Best Tips To Optimize Processes For A Healthcare Supply Chain

Updated on September 28, 2022

Although they may realize huge profit margins from time to time, most healthcare supply chains are highly regulated businesses operating on stringent quality standards like the use of cold-chain storage and transportation facilities. Nonetheless, some of these processes need improvements to provide greater efficiency.

Frequently, weaknesses arise when healthcare providers outsource competencies to medical logistics services providers (LSPs) without putting in place the requisite regulation or considering cross-border demand for most of the products. Other times, the complexity of the legal structures in some jurisdictions is a common cause of the slip-ups.

Fortunately, there are practical ways corporations in the healthcare sector can realize significant value in management spheres like cost, inventory and working capital management, sales, and service quality. Companies stand to enjoy great benefits, such as:

Below are five strategies to boost healthcare supply chains:

Focus on your suppliers.

One of the best starting points is consolidating or optimizing the management of your suppliers. Most of the costs of an ordinary supply chain are spent on buying input materials, products, or services.

The list of suppliers often includes warehousing suppliers, LSPs, suppliers of raw materials, and re-packagers. After outsourcing these components, you will need to manage them efficiently to generate enough value for your enterprise.

To consolidate suppliers and contracts, we recommend that you follow these steps:

Make the most of your volumes.

Streamline processes between your warehousing and LSP partners through a number of considerations.

Prioritize win-win contracts.

Regularize your contracts and contract terms to ensure you create beneficial relationships where you share the gains and losses in a collaborative way.


This strategy enables you to learn the industry and ensure you get the most competitive terms with the suppliers. For transparency, it is better to create a fully open contract.

If you want to guarantee supplier performance and constant service and product improvement, we recommend the following:

Keep a well-measured performance record.

Create a balanced performance scorecard and generate monthly, quarterly, and annual performance reviews to safeguard the quality of your goods and services.

Measure the delta improvement. Determine if there are changes in quality and consistency over a given duration and the reason for the variations.

Continuously evaluate the efficiency of the improvement program as your supply chain grows and evolves. 

Managing these two areas effectively result in huge improvements in the cost and quality of products and services from suppliers.

Pay attention to performance.

Create and commit to a grade of outcome-based performance assessment of the value chain for the benefit of your customers. The assessment techniques must be broad-based and comprehensive to provide a comparison between the supply chain’s tradeoffs and your key performance indicators (KPIs). Among other tips, this strategy is possibly the most significant for continually improving product quality and work processes.

The best KPI model must be based on industry fundamentals and focus on improving the management of costs, cash, and quality of services for the supply chain. The KPI model used must be comprehensive enough to assess the performance of the entire enterprise and subdivisions such as finance, manufacturing, distribution, and future planning and projections.

We recommend that you use industry standard measures like APICS, Gartner, and POBOS to evaluate current and past performance and set realistic goals. Sometimes, you need to separate various supply chains in your company such that each has its own set of targets and objectives.

Establish targets at each level of the company. You need to source for the required business support to develop and implement target setting in all departments of the supply chain. We recommend that you display real-time performance data for all staff, departments, and suppliers to keep track of progress.

Pay attention to the daily, weekly, monthly, and annual performance of the organization, and compare it to the set targets for all departments. That way, the supply chain will be on course to realize a 20% year-on-year improvement in the key performance indicators.

Allow for visibility.

You are likely to encounter numerous optimization opportunities by keeping track of the location of your finished products in the supply chain. However, this task is more difficult than it seems.

Consolidate your key information. Putting your supply chain’s vital information together allows for analysis and information-backed decision-making processes. Key data includes manufacturer’s sites, information on products and SKUs, distribution centers, supplier information, shipping lines, modes, and customer data.

Create an effective end-to-end analytical tool.

Other than employing your capabilities, we recommend using software programs designed for this purpose. Also, think about using an artificial intelligence solution to gather new field data. If you decide on investing in an analytical service, insist on a fourth-party logistics (4PL) or a dependable third-party logistics (3PL) supplier.

Understand your expenses. It may sound mundane, but most companies do not know how much money they are spending on costs and why. Indeed, cost analysis can be a complex task to achieve. This is because you must rely on one source of truth to know how much the supply chain is spending without any missing or inaccurate information.

Gather your cost-of-goods and cost-to-serve information as frequently as possible. Assemble it into standard groups for benchmarking and additional analysis. Watch out for outlier costs—figures beyond the normal records. Use both internal and external data to evaluate the performance of your supply chain.

Focus on the invoice. By studying the invoice, you will find avenues of saving money for your supply chain. In addition, you will detect any peculiar cost patterns and eliminate projects or programs that are wasting resources.

Standardize all the time. Most big companies have expanded their portfolios through mergers and acquisitions. At first, this might be okay, but inefficiencies begin to come up after some years when different processes and systems overlap or become redundant. Additionally, many decentralized organizations enable local and regional subsidiaries of the business to execute some processes independently, creating a lot of room for improvement.

Regularize financial and physical processes using the Supply Chain Operations Reference (SCOR) model or another industry-based framework. Remember, one way to implement the right standards is via top-down support and including the names of the suppliers and customers.

Assess the performance of your in-house processes and major output parameters to determine how well they are performing. You can then compare the performance to local, regional, and international performance standards for benchmarking purposes. However, the conclusions you draw from these results must be taken with a bit of caution.

It is difficult to restructure the entire organization to ensure everyone and all processes are executed harmoniously and consistently. However, it will prove to be a worthwhile investment. It is good to use standard global tools and processes that can accommodate local changes – you only need to manage them correctly.

There are numerous opportunities to enhance the processes of an ordinary healthcare supply chain. However, you must begin by creating a clear structure as soon as possible; every day that passes is an opportunity to add extra value and profits for your company. To adopt the necessary change, all levels of your supply chain require the right business support, starting from the top.

Also, remember to consult external specialists in the industry and see what you can borrow and use in your supply venture. You do not have to begin all the way from the beginning and do alone.

The Editorial Team at Healthcare Business Today is made up of skilled healthcare writers and experts, led by our managing editor, Daniel Casciato, who has over 25 years of experience in healthcare writing. Since 1998, we have produced compelling and informative content for numerous publications, establishing ourselves as a trusted resource for health and wellness information. We offer readers access to fresh health, medicine, science, and technology developments and the latest in patient news, emphasizing how these developments affect our lives.