Gartner announces rankings of its 2019 Healthcare Supply Chain Top 25

Gartner, Inc. has released its 11th annual Healthcare Supply Chain Top 25 ranking, which recognises companies across the healthcare value chain that advance healthcare by improving patient outcomes and controlling costs. 

"New technology, cost pressures and the growing influence of the patient require the healthcare industry to change at an unprecedented pace," said Stephen Meyer, senior research director with the Gartner Supply Chain Practice. "There is a need to adapt the current ways of working and implement new capabilities such as digital technology and agility. The top supply chains in this year’s ranking have embraced those skills and excelled in executing them.”

Johnson & Johnson (J&J) is up two spots from 2018 and earned the top spot in the ranking (see Table 1). It’s the first time that the company placed first since Gartner’s inaugural Healthcare Supply Chain Top 25 back in 2009. “J&J’s supply chain has been a source of stability during its climb to reclaim the top spot,” Mr. Meyer said. “J&J supply chain consists of more than 50,000 team members across three different business units. One distinguishing characteristic of J&J’s supply chain is its embrace of digital.”

J&J has established a 3D printing center of excellence and made strides in advanced technologies such as analytics, intelligent platforms, Internet of Things (IoT) and automation. J&J is also committed to improve access to healthcare on a global level and has launched projects aligned to several UN Sustainable Development goals. 

Table 1. The Healthcare Supply Chain Top 25 for 2019

2019 Ranking Company Name Three-Year Weighted ROA (2016 to 2018)1 One-Year, End-of-Year Inventory Turns (2018)2 Bond Rating3 Watson Health 15 Top Health Systems Study4 Peer Opinion5 
(72 Voters)
Gartner Opinion5 
(20 Voters)
Composite Score6A,6B
1 Johnson & Johnson 7.6%
 
3.1     970 298
 
7.41
2 Cleveland Clinic (OH)     AA 3rdQuintile 711 263 7.14
3 Mercy (MO)     AA- 15 Top 443 216 6.50
4 CVS Health 3.1% 9.9     585 250 6.48
5 Duke University Health System (NC)     AA Top Quintile 418 162 5.58
6 McKesson 2.1% 12.1%     433 176 5.53
7 Banner Health (AZ)     AA- Top Quintile 252 200 5.47
8 Novo Nordisk 36.4% 1.1     258 238 5.25
9 Amerisource Bergen 3.3% 13.7     333 131 5.07
10 Medtronic 4.4% 2.4     651 192 5.07
11 Walgreens Boots Alliance 6.7% 10.5     389 138 5.04
12 Becton Dickinson 1.9% 3.3     536 187 4.66
13 Stryker 9.5% 1.6     456 184 4.55
14 Ochsner Health Systems (LA)     A 2ndQuintile 253 195 4.37
15 Henry Schein 6.7% 4.9     350 154 4.25
16 Advocate Aurora Health (IL)     AA 2ndQuintile 202 140 4.21
17 Spectrum Health (MI)     AA 2ndQuintile 82 124 3.81
18 Trinity Health (MI)     AA- Top Quintile 235 76 3.80
19 Pfizer 8.1% 1.5     339 130 3.56
20 Roche 12.9% 2.5     259 107 3.50
21 Boston Scientific 4.5% 2.4     397 100 3.37
22 Owens & Minor -4.3% 6.5     257 131 3.35
23 BJC Healthcare (MO)     AA 2ndQuintile 250 48 3.34
24 Northwestern Medicine (IL)     AA+ Top Quintile 124 24 3.28
25 Scripps Health (CA)     AA 2ndQuintile 101 72 3.21
  1. ROA: ((2018 net income / 2018 total assets) * 50%) + ((2017 net income / 2017 total assets) * 30%) + ((2016 net income / 2016 total assets) * 20%)
  2. Inventory Turns: 2018 cost of goods sold / 2018 inventory
  3. Bond Rating: All ratings were mapped to the Standard & Poor’s (S&P) rating system using an industry-standard mapping system
  4. Watson Health 15 Top Health Systems Study: Based on score in IBM Watson Health’s 2019 15 Top Health Systems Study
  5. Peer Opinion and Gartner Opinion: Based on each group’s forced-rank ordering of performance to Gartner’s Healthcare Supply Chain Capabilities Model
  6. A Composite Score, Health Systems: (Peer Opinion * 35%) + (Gartner Opinion * 35%) + (Bond Rating * 15%) + (Truven Score * 15%
    B Composite Score, non-Health Systems: (Peer Opinion * 30%) + (Gartner Opinion * 30%) + (ROA * 20%) + (Inventory Turns * 20%)

2018 data used where available. Where unavailable, latest available full-year data used.
All raw data normalized to a 10-point scale prior to composite calculation.

Source: Gartner (November 2019)

Three Companies Make Up Masters Category

“Now in its second year, the Healthcare Supply Chain Top 25 Masters recognised sustained supply chain leadership in healthcare. The criteria are the same as in Gartner’s Global Supply Chain Top 25 – a top 5 composite score in any 7 of the last 10 years,” said Mr. Meyer. “Mayo Clinic, Intermountain Health Care and Cardinal Health managed to defend their standing as Masters.”

The Masters category is not a permanent appointment. Companies must requalify every year and continue to innovate. Mayo Clinic, for example, exceled in terms of collaboration and industry leadership. Over the years, it has commercialized some of its most successful programs such as its freight management program with FedEx and the collaborative healthcare organisation Captis.

Intermountain Healthcare has been a pioneer in the use of analytics to improve its supply chain. However, it also embraced the power of population health management and is a formidable partner as can be seen in the collaboration with J&J’s Medical Device business. The supply chains worked together to improve forecasting, performance reporting, and streamlined logistics processes. The net result was a 40% decrease in stock outs.

Another repeat Master from last year, Cardinal Health, continued to evolve its role in healthcare towards manufacturing and patient experience. A specific area of focus for Cardinal is the hospital pharmacy. It leveraged automation, analytical tools and process guidance to improve the efficiency of pharmacies and free up clinical staff to focus on more patient-centric activities.

Where Leaders Make Changes: Agility, Strategy, Digital 

Leaders in the Healthcare Supply Chain Top 25 are making changes in three areas: agility, strategy and digital. 

Traditionally, healthcare supply chains have not been very agile. But the rise of tailored, personalised healthcare means that a lot of healthcare products can’t be made-to-stock anymore. Efforts are now underway to reduce manufacturing lead times and improve information flow. 

“The second area where leaders excel is strategy execution,” Mr. Meyer said. “While most supply chain leaders can design compelling presentations that show the links between their proposed actions and corporate goals and needs of their customers and patients, this is only the beginning. The real effort is required in deploying the strategy across a complex organisation, ensuring that every individual in the organization is aware of their expected contribution to the initiative.”

Lastly, the potential of digital – especially connected devices and communication technology- has been a front-of mind for supply chain leaders for the past few years. The leading supply chains have already started to leverage this potential and improve patient experience. “Digital supply chain requires experimentation to be successful. Supply chain leaders must be willing to provide resources without the expectation that every project will generate a return on investment,” Mr. Meyer concluded. 

About the Healthcare Supply Chain Top 25 Methodologies

Consistent with our Global Supply Chain Top 25 research methodologies, the Healthcare Supply Chain Top 25 ranking is derived from two main analyses: quantitative measures and opinion. Quantitative measures provide a view into how companies have performed in the past, and establish proxy connections between financial health, performance and supply chain excellence. The opinion component offers a qualitative assessment of value chain leadership and demonstrated supply chain performance — crucial characteristics of our Top 25. These two components are combined into a total composite score.

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