The Operating Chief: Supply Chain Audit That Saved $3 Million 💵

Welcome to The Operating Chief, where we go behind the scenes with the operators, logistics leads, and fulfillment architects who keep supply chains moving every single day.

In this edition, we have Summer Bautista, a supply chain and operations leader with 20 years of experience across retail, manufacturing, 3PL, CPG, and healthcare logistics. From managing 17 facilities across 10 states at Labcorp to building supply chain infrastructure from the ground up at giftHEALTH, she has operated at nearly every scale and in nearly every environment the industry has to offer.

In this conversation, Summer talks about why healthcare logistics is years behind retail, how she approaches carrier negotiations and freight audits, and what it actually takes to cut turnover in warehouse operations.

You have worked across retail, manufacturing, 3PL, CPG, healthcare diagnostics, and digital pharmacy. Each of these has a fundamentally different operating rhythm, different constraints, and different definitions of what a good day looks like. What are the real differences in how operations work across these industries, and what carries over from one to the next?

Ultimately, they all operate with the same idea: deliver what people need, when they need it. In retail, that might be clothes. In healthcare, it could be their life. We all have the same issues: late carriers, a dwindling pool of people willing to work for what corporations are willing to pay, and, in some cases, a lack of technology. The core truth of it is retail just isn’t as different as we think it is. From ambient logistics of pharmaceuticals or food and drug safety, from a cold chain perspective, it’s similar. You just have different guidelines and audits/quality perspectives. 

Regarding fundamental differences, I have observed that healthcare logistics is a few years behind retail and CPG, which is detrimental to the industry. Many pharmaceuticals, laboratories, and hospitals treat logistics/supply chain as an afterthought - and that’s unfortunate. It only leads to increased costs and inefficiencies for them and their customers/patients.

There is a point where managing operations changes fundamentally. You stop being close to every decision and have to build the system that makes decisions without you. You have gone from running a single distribution center to multi-state, multi-facility networks with hundreds of people. What does that transition actually look like, and what breaks first when you get it wrong?

The most important thing to be effective and make the transition from operations to strategy is to have a strong team. When you inherit a team that isn’t strong or is discombobulated, you’re going to struggle more as a leader and let go of those day-to-day decisions.

You have to be able to trust your people, so you have to be strong as a leader to hold others accountable. It’s a delicate balance. What I disliked most early in my career was experiencing leaders making decisions when they didn’t know the impact of their decisions. My goal is to understand operations - both upstream and downstream - to understand how my decisions will impact operations and people…even if I’m four people removed from an operator on the floor. How else am I going to defend and fight for my team when I need to? 

Getting your team to where they need to be can be painful for you, the team, and the business. I use the analogy frequently that it’s like when you were a kid, and your parents told you to clean your room. There came a time when you looked around and thought, “This is an even bigger mess than when I started”. I’ve found that when I share that analogy with my teams, people resonate with it, and I’ll frequently hear, “We’re in the middle of cleaning our room!”

If you leave a company before you are done cleaning your room, you’re leaving a mess for the next person to fix. We as leaders need to realize this when we are hiring and firing people, too. If you don’t make sure your team is ready to handle the day-to-day operations, your operations will suffer, and culture and efficiency will break first. 

The healthcare supply chain is often described as broken. That is a broad claim. You have been inside it at Labcorp, Cardinal Health, and giftHEALTH, across diagnostics, pharma distribution, and prescription fulfillment. What specifically is broken, and why has it been so resistant to the kind of optimization that retail and e-commerce have gone through?

It’s funny to see this question, as I stated in an earlier answer that it absolutely is broken, and I hadn’t seen this question yet!

It’s years behind. I recently went to a conference specifically for healthcare logistics with a coworker, and we were really disappointed with the level of information being shared. My coworker is in college for her master's and had legitimately seen the same presentations in her master’s class weeks before. 

What I’ve heard most is “but we are a <insert company name here>, not a logistics company”, but the truth is, you are no longer operating in that model. Your business model has to change. You have to adapt and realize that the caliber and skill set of associates you need to attract is different, and invest in some technology and talent.

You managed operations for Labcorp across 17 facilities in 10 states. Diagnostic specimens, clinical trial materials, and products with shelf lives and cold chain requirements. For operators reading this who have only ever worked with consumer goods, what does complexity look like when the product is perishable, regulated, and the downstream cost of failure is not a refund but a patient outcome?

Honestly, I remember one time early in my career where a customer called, upset that their furniture hadn't been delivered, and it was the Tuesday before Thanksgiving. When I hung up, I said to a coworker, “No one died, so it’s not THAT big of a deal”. I can’t say the same about healthcare. 

Not only is there a significant amount more at stake with healthcare, but the cold chain regulations are also strict. I was genuinely surprised coming into the space, how much small parcel providers do to ensure on-time delivery. In many cases, there is a high RTS (return to sender) rate because there’s a time limit on delivery. 

Another portion I never really thought about was all that went into packaging these items. The thought, testing, and regulation of getting the most optimal outcome for your patients with the least impact on the environment is mind-boggling. At Cardinal Health, I was able to be part of a program that, once implemented, would see a sustainability impact equivalent to planting 325,000 trees annually. 

You ran a third-party audit program at Labcorp that identified $3 million in erroneous vendor charges. That is a significant number for a single initiative. For operators thinking about procurement visibility in their own organizations, walk us through what that audit process looked like and what it revealed about where money actually leaks in large-scale logistics operations.

Companies have to invest in Freight Management Systems to compare invoices to actual contractual agreements. All I did was build a spreadsheet that calculated zip-to-zip pricing. My team would add the loads that were hauled into the spreadsheet, and we were able to enter the invoice amounts.

A good FMS would process those invoices, match them to shipments in a TMS, assign a delta as approved by the business, and kick out any outliers to an exception. We found not only overcharges but also shipments we hadn’t even shipped that we were being billed for. 

At giftHEALTH, the operation was handling daily shipments of prescription medications. At Cardinal Health, you designed a backhaul optimization solution projected to save 2 million miles annually. These are very different operational problems at very different scales. What is the common thread in how you approach a logistics problem when you walk into an organization for the first time?

The first thing I do is learn the operational business. I’m not the expert here; the people doing the work on a daily basis are. When I feel confident that I understand the operations and impacts my decision will make, I identify core team members who need to be involved every step of the way. These members help identify all the departments impacted, tasks that need to be done, and stakeholders that need to be involved. With all of this, we are able to make a project plan and ensure we touch on all aspects. If you’re operating without a project plan, you’re going to miss details, and those details add up quickly. 

I also would love for more people to be aware of the Prosci ADKAR Organizational Change Management model. The Prosci model operates on the assumption that people are at one stage of ADKAR (awareness, desire, knowledge, ability, and reinforcement). How you handle and communicate with each stakeholder is very important to get them bought into the cause and the change. 

If a founder or CEO is building a company in healthcare or any regulated space and they are thinking about their supply chain for the first time, what is the one structural decision they should get right early that most people get wrong?

Recognize and have a separation of your core healthcare space and also your supply chain. They are two separate and distinct functions and should be treated as such. Hire someone who knows supply chain and logistics and build the appropriate best-in-class operations around your business, not in spite of it.

Retention in warehouse and logistics is one of the hardest problems in operations, and most companies treat it as an HR problem rather than an operations problem. You have cut turnover by 31% at one company and 32% at another. What is your read on why people leave warehouse and logistics jobs, and what did you actually change?

Ultimately, people need to feel valued. They need to be paid what they feel their value is. Advocating for market analysis wages, especially in the environment we’re in, where costs keep going up, is so important.

Showing your appreciation with giveaways (things they can use, not keychains and branded t-shirts all the time) is another way. When you have a group of individuals who are mostly living paycheck to paycheck, they don’t always spend money on themselves. They put themselves last after their families. Dialing into what that need/desire is so important. Unfortunately, it’s not always practical, but if you can do it, you should. 

I also invest in people. One thing I do is a daily gemba walk where we walk the facility as a member of leadership. Once the process is established, I bring people into these walks frequently and ask them to walk with me. A) It gives them a break from their day-to-day job and the chance to be a part of something. B) They are able to see the problems I see through my vantage point and react accordingly without the need for me to walk the warehouse with them. C) They are bought in because their ideas are heard. I hire talented people, then try to get out of their way, which instills a level of confidence. D) You’re able to hold people accountable. Too many businesses don’t hold themselves accountable, and your star achievers see that. 

I am also a big fan of Hersey and Blanchard’s situational leadership theory. This theory states that everyone goes through one of four stages at some point during a new project (but I believe it’s appropriate for a new job, too). Essentially, you can have high or low confidence and high or low competence. (Side note: competence doesn’t mean you don't know what you’re doing overall. It means you don’t know what you don’t know.)

The way you’re going to lead someone with high confidence and low competence is completely different from the way you’re going to lead someone with low confidence and high competence. You don’t want to give someone who believes they understand everything but doesn’t really carte blanche to make decisions and impact the business. You do want to encourage someone who truly understands the business but doesn’t realize they need encouragement to gain that confidence.

Warehouse operations at scale are often multilingual environments, and a lot of communication gaps get papered over with signs and training manuals that nobody reads. You are bilingual in English and Spanish. How much does language, and I mean literal language, actually matter in running a tight operation?

I haven’t led a team in areas that have a high concentration of Spanish speakers, so in my experience, it’s helpful to be multilingual but not necessary. If I were leading a warehouse in, say, El Paso, Texas, the answer would be a lot different. There is a certain satisfaction in being able to ask someone in their native tongue how their son did at their recital the week before. This also leads to retention, getting to know your associates, and reducing turnover.

Supply chain leadership has historically been a narrow pipeline. The people who make it to the director and VP level tend to look and sound a certain way. You have been in this industry for 20 years. What has shaped your perspective on how the industry develops its leaders, and what is it getting wrong?

I’ve recently lost a lot of weight (100 lbs), and I really struggled to get hired into a senior role before losing the weight. There is a certain prejudice in the industry. My personal opinion — and this is just my opinion — is that it can be difficult to come into an organization as a young woman, a minority, or when you look/sound/operate differently than what people expect. When you walk into a room, people make up their minds about you pretty quickly. It’s unfortunate, but it’s true. How can we, as an industry, start changing that?

I tend to be peppy, high energy, happy— all the things you don’t think of as a leader in a director or VP role. But let’s be honest, the way we’ve been leading and managing simply won’t work for future generations. How do we become a more friendly environment while also maintaining strict standards and accountability?

There is a difference between managing an operation and building one. You have done both. At Saddle Creek, you walked into a 300,000 sq ft DC and improved safety scores, reduced labor costs, and cut turnover. At giftHEALTH, you were setting up facilities and supply chain infrastructure during a rapid growth phase. Which is harder, and why?

This is an incredibly personal question, in a way, because for me, coming into a facility that is set and has processes and procedures in place is more difficult than creating your own. For someone else, they may prefer the opposite. 

Given I have a fairly broad sense of expertise and experience, I like to mesh all of my experience together and build a supply chain and operations that is best in class. Hence, rapid growth and infrastructure building are my favorite.

A lot of operators know they are overpaying for freight, but do not know where to start. You have run carrier summits and bid processes at multiple companies, generating $310K in annual savings at one and $1.2M at another. Walk us through the process. How do you structure a carrier negotiation that actually moves the needle without destroying service levels?

First, you have to have data. If you don’t know how many loads you're hauling each year on a zip3 to zip3, how is a carrier going to effectively price your business? 

Second, you need to clearly outline your requirements. You need teamsters because it’s pharmaceutical and can’t stop moving? Great! CALL THAT OUT. Refrigerated vans/cold chain monitoring/load bar requirements - all of that needs to be spelled out. Dimensions of freight. The more the carrier knows, the better they can price your business. 

Third, treat your carriers as partners. You’re in this together, and at the end of the day both of your goals are to make/save money. Beware of paper rates, also known as rates that look good on paper but change once you go live. A lot of paper rates are due to requirements not being spelled out in the RFP/go-live, however, and carriers get a bad rap for that. Don’t put all your eggs in one basket - diversify your carriers. Award lanes according to their business and what works for them. Again, treat them as a partner. 

Finally, enact appropriate SLA’s (service level agreements). Your expectations for SLA’s should be called out in the original RFP, but also in the contract you ultimately sign with the carrier. Having a rebate each quarter an SLA is missed helps incentivize. Don’t punish your carrier for things out of their control.

What is the one thing you wish more operators understood about running a supply chain well?

Supply Chain and Logistics isn’t rocket science, and it’s true you don’t need a degree to do it well. However, there are best-in-class practices that are known by people who have been in the roles before. Promoting people from within is always great, but sometimes you need to bring in external talent to get your business to the next level. Supply chain is one of those areas. Again, not rocket science, but it is and can be niche. 

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