Healthcare supply chain leaders are struggling to procure medical supplies amid widespread shortages. Supply chain disruptions stem from component scarcities, backlogged ports, transportation glitches, and lockdowns in China to combat the spread of COVID-19.
Optimizing healthcare supply chain operations—making them flexible, resilient, and proactive—is essential to keep hospitals operating in normal times and in crises.
During the early days of the pandemic, supply chain staff scrambled to find personal protective equipment, ventilators, and test supplies. Now they’re facing shortages of a wider range of medical supplies and equipment. According to the U.S. Food and Drug Administration (FDA), the list of scarce items includes latex and vinyl examination gloves, surgical gowns, laboratory reagents, specimen-collection testing supplies, and dialysis-related products.
According to one healthcare logistics firm, 45% of the medical items it handles are supply constrained—including frequently used items such as hypodermic needles and flush syringes, blood-collection tubes, IV solutions, wound care products, catheters, and sharps containers. Pharmaceuticals, whose manufacturers rely on key ingredients from Asia, are also in short supply. And the severe global shortage of semiconductors threatens to disrupt the manufacturing of life-saving medical devices and systems.
Supply chain disruptions have driven up medical supply prices, according to Kaufman Hall’s 2021 State of Healthcare Performance Improvement Report. An astounding 99% of those survey respondents report have experienced challenges in supply procurement, including shortages of key items and significant price increases.
Supply chain issues—particularly higher transportation costs incurred by distributors—are decreasing healthcare organizations’ profit margins.
Supply chain disruptions that started in 2020 are likely to continue through 2022 and into 2023 due to ongoing congestion at manufacturers, in shipping, trucking, and rail delivery. In the U.S., a shortage of 80,000 truck drivers and a potential dock workers strike on the west coast mean that port congestion and supply chain delays may increase.
When supplies are limited, just-in-time ordering—relying on distributors to deliver supplies quickly instead of keeping them in stock—doesn’t work. Longer product lead times—the time between placing an order and receiving it—mean that hospitals need to reevaluate their purchasing strategy. With health systems dealing with lower fill rates (in the high 80% range, versus the pre-COVID 96-98%), supply chain staff must maintain larger inventories of necessary supplies.
Optimizing your supply chain is essential to the ability to respond to disruptions, increase efficiency, and control costs.
With many healthcare organizations dealing with 800 to 1,000 backorders per day, you may need more than just one or two suppliers to meet your immediate needs. Identify domestic vendors if possible, to avoid higher costs and delivery delays with imported supplies.
Analyze prospective contracts before signing them. Compare quoted offers to knowledgeably analyzed, appropriately vetted, consistent, accurate, and unbiased benchmarks. This ensures they are competitive compared to multiple group purchasing organizations (GPO), non-GPO, corporate, and special conditions related to purchase. Examine benchmarking data for list price, component price, warranty terms, and other measures.
Measure your suppliers’ performance using key performance indicators (such as contracted price vs. invoice price; delivery in full and on time) to ensure they are delivering high-quality products and services at the best prices. Reconcile your invoices against the contract terms to identify overcharges.
Artificial intelligence- (AI) and machine learning-powered technology solutions leveraging predictive analysis and/or business insight tools can help your supply chain leaders more accurately predict your facility’s future needs. For example, predictive modeling helps healthcare leaders anticipate future surges of COVID-19. By using predictive analysis combined with value analysis solutions, supply chain leaders can more easily identify long-term needs, share the information with key stakeholders, and address those needs with vendors.
AI- and ML-powered technology can help supply chain staff reduce costs by optimizing sourcing and better managing purchases, invoices, and inventory.
Analyze existing contracts to detect auto-renewals and redundancies. Auto-renewals can be costly contractual obligations when the terms are unfavorable, or when you no longer require a particular service. You may not need certain print and fax services if your administrative staff are working remotely.
In the case of a merger or acquisition, you may wind up with duplicate services. If the newly merged healthcare organizations are in the same geographic area, you won’t need multiple contracts providing the same laundry and waste management services, for example. AI-powered technology quickly scans contracts to find those with auto-renewal clauses. This lets you track critical dates, conduct an expedient review, and determine necessity prior to contract renewal. Contract analytics highlight redundant contracts and pricing that is higher than benchmarks, helping you determine which contracts should be canceled or shouldn’t be auto-renewed.
Analyze your spend data to identify savings opportunities. Examine your spend data to determine where you’re spending your money, then use AI-powered analytics tools to identify savings opportunities. Analyze existing contracts and spend data to:
Your decision-making team should consider the clinical evidence and safety data for new products, instead of making purchasing decisions based solely on cost or subjective opinions that may be heavily influenced by vendor relationships. Clinical evidence reveals the effectiveness (or lack thereof) of a device or technology, which has a direct impact on safety, patient satisfaction, readmission rates, and measurable improvements in care.
When medical equipment and drugs are scarce and you can’t get the physician preference items, you may need to find clinically comparable alternative products. Use clinical evidence and safety data to compare the medical devices, drugs, and other products you’re considering purchasing. Standardize utilization based on clinical evidence to save money and reduce wasteful spending on ineffective treatments.
If your health system has grown through acquisition, there may be several different systems and processes throughout your organization. Standardize your physical and financial processes, using industry-standard frameworks such as the Supply Chain Operations Reference (SCQR) model. Standardize your new-product decision making process by using value management workflow software that automates the collection and distribution of decision-support information.
You can simplify the new product decision-making process by taking these steps:
Store decision-support data in a central, electronic repository. Your decision-makers need easy access to vital information, so they can review it at their convenience and engage in virtual discussions. They won’t have to wade through their inbox to find the relevant report or wait until next month’s committee meeting.
Take advantage of value analysis software with workflow automation. Value analysis software automates the decision-making process, distributing the right product data to key stakeholders, who engage in virtual discussions and collaborative decision making.
symplr’s spend management and value management solutions and services are your keys to optimizing your supply chain operations so you can better cope with disruptions. An automated, clinically integrated supply chain solution can help with inventory tracking, storage, replenishment, decedent management, demand forecasting, and master data management. Now is the time to create a supply chain management process that promotes agility, scalability, and optimal distribution based on actual and anticipated needs.