Smarter Sourcing

Welcome to the inaugural episode of Smarter Sourcing: Healthcare, with host Eric O’Daffer. Gary Fennessy, VP & Chief Supply Chain Executive at Northwestern Medicine, has been NM's Chief Supply Chain Officer for over 20 years and brings 44 years of industry experience navigating the transformation from a single academic hospital to a multi-site health system. His operational approach during COVID-19 kept Northwestern "two steps ahead of the bear," maintaining full supply availability when other systems faced shortages. That success came from years of building procurement infrastructure and distributor partnerships that most executives overlook until crisis hits.

Gary's leadership development philosophy of "throw you in the deep end but never let you drown" has produced chief supply chain officers now leading major health systems, along with multiple CFOs who came up through his finance and operations teams. He identifies shadow supply chain areas like pharmacy and lab as the next major opportunity for cost reduction, noting that indirect spend now delivers bigger returns than traditional medical supply optimization. His candid admission about delegating AI leadership to his team while timing retirement around the next ERP implementation offers a realistic view of generational transition in healthcare supply chain. 

Topics discussed:
Navigating 44-year healthcare career progression from accounting through finance and operations into corporate leadership 

Managing M&A expansion integrating multiple community health systems into academic medical center operations framework

Building procurement infrastructure that maintained full supply availability during COVID-19 by staying "two steps ahead of the bear"

Transitioning from hard-nosed vendor negotiations to collaborative partnership model with distributors, GPOs, and tech providers

Identifying shadow supply chain opportunities in pharmacy, lab, facilities, and indirect spend categories as next frontier for savings

Developing leadership talent through "throw them in deep end but never let them drown" philosophy 

Delegating AI and rapid technology adoption to next generation while planning retirement timeline around ERP implementation cycles

Establishing executive credibility by delivering value through foundational work

EBIT Intelligent Procurement ditched their 50% gain-share model for fixed-fee managed services after recognizing how gain-share creates operational friction: departments paying fees from their budgets start resenting consultants as cost-cutting mercenaries, regardless of actual performance. The fixed-fee pivot quieted the "who really drove this saving?" disputes that derail stakeholder relationships and freed category experts to focus on supplier relationship management and outcomes beyond P&L line items. 
When a client needs marketing expertise for a quarter, then shifts to facilities work the next, CEO Joanne McCourt and her team pull from EBIT's specialist pool without carrying fixed overhead or managing staff augmentation contracts. Their C-suite pitch challenges why companies attempt building procurement capability across fragmented indirect spend instead of investing that talent in core business operations. The MRO reality: manufacturing sites that have operated independently with local contractors for years will emotionally resist centralization, even when compliance requirements and supply chain transparency demand it. The business case exists, but the operational resistance is real. 
Topics discussed:
Transitioning from 50% gain-share to fixed-fee managed services to eliminate departmental friction and stakeholder resistance

Implementing virtual procurement models that provide flexible category expertise through monthly fees

Targeting C-suite executives instead of procurement teams when selling outsourced services to address strategic business priorities 

Managing emotional resistance when centralizing MRO and facilities procurement across manufacturing sites that operate independently 

Measuring procurement success through operational outcomes like supplier relationship management, governance improvements, and board-level reputation rather than savings alone

Protecting revenue through procurement interventions in courier performance issues, payment processing optimization, and customer experience improvements across indirect categories

Partnering with LogicSource to move away from spreadsheet-based client management systems

Most health systems report supply chain spend in the high teens while industry data confirms it's actually 35-40% of operating expenses, a measurement gap that systematically undermines investment cases to the C-suite. Eric O'Daffer, Executive Producer for Smarter Sourcing: Healthcare Edition, shares why he's convinced the answer to indirect spend isn't another platform but sustained center of excellence expertise: the average $3 billion health system has 2-3 people managing purchase services at a 1:$250 million ratio across 800 categories, and when they get good at sourcing, they get promoted out. 
His three true north focus areas reveal where the biggest gaps remain: doubling AI and analytics investment, solving the governance and knowledge retention problem in indirect (which represents roughly 30% of total spend), and creating benchmarking with "unfettered access to data" that counts supply chain the same way. Rather than exhausting failed experiments, Eric argues organizations should lean into entrepreneurial entrants putting focused effort into supply chain. There simply aren't enough companies doing it, and the industry hasn't made it easy for them.  
Topics discussed:
Measuring supply chain spend accurately by including fully loaded costs instead of GPO-submitted data that undercounts actual expenses

Solving indirect spend management through sustained center of excellence expertise rather than platform-only solutions

Addressing the 1:$250 million staffing ratio problem where 2-3 people manage purchase services across hundreds of spending categories

Implementing "stick-to-itiveness" principle by keeping leaders in roles 5-10 years instead of promoting every 18-24 months

Doubling investment in AI and analytics technology while recognizing supply chain is understaffed in wrong areas, not overstaffed

Developing definitive benchmarking systems with unfettered access to data that counts supply chain consistently across organizations

Leaning into entrepreneurial companies focused on supply chain instead of continuing failed experiments

Shifting evaluation from pure sourcing lens to integrated clinical alignment, procurement, logistics, and analytics in equal footing

Aleck Matambo's approach to supplier relationships proved critical during Dell's COVID-era factory relocations. When inventory shortages forced allocation decisions across the industry, suppliers prioritized Dell because of partnerships built long before the crisis. His framework moves beyond transactional cost negotiations to create symbiotic relationships focused on innovation, market insights, and long-term value creation. This partnership model becomes essential during supply chain disruptions, enabling faster adaptation and stronger resilience against geopolitical challenges that continue reshaping global manufacturing.

Aleck’s experience at Google reveals that most procurement teams struggle with AI adoption because they lack aligned strategy and change management. Rather than implementing AI tools to improve existing workflows, he advocates for using AI's transformational capabilities to reimagine operating models entirely. The key lies in selecting three to five priority areas, building strong business cases that address change impact, and investing in reskilling so teams view AI as capability augmentation rather than job replacement. 

Topics discussed:

How e-procurement and e-auctions in automotive achieved 20-30% savings while enabling low-cost sourcing expansion into China.

The transition from operator to consultant, bridging the gap between conceptual strategy and practical implementation.

Partnering with senior executives to identify how procurement addresses boardroom priorities like innovation, resilience, and growth.

Redefining procurement as a strategic enabler rather than cost center through executive partnerships, data-driven decision making, and leveraging AI and digital tools to reimagine workflows and organizational value.

Using data as a compass for opportunity identification rather than a mirror for cost savings alone.

Building symbiotic supplier relationships that deliver competitive advantages during crises.

The balance of trade program where procurement opened doors for sales teams by leveraging supplier relationships that sales didn't have.

AI implementation challenges where 85-95% of programs fail to achieve ROI, requiring aligned corporate strategy, prioritized use cases, strong change management, and focus on reskilling rather than replacement.

Moving beyond cost-focused metrics to measure total cost of ownership, supplier partnership quality, third-party risk management, and procurement's contribution to organizational resilience and agility during supply chain shocks.

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Kriti Jain, Sr. Director of Indirect Procurement, walked into Lucid Motors to find an indirect procurement function that barely existed — a team in single digits without the infrastructure to support a scaling EV manufacturer competing against established players. Within a year, she built what she calls "indirect procurement 2.0," growing to nearly 30 people globally while establishing frameworks that position procurement as a strategic partner rather than a cost-cutting function. 

 

Her grandfather, who built an ice factory by hand in India, taught her at age 10 to trace problems upstream to root causes rather than wait for symptoms to cascade. That lesson about following data to find solutions shapes how she approaches organizational transformation decades later, actively seeking companies with "maximum problems" because that's where change creates the most value. She explains why 80% information is enough for decision-making when you can bridge the gap with accumulated expertise, how her team resolves stakeholder pushback through peer-to-peer subject matter expert engagement rather than escalation, and what it takes to earn credibility with engineering-focused leadership in a capital-intensive startup racing established competitors.

 

Topics discussed:

Building procurement infrastructure for technology, manufacturing, and automotive operations simultaneously in an EV startup environment.

The decision to prioritize tomorrow's organizational scalability over immediate cost savings when defining transformation success metrics.

An 80% information threshold for decision-making that relies on accumulated cross-industry expertise to bridge remaining uncertainty.

Developing team ownership mindsets that enable subject matter experts to resolve stakeholder pushback without leadership escalation.

How intentionally targeting companies with maximum operational chaos creates the most valuable conditions for professional growth.

The three-pillar focus strategy of technology innovation, policy evolution, and people development to avoid overwhelming teams with market changes.

How peer-to-peer communication between procurement specialists and business stakeholders builds stakeholder buy-in.

Building procurement team capabilities by hiring for ownership mindset and communication effectiveness.