Healthcare Supply Chains: Fixing Weak Links to Emerge Stronger

July 28, 2020
4 Minute Read

Supply chain expert Ron Rod details how healthcare providers, payers and life sciences companies are responding to COVID-19 supply chain interruptions while preparing to emerge stronger in the future.

Long a staple in business, it’s fast becoming an everyday expression. During the current pandemic, the phrase “supply chain issues” has become shorthand for inconvenient shortages of foodstuffs, hygienic products, and even run-of-the-mill items online that can quickly go out-of-stock somewhere between “Add to Cart” and “Proceed to Checkout”. For the healthcare industry—providers, payers, and life sciences companies—the supply chain management stakes are much higher, however.

“COVID-19 hit like a once-in-a-century tsunami… Providers, payers & life sciences companies now face unprecedented demands on their supply chains.”

While most healthcare organizations had robust supply chain management systems already in place and were prepared to ride a wave or two, COVID-19 hit like a once-in-a-century tsunami—affecting everything from top to bottom.

The result?

Providers, payers, and life sciences companies now face unprecedented demands on their supply chains.

More than ever, they now need to:

  • Leverage enterprise-wide spend on the supply of services and materials while also lowering the total costs of procurement of services and materials.
  • Meet internal stakeholder demands for increased simplicity and efficiency in the order-to-pay cycle while also adhering to regulatory and internal controls.
  • Locate and qualify new services, equipment, and consumable providers.
    Improve digital enablement in order-to-pay processes as well as ensure the visibility and governance of enterprise spending.
  • Change strategies such as over-stock drug or investigational product chemicals and other ingredients to hedge against shortages (the very antithesis of just-in-time, efficient logistics).

A supply chain audit will reveal key vulnerabilities as well as help you identify new opportunities to reduce costs.

Bringing Order to Disorder

While the situation has improved since March, there’s still a long way to go. As we continue to help our healthcare providers, payers and life sciences companies during this crisis, we’ve noticed a few key trends. They’re addressed below in the same order a physician would with a patient: diagnose, treat and prevent.

Diagnose—Know Exactly Where Your Weak Links Are

Start by fully understanding the new landscape. It’s important to have as complete a picture of what challenges your supply chain is facing so you can plan—and act—appropriately. A supply chain audit will reveal key vulnerabilities as well as help you identify new opportunities to reduce costs.

Chances are you’re already multitasking, which means you won’t likely have a lot of time for anything too in-depth. So keep it simple with basic “what-if” assessments. Don’t get caught in too much time-consuming over-analysis, but don’t neglect getting started, either.

“If your supply chain is in an acute stage, it may be time to identify where you can quickly ‘lean down.’”

Hedge your bets beforehand. This is the opportune moment to strengthen your ties with suppliers and alliances through greater communications, both in quality and quantity. Become their best customer, because while you may not need them right away, you might need them sometime later. Relationships matter. This brings us back to the point of over-stocking, particularly in the case of clinical trials materials, such as those in oncology trials, where it’s critical to avoid disrupting life-saving treatments that might be a patient’s last hope.

If your supply chain is in an acute stage, it may be time to identify where you can quickly “lean down.” Identify what can temporarily be eliminated from current supply chain processes so you can focus on value-creating efforts. Lastly, begin qualifying new vendors as backup suppliers. It’s always wise to have a contingency plan.

Treat—Focus on Weakest Links First

While companies clearly understand that supplier service levels are just as important as initial costs, many companies are taking advantage of recent heavy investments in their financial system upgrades to enable their workforce to plan, procure and monitor their spend in an Amazon-like environment.

“An S2P engagement with a medical device manufacturer helped reduce cycle time by 20%.”

Specialty technology tools focusing on areas including inventory optimization, eProcurement catalogs, logistics, and warehousing efficiency are increasingly being implemented to reduce costs and complexity and provide timely information to manage the business. These tools are disruptive in nature and can cause risk for older utilization models, including integrators and group purchasing organizations (GPOs).

Source-to-pay (S2P) and procure-to-pay (P2P) optimizations can help reduce costs and increase efficiency. One S2P engagement we did with a medical device manufacturer helped reduce cycle time by 20%, developed a right-sized resource model, and identified millions in potential savings, as well as increased their sales and service levels. That same engagement also improved PO and invoice processing time while reducing vendor risk. P2P assessments and transformations for healthcare supply chains can also help improve process designs, better define organizational roles and better integrate technology.

With some 70% of the world’s clinical trials now disrupted, life sciences providers these days are increasingly turning to innovative solutions, including using telemedicine to keep operations going. Some are examining drug supply chain logistics systems where the trial medicine or medical device is delivered directly to the patient’s home through trackable Interactive Response Technology (IRT) so supply chain interruptions are kept to a minimum.

Claims are part of payers’ supply chain, and they’re facing enormous financial strains that also need to be addressed. We developed a solution for a major health insurance company, which enabled them to prioritize the enormous volume of COVID-19-related claims they expect to process while also helping them determine which claims are legitimately theirs and which are covered by government funding so that claims can be properly sorted, channeled and processed.

For example, by doubling down on digitization, automation, and other tech upgrades, healthcare providers, payers, and life sciences companies can emerge from the current pandemic with supply chains that are more efficient, more cost-effective, better able to mitigate against risk—and perhaps most importantly, more agile. This is especially important should we be hit with yet another wave in autumn.

To paraphrase the traditional saying, if your supply chain is only as strong as your weakest link, it’s time to strengthen all your links. COVID-19 may have forced your hand, but that doesn’t mean you must only react. You can proactively plan for your supply chain to emerge better. The safe bet is that your competitors are doing exactly that. And because ramping up is easier than catching up—the time to start is now.

Use this time to clearly define your roadmap and prepare for the new and exciting return to work. Transformation and change are always in flight, but events like COVID-19 have just given us the opportunity to accelerate those changes.

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