, and Inclusion Advance Supply Chain Operations, Healthcare Purchasing News, March 26, 2024, https://www.hpnonline.com/sourcing-logistics/article/53098241/diversity-equity-and-inclusion-advance-supply-chain-operations
7. Supplier diversity: how health and life sciences executives can drive business and social value, Insights and observations 2023, EY
8. Scaling DE&I through supplier diversity, Korn Ferry, https://www.kornferry.com/insights/featured-topics/diversity-equity-inclusion/scaling-dei-through-supplier-diversity
9. Chapter 1. Setting the Stage, Building a Successful Supplier Diversity Program, SMI, https://www.smisupplychain.com/programs/smi-supplier-diversity-playbook/chapter-1/
10. A Proactive Approach to Supplier Diversity, HealthTrust, https://healthtrustpg.com/thesource/workplace-trends/supplier-diversity/a-proactive-approach-to-supplier-diversity/
11. About Us, MightyWell, https://mighty-well.com/pages/our-mission
12. Accelerating Contract-Readiness for a Diverse Community of Suppliers, Cleveland Clinic, January 24, 2023, https://consultqd.clevelandclinic.org/accelerating-contract-readiness-for-a-diverse-community-of-suppliers/
13. 4 Ways Directed Buying Can Help You Achieve Your ESG Goals, GHX, October 24, 2023, https://www.ghx.com/the-healthcare-hub/how-to-make-esg-healthcare-priority-for-scm/#for-esg-initiatives
14. GHX Marketplace, https://www.ghx.com/order-automation-providers/marketplace/

Kara L. Nadeau

Healthcare Industry Contributor

Kara L. Nadeau has more than 20 years of experience as a writer for the healthcare industry, working for clients in fields including medical device/supply manufacturers and distributors; software, solution and service providers; hospitals and health systems; and industry associations.