A Framework for Success: Applying the Baldrige Excellence Framework to the Healthcare Supply Chain

March 28, 2016 | Content Areas: Performance Metrics | Tags: Analytics, Benchmarking, Clinical Resource Management, CQO, Lean/Six Sigma | Formats: White Paper
Authors: Jon Reiners, CMRP, FAHRMM

Jon Reiners, CMRP, FAHRMM
Director, Materials Management
Community Hospital
McCook, NE


The pervasive influences of volatility and uncertainty continue to shape the healthcare landscape within the United States. Financial stressors and shifting regulatory burdens are pushing some hospitals to their breaking point, causing many healthcare providers to turn inwardly to find ways to become more efficient and profitable. Supply chain is increasingly becoming the focus of senior leadership, and supply chain leaders that deliver sustainable results in this environment have much to gain. While enhanced focus and support from the C-Suite will be welcomed by most supply chain professionals, new tools and tactics may be required to achieve long term success. One such tool is the Baldrige Excellence Framework.

This paper explores the application of the Baldrige Excellence Framework to the healthcare supply chain. Specifically, the paper will explore the reasons that the Baldrige Framework might be used to evaluate and improve supply chain systems and processes. An examination of the need of a systems perspective will be followed by a brief overview of the Baldrige program. The complexity of the supply chain work system will be explored, making the case that supply chain can be evaluated as its own entity. The paper will then center on a discussion of how each of the seven criteria categories can be applied to the healthcare supply chain, and how such an application may yield supply chain results.

The Work Systems View of the Healthcare Supply Chain

The healthcare supply chain has come a long way. Not long ago, the concept of supply chain management was foreign to most hospitals. Over the last few decades, many providers have experienced the departmental evolution from Purchasing to Materials Management, and now, Supply Chain. The impetus behind these changes wasn’t to find a better name, but to reflect expansion of departmental scope and accountability, representing a shift in duties from a narrow, tactical focus to a broad, strategic focus centered on the alignment of supply chain strategy with organizational strategy. As the scope of supply chain processes has increased, so has the complexity. Today’s supply chain leaders need new tactics and strategies to maximize their contributions to the organizations they serve. This paper explores one such new strategy, the application of the Baldrige Excellence Framework to the healthcare provider supply chain work system.

Regarding the complexity of today’s supply chain, consider the following definition of supply chain management, according to Schneller & Smeltzer (2006):

The term supply chain management refers to the traditional materials management function of product selection, procurement, and distribution. Operationally, the supply chain management functions combine related functions such as purchasing, inventory, control, and stores under the authority of one individual…It includes the upstream aspects of purchasing that require planning, forecasting and scheduling material flows from suppliers and downstream aspects that include internal distribution channels, processes, and functions that product passes through on its way to the end customer. Supply chain management also includes internal functions associated with transforming the inputs from suppliers into units that could be applied at the point of service. (p. 30)

While the number is growing, few healthcare providers have realized this level of supply chain integration. The voluminous scope of supply chain processes require visionary leadership and a rigorous focus on implementing and maintaining discipline to achieve sustained success. Viewing supply chain as a work system within the enterprise allows for end-to-end visibility of supply chain systems and processes.
According to Steven Alter (n.d):

A work system is a system in which human participants and/or machines perform work (processes and activities) using information, technology, and other resources to produce specific products/services for specific internal and/or external customers. Typical business organizations contain work systems that procure materials from suppliers, produce products, deliver products to customers, find customers, create financial reports, hire employees, coordinate work across departments, and perform many other functions. (n.p.)

This type of systems thinking allows departmental silos to be broken down by taking a holistic view of the supply chain, with processes taking place across multiple organizations, such as vendors, GPOs, and providers, and within virtually every department of the provider organization.

Viewing the supply chain as a work system does not mean that it is considered to be separate from the healthcare provider organization; rather, it should be viewed as one of a number of interdependent work systems, each with its own set of inputs, processes, constraints, requirements, and customers. All work systems should be aligned and focused on the mission of the organization. One example of how this can look is represented below in Community Hospital’s Enterprise Work System. Supply chain supports the leadership and care delivery work systems, thereby supporting the organization’s mission and strategic objectives.

Figure 1. Community Hospital, McCook, NE Enterprise Work System. This figure represents one interpretation of a work systems view of an organization, and supply chain’s fit within the overall system.

The diagram addresses the question of where the work system fits in the enterprise, but it doesn’t answer the most important questions. Questions such as: Are we focused on the right things? How good are we really? Are we good enough? How do we know? These are exactly the types of questions that the Baldrige Excellence Framework can help you answer.

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Introduction to the Baldrige Program

According to National Institutes of Standards and Technology (n.d.):

In the mid-1980s, U.S. leaders realized that American companies needed to focus on quality in order to compete in an ever-expanding, demanding global market.  Then-Secretary of Commerce Malcolm Baldrige was an advocate of quality management as a key to U.S. prosperity and sustainability. After he died in July 1987, Congress named the Award in recognition of his contributions.  The goal of the Malcolm Baldrige National Quality Improvement Act of 1987 was to enhance the competitiveness of U.S. businesses. Its scope has since been expanded to health care and education organizations (in 1999) and to nonprofit/government organizations (in 2007).  Congress created the Award Program to identify and recognize role-model businesses, establish criteria for evaluating improvement efforts, and disseminate and share best practices. (n.p.)

The Baldrige Performance Excellence Program exists to support organizations in achieving performance excellence. Organizations attaining this level of performance may receive the Malcolm Baldrige National Quality Award; however, as most award recipients will validate, the award is a destination. The value in the Baldrige process is in the journey itself, pursuing excellence at every level of your organization.

The Baldrige Performance Excellence Program (2015) quoted Rulon Stacey, former CEO of Poudre Valley Health System in Fort Collins, CO, a 2008 award recipient as saying:
I honestly in my heart believe that because we participated in the Baldrige Program and because it gave us that consistent feedback, there are people who are alive today that wouldn’t have been had we not been so committed to the Badrige process. (p. ii)

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Criteria Categories and Their Application to the Healthcare Supply Chain

While the Baldrige framework was designed to evaluate an entire organization, such as a manufacturer, business, or healthcare provider, the Baldrige Framework may be used to evaluate the performance of the healthcare provider supply chain as a standalone work system. Although a few of the questions may be less relevant at the work system level, most will still apply, and may be used to push supply chain performance to a new level.

The Baldrige Excellence Framework contains 7 categories: Leadership; Strategy; Customers; Measurement, Analysis, and Knowledge Management; Workforce; Operations; and Results. Each category contains a series of questions to assess how you approach the work of the category, whether you have deployed the approach to the correct people, how aligned the approach is with organizational needs, and whether you are learning from your efforts so that you may improve. The criteria does not provide a roadmap for accomplishing objectives; rather, it asks what you do and how you do it, yielding an introspective look at the systems and processes you have in place. The questions are to make you think; the answers you must come up with on your own.


We all know the importance of leadership. A visionary leader is that special kind of person who inspires you to push farther and climb higher than you ever thought possible, not through fear or badgering, but because they saw in you something you didn’t see in yourself. According to Daskal (n.d.), Ronald Reagan said: “The greatest leader is not necessarily the one who does the greatest things. He is the one that gets the people to do the greatest things” (n.p.). People often speak of great leaders with regards to their vision. While it is true that great leaders usually possess a strong vision of the future, vision by itself doesn’t ensure success. The achievement of a vision requires patience, planning, and discipline. What is needed to implement such a vision is a leadership system that is systematically deployed to convey consistent messages, create a shared vision, cultivate a culture of excellence, and reinforce organizational values.

The Baldrige criteria can help you to assess your leadership structure and programs. For example, category 1 questions ask about the use of a formal leadership system, including questions such as: How you deploy your mission, vision, and values? How do your leaders communicate? What is your governance structure? How do you promote ethical behavior and meet your societal responsibilities? To answer criteria questions effectively, you must demonstrate a systematic approach to address each item, with a documented process for deploying the approach to all relevant members of the workforce.

To see how this could apply directly to supply chain, let’s take one specific section of Category 1: The questions that ask about Mission, Vision, and Values (MVV). While it may be ill advised to draft supply chain specific core values, supply chain leaders should have a process to draft, deploy, and systematically revise and review a mission and vision unique to the supply chain that supports the organization’s mission and vision. This is typically accomplished through the supply chain strategic planning process. The criteria forces an evaluation of this process, focusing on things such as how the MVV are deployed not only to the workforce, but also to key suppliers, partners, stakeholders, and customers. Full deployment of the MVV to suppliers and partners, in addition to the internal customers of supply chain ensures alignment both upstream, to suppliers and partners, and downstream,to supply chain customers.

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According to The Marketing Therapist (n.d), Sun Tzu said “Tactics without strategy is the noise before defeat” (n.p.). Healthcare supply chain executives work in an incredibly dynamic environment. They are tasked with working with a diverse group of stakeholders, often with competing interests, to produce results in a volatile market filled with uncertainty. All of this chaos can make it rather difficult to prioritize improvements. How do supply chain leaders know which opportunities to pursue, or what activities should they continue, improve, or discontinue? The key to answering these questions is strategy, and a strategic plan for supply chain is of paramount importance. An effective plan flows from and supports the organizational strategic plan, assessing the strategic direction of the organization and supporting organizational initiatives, ensuring a supply chain that is integrated and responsive to the needs of the organization. A good strategic plan also aligns objectives with the needs and desires of the customer.

The criteria assess many facets of strategy development and deployment, including the strategic planning process, strategic objectives, action plan development, and action plan modification. As with all sections of the criteria, to satisfy the requirements, an effective, systematic approach should be present, and it should be fully deployed to the workforce. For example, questions about planning horizons, participants in the planning process, the stimulation of innovation, action plan deployment and modification, and performance measures are just a few of the items to consider within this section. Using the criteria to systematically develop and deploy a supply chain strategic plan will help to focus resources where they matter most.

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The next section of the Baldrige criteria assesses how you gather information from and engage your customers. It is with good reason that most businesses expend incredible quantities of resources to ascertain the opinions of their customers. What are their likes? Dislikes? Preferences? Needs? Wants? These questions and more are critical for companies tailoring goods and services for their customers, but what about the health provider supply chain?

A good start is defining who the customer is. In healthcare, we often think of the patient as the customer. While the patient is clearly a customer of the health system, they are at most a secondary customer of supply chain.
According to Schneller & Smeltzer (2006):

Patients, with virtually hundreds of different medical problems or diagnoses, are the downstream recipients of an incredible host of nonclinical and clinical products and services.  Patients are the source of revenues and the recipients of the value attached to goods and services, traditionally they only marginally influence the upstream decisions that are made…patients are actually in a position to express their preferences in only a minority of instances.  (pp75-76)

While patients may choose to receive their care at a certain provider, they rarely, if ever, choose which products will be used, and often aren’t paying for those items. They are a downstream recipient of supply chain products and services, but are clearly not the primary customer. Typical supply chain outputs include such things as supplies, inventory, cost reductions, and contracts. Keeping in mind that the customers of supply chain would be the direct recipients of supply chain outputs, it becomes easy to understand who the customers of supply chain are. Obviously physicians and clinicians would be in this group, but so would support, ancillary, and administrative staff at virtually every level. Depending upon the process, vendors, partners, and regulators may also be customers.

Once you have a solid definition of who your customers are, you may then begin to work through the criteria questions regarding how you manage customer relationships. The criteria push you to consider how you aggregate dissatisfaction data, manage complaints, and enable your customers to seek information and support, among other things. Most healthcare supply chain leaders are familiar with patient experience data such as the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS), and understand the importance of patient satisfaction data to the hospital or health system in which they work, but how many supply chain leaders have taken that same concept and built a customer relationship management model for the internal customers of their supply chain? Doing so may identify areas of opportunity, and help supply chain leaders ensure that customer expectations are realistic and achievable.

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Measurement, Analysis, and Knowledge Management

We live in a measurement age. There is almost nothing we can buy or use that hasn’t been measured at numerous points in the production, sales, and delivery processes. Automated manufacturing processes have allowed us to produce reliable, repeatable product quantities, thereby maximizing manufacturing efficiencies and, of course, profits. While standardized units of measure for trade date back to Biblical times, the type of measurement we will be focusing on is a somewhat newer idea.

Performance measurement, as the name suggests, measures the performance of a process or set of processes. It helps organizations answer questions such as: How are we really doing? Where do we need to improve? Category 4 of the Baldrige criteria is titled Measurement, Analysis, and Knowledge Management, and asks you to consider how you collect, analyze, control, and use performance data to drive innovation and improvement. Questions in this section push you to consider how you incorporate the voice of the customer into your data, how you conduct regular organizational performance reviews, what systems and controls you have in place to ensure the validity and security of your data, how agile your measures are, how you share best practices across the enterprise, how you project future performance, and how you use comparative data to measure performance.

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Many unknowns are evidenced as we consider the future of the healthcare providers, but there is one glaring certainty: If we are to build supply chains that thrive in the future state, we must recruit, mentor, develop, and retain the right people to lead, manage, and implement supply chain operations. Many supply chain jobs have evolved from the stereotypical positions of purchasing and receiving to positions like planning, project management, and data analytics. Continued market upheaval and technological advancements make it plausible to assume that this evolutionary trend will continue for the foreseeable future, creating the need for supply chain staff who are able to quickly assimilate new concepts, skills, and ideas into their daily tasks. Additionally, senior leaders must ensure that they have the right numbers of the right people in the right positions to meet current and future demands. In all of these cases, the Baldrige Excellence Framework can help.

The criteria questions for the workforce section ask you to consider how you build an effective workforce environment, empower employees, and create a culture of high achievement. This sounds fairly open ended, but as you dig into the criteria questions, you find that the criteria force you to consider systematic approaches for such items as how you; assess and adjust your workforce capacity and capability needs; ensure health and safety within the workplace; support the workforce via services, benefits, and policies; prepare the workforce for changing capacity and capability needs; foster a culture of communication, engagement, and high performance; and develop a learning management system that supports organizational and personal development needs within the workforce.

Frequently, supply chain leaders will leave many of these tasks to the human resources department. While human resources may be the ones implementing and/or carrying out workforce development initiatives, supply chain leadership should be engaged with these processes, providing suggestions, and helping to tailor programs to supply chain staff when it makes sense to do so.

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Operations are the day to day tasks your organization performs. Think of operations as the “what” in the question: What do you do? According to BusinessDictionary.com (n.d.), “Operations transform resource or data inputs into desired goods, services, or results, and create and deliver value to the customers” (n.p.). To put it another way, operations are the processes, tasks, and activities that create and enable the creation of value for your customers. In the healthcare supply chain, operations encompasses such things as sourcing, procurement, receiving, distribution, logistics, and value analysis.

The Baldrige criteria for the operations category pushes you to consider a structured approach to how you design, implement, measure, control, and improve your operational services and processes. Considerations must be made for your process requirements, as well as how you validate those requirements with your customers to ensure that they are accurate. Further, you are asked to consider how you leverage your core competencies and build on them to ensure that you are maximizing operational performance.

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Accord to Goodreads.com (n.d.), Henry Ford once said “You can’t build a reputation on what you are going to do” (n.p.). In other words, talking and planning are all well and good, but without disciplined action, planning will not bring you to your ultimate goal: favorable results. Category 7 of the Criteria is focused solely on results. While categories 1 through 6 ask what you do and how you do it, Category 7 evaluates the fruits of those labors by reviewing results data. This category asks you for all relevant measures for the items you discussed in categories 1 through 6. While this seems to be a little more straightforward than the other categories, as the numbers “are what they are,” there is a little more to it than just looking at today’s performance.

Results are assessed based upon current levels, trends, comparisons, and integration. Current levels are just what they seem, a quantification of today’s performance. Using inventory turns as an example, let’s assume that your most recent calculation of inventory turns is 6. This performance level may or may not seem good to a given individual, but the fact is that the level by itself does little to indicate marketplace performance. We need some more information. Let’s assume inventory turns performance over the last 4 years was 11, 9, 10, and 6. The historical data, then, reveals a trend that is not beneficial. In this case, the current inventory turns level of 6 is most likely indicating poor performance, and should be improved. 

If we assume that the previous example demonstrated a positive trend (enhanced performance over a period of time), there is still insufficient data to determine performance in the marketplace. Comparative data is required to assess performance. Many organizations will compare their data to a national average, or a local or regional peer group. While this may be helpful to some degree, organizations that strive to be world class shouldn’t compare themselves to average performers. Thus, comparisons should be at the national benchmark (top 10%) level. Doing so sets the bar high, but allows organizations to strive for role model level performance. The last area of assessment for results is integration. Integration is, quite simply, alignment. Measures must be aligned with the needs of your organization. As measures are selected, reported, and analyzed, it should be obvious how success for each measure contributes to the success of the organization, or to the achievement of a strategic objective.

One last note regarding results: sustainable results are the product of focused effort demonstrated through systematic approaches rigorously deployed and perpetually improved. For an organization to deliver sustainable high performance, it must be continually learning and growing; however, it is possible for a short period of time for an organization to demonstrate positive results without having caused it themselves due to some market condition. High performance today is not a guarantee of success tomorrow. Leaders that desire to build truly great supply chains must make the commitment to engage in continuous cycles of learning and improvement. Doing so helps to pave the road for sustainable success in the marketplace.

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Since its inception, the Baldrige Excellence Framework has been utilized by numerous institutions to further their journey to performance excellence. Viewing the healthcare provider supply chain as a stand-alone work system allows the ability to utilize the framework to assess supply chain capacity, capability, and performance at all levels. The methodologies of the framework allow supply chain leaders to use it as a vehicle for continuous improvement. As the supply chain work system is formally reviewed and evaluated across each of the 7 criteria categories in the framework, strengths and opportunities for improvement are identified, and when these elements are factored into the planning process, a circle of improvement is initiated that helps to ensure long-term success.

If you are interested in learning more about the Baldrige Performance Excellence Program, the web site address is www.nist.gov/baldrige.

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Alter, S. (n.d.). Work System Definition and Special Cases. Retrieved 02/10/2016, from http://www.stevenalter.com/work-system-basics-2/

Baldrige Performance Excellence Program (2015) 2015-2016 Baldrige Excellence FrameworkA Systems Approach to Improving Your Organization’s Performance (Health Care). Gaithersburg, MD: U.S. Department of Commerce, National Institute of Standards and Technology

BusinessDictionary.com (n.d.). Operations Definition. Retrieved from http://www.businessdictionary.com/definition/operations.html

Daskal (n.d.). The 100 Best Leadership Quotes of All Time. Retrieved from http://www.inc.com/lolly-daskal/the-100-best-leadership-quotes-of-all-time.html

Good Reads (n.d.). Henry Ford Quotes. Retrieved from http://www.goodreads.com/quotes/7482-you-can-t-build-a-reputation-on-what-you-are-going

National Institutes of Standards and Technology (n.d). Baldrige Performance Excellence Program History. Retrieved from http://www.nist.gov/baldrige/about/history.cfm

Schneller, E., & Smeltzer, L . (2006). Strategic Management of the Health Care Supply Chain. San Franciso, CA: Jossey-Bass

The Marketing Therapist (n.d.). 25 Famous Quotations About Strategy. Retrieved from http://www.metznik.com/25-famous-quotations-about-strategy.html