Will Healthcare’s Supply Chain Ever Look The Same Again?

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Photo credit: Depositphotos

By Joel Landau

The coronavirus pandemic has brought into sharper focus what had already been widely known, even before the outbreak — that the healthcare supply chain is stretched too thin.

In February — i.e., before the worst of the crisis had struck the U.S. — just 11 percent of hospital representatives believed that supply chain management in the medical sector was comparable to that in other industries, and 46 percent said they managed their supply chain no better than “moderately well.” 

It should come as no surprise, then, that once the pandemic took hold in March, there were widespread shortages of personal protective equipment (PPE) and other supplies. Nor should it be a surprise that Steve Cottrell, president of the compliance consultancy firm Maetrics, wrote in a white paper in August that there is a “need to re-assess operations” in the healthcare industry, in the hope that it could lead to “increased business efficiency and streamlined processes.”

Two months earlier Karen Conway, vice president of healthcare value for the Global Healthcare Exchange, noted that the supply chain had always been “one of the biggest challenges” during past outbreaks, like SARS, H1N1 and Ebola. She added that in the case of COVID-19 the situation was worsened by the fact that supplies made in China and typically distributed in the U.S. were instead commandeered by the Chinese government. That, coupled with American demand that extended beyond hospitals to nursing homes, led to the shortages that have become all too common.

A report on Supply Chain Dive showed just how problematic it can be for the U.S. to be dependent on foreign sources in a crisis. Fully 80 percent of the pharmaceutical ingredients come from overseas, most often India and China, and before the pandemic fully half of the world’s surgical masks were produced in the latter nation.

So the answer to the question posed in the title of this piece is very obviously this: No, the healthcare supply chain will never look the same again. In fact, it shouldn’t look the same again. It needs to be overhauled, so that essential products can be moved more efficiently to hotspots throughout the world.

Thankfully, there is a higher level of awareness now. The pandemic has served as something of a call to action for healthcare leaders, alerting them to the fact that change is in order. That they need to take into account metrics other than cost. That there should be greater dependence on domestic and near-shore suppliers. That new technology should be implemented to increase efficiency.

That same Supply Chain Dive report noted that officials are well aware of the problem, citing a PwC survey showing that one-third of the U.S. healthcare CFOs place supply chains among their top three priorities. The caveat is that cost containment still tops the list. The other caveat is one pointed out by Spend Matters chief research officer Pierre Mitchell in an interview with Conway — that once the pandemic subsides, these same officials will have short memories about the scope of this problem.

That would be incredibly short-sighted, given the fact that experts believe another pandemic is “inevitable.” That doesn’t mean that these same problems need to be repeated, however. Conway emphasized it will require the efforts not only of the federal and state governments but the suppliers and healthcare facilities to unearth permanent solutions. She also touched on the reasons for offshore production — how it’s not just a matter of savings, but the fact that there are “very significant markets” in places like China and India.

She is convinced that will now change.

“Every country in the world is talking about the need for more domestic production,” Conway said. “I do believe we will see investments in advanced manufacturing capabilities that make it easier to build product in the United States, often closer to the point of use, and in a manner that creates more flexibility for all involved.”

There have in the past been examples of adaptation, as when Ford, GM and Tesla responded to the ventilator shortage early in the pandemic by producing them at their plants instead of vehicles. (The U.S. built so many of those machines, in fact, that it has developed a glut.) But there clearly needs to be a more extensive, more consistent shift toward domestic production, in anticipation of future crises.

It is no less clear that technology needs to play a greater role in supply chains of the future. Specifically, the Internet of Things (i.e., the IoT, or the world of interconnected devices) and distributed ledger technology (DLT, a fixed, transparent digital ledger usually associated with cryptocurrency), can be combined to resolve tracking challenges. Those difficulties can be considerable, too, given the fact that over half the world’s products require shipment over a border.

But in a supply chain of the future, any party at any point in the process has access to real-time information about a product’s status, either through sensors or bar codes affixed to that product. Paperwork is minimized, and the system optimized.

There is little question it is high time for change; the current pandemic has made that abundantly clear. And as much as new, improved approaches will help at present, they will mean that much more in the future, given the challenges that likely await. Healthcare leaders are well aware of that now, and going forward supply chains figure to be better for it.