Academic journal article Journal of Theoretical and Applied Electronic Commerce Research

Supplier Relationship Management: A Case Study in the Context of Health Care

Academic journal article Journal of Theoretical and Applied Electronic Commerce Research

Supplier Relationship Management: A Case Study in the Context of Health Care

Article excerpt


Supplier Relationship Management (SRM) plays an important role in the reduction of costs and the optimization of performance in industrial enterprises. Despite enormous investments in innovation, the health care sector has not experienced fundamental change yet. However, increased market dynamics and the implementation of economic principles will force health service providers to optimize cost structures as well as effectiveness and efficiency of business relationships. This paper reviews the current state of the art in the field, translates and amends the current findings for the health care context, and presents a case study illustrating the impact of the implementation of SRM principles in a leading Swiss hospital.

Key words: Business Networking, E-Business, E-Collaboration, E-Procurement, Health Care, Supplier Relationship Management, Supply Management

1 Introduction

The adoption of information and communication technology (ICT) in health care is currently seen as an opportunity to improve not only effectiveness, efficiency, and quality of health services but also the transparency of the economic activities and the availability of information in real time [65]. Despite enormous investments in innovation and the magnitude of the opportunities for innovators, the health care sector has not experienced fundamental change yet [23]. However, the pressure to achieve effectiveness and efficiency is set to increase significantly as in many countries economic principles, such as fixing rates for medical treatments or charges for medical registration, are introduced in order to reduce health expenditures and enhance the competition among the health care providers.

Although labor costs constitute the major share of the total costs of a medical treatment, there is still a major economic potential in improving expenditure on materials and services [15], [25]. One source to reduce costs and enhance service delivery can therefore be found in the sophisticated management of the relationships with suppliers, commonly referred to as supplier relationship management (SRM) [30]. For doing so, a wide spectrum of managerial tools and technological aids have been developed, mainly in highly competitive sectors e.g. automotive or engineering [8], [49], [53]. However, the not reflected usage of these instruments is inadvisable since health care has considerable differences compared with the mentioned sectors (e.g. extensive governmental control, permanent obligation for service delivery, the structure of a seller's market).

Nevertheless, in health care research and practice the concept of SRM is not paid much attention yet. The weak positioning of the purchasing department in the value chain of health service delivery and resulting low attention on the part of the hospital's board of directors makes it difficult to promote the purchasing function from a pure cost driver to a respectable facilitator of health service delivery that contributes to revenue increases, knowledge acquisition, and added value to the organization. Accordingly, hospital buyers were just expected to attain the best price for the needed goods. Therefore trust between the buyer and the supplier is weak and the relationship is oftentimes adversarial. Due to the onward 'marketization' of health care, open-minded hospital managers expect that the hospital procurement department will increasingly contribute to revenue gains and to knowledge acquisition in future [57]. In order to achieve this goal, the hospital purchasing departments have to better integrate internal consumers as well as the external suppliers. Hence, cooperation (trust and commitment), coordination (processes and work practices), and communication (information systems) will be the key concepts to implement the required change. However, as the current research is mainly focused on industrial enterprises, it is the aim of this paper to provide an actual but sector-specific discussion of the subject matter and present first experiences of a SRM implementation project of a Swiss hospital. …

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