Why Healthcare Organizations Need to Focus on Supply Chain Risk in a Post Pandemic World

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By Sundar Kamak

The pandemic showed the world our healthcare supply chain is very fragile and inelastic as hospitals experienced shortages and private companies stockpiling supplies. In a February 2021 survey, more than three in four nurses reported that supply shortages are common. These shortages can impact patient safety and increase inefficiencies and risk in day-to-day care. As we shift to the hopeful end of this pandemic, healthcare organizations must work to stabilize their supply chains to make them resilient as well as prevent passing on rising prices on medical supplies and pharmaceuticals to patients.

The crisis has put a spotlight on the vulnerabilities of global supply chains when faced with disruptions from extreme events. The cracks that emerged resulted in widespread shortages and surging prices of critical medical supplies and personal protective equipment (PPE) at a time when they were needed most. The challenges brought on have put an increased focus on risk and risk management as well. Compliance was always a big focus, but the importance of risk has been brought to light during the pandemic. In response to the pandemic, healthcare providers are working to build resilience into their supply chains by conducting risk assessments and implementing business continuity plans.

Supply chain partners interact with and have an impact on every department within healthcare organizations yet there still seems to be an overall misalignment between patient needs, physician needs and the supply chain. As is, the healthcare supply chain is complex with multiple players involved such as manufacturers, distributors and group purchasing organizations (GPOs) supporting and interacting with multiple departments and care delivery points. 

Across this supply chain there is typically a lack of visibility due to siloed information and data. This becomes even more complex due to the high amount of clinical variation which drives up costs and complexity. Often this variation is valid and leads to better quality of care but often it is not. The only way to really understand that is data. Data to better understand costs, utilization and, if possible, connect this to patient outcomes. 

In response to the pandemic, healthcare organizations need to take a more proactive approach to their supply chains by conducting risk assessments more frequently. In order to strengthen and stabilize the health care supply chain for the future, it’s important to first identify the challenges that resulted in the major supply chain interruptions seen during the pandemic. Health care organizations need to assess which strategies can help them mitigate supply chain disruptions during major emergencies without incurring exorbitant costs.

One way to do so is to apply technology solutions what can work toconnect key IT systems to leverage data wherever possible to drive better decisions. Establish a supply chain risk and performance assessment, monitoring and mitigation plan. Explore a self-distribution model and more transactional automation with procure-to-pay solutions. When the time is right and you’ve been able to automate much of the source-to-pay process, then you can engage in more supplier collaboration and innovation activities. The approach would differ based on organizational goals and objectives. But one thing is clear – that an overly standardized and rigid solution will not work for healthcare. What is needed is a powerful and comprehensive platform that can offer the level of agility and flexibility that’s needed within the healthcare supply chain.

It is also important to diversify and expand on your suppliers. Healthcare organizations need to create a system that offers a better view of essential medical supplies in order to ensure that they are optimizing highly fragmented health care supply chains. This will more effectively align potential demands to constrained supply by avoiding excess in some regions and shortages in others. Health care organizations can improve supply chain resiliency by dual sourcing raw materials, if possible, and onshoring more of the manufacture of critical medical products. To respond effectively to changes in demand, companies will need to have multiple suppliers from multiple regions. 

The COVID-19 pandemic highlighted the power of collaboration in solving complex problems. During the year ahead, expect to see more collaboration, including the formation of regional collaboratives, greater investment in data management and forecasting initiatives by suppliers and providers, reliance on more clinical evidence to drive purchasing decisions, heightened transparency between providers and suppliers and exploration of stockpile strategies that share cost, rotate to avoid expirations and create supply buffers to avoid future shortages. 

Sundar Kamak is Global Head of Industry Solutions for Ivalua, a global leader in Cloud Spend Management solutions. He works with customers around the world to improve their procurement practices.

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