Supply Chain: Improved Data and Closer Supplier/Provider Collaboration

Over the past year, the supply chain has emerged into the public spotlight. From the dire need for PPE to consumers stockpiling paper goods and cleaning supplies and the ripple effects of the container ship Ever Green getting stuck in the Suez Canal, the supply chain continues to spark discussions—including many suggestions for ways to improve it. Today’s supply chain leaves little room for error. The impact of its fragility on a local, national, and global level has never been more pronounced.

From a medical products perspective, hospitals are striving to better understand what they have in stock, how they can quickly replenish critical items such as PPE, and balance demand with looming expiration dates. This requires greater insight and collaboration among all stakeholders across the healthcare supply chain.

In a recent roundtable hosted by First American Healthcare Finance and moderated by Karen Conway, vice president of Healthcare Value at GHX and Mike Schiller, senior director of Supply Chain for the Association for Health Care Resource and Materials Management (AHRMM), experts representing 45 hospitals across 18 states discussed these topics. Specifically, they delved into how they can build a reasonable middle ground between just-in-time (JIT) sourcing and an overstock of supply on the shelves. The consensus: doing it successfully and ensuring a more resilient supply chain begins with the following five shifts.

1. Collaborate with more local and regional suppliers for demand planning. Hospitals need faster access to fresh supplies at the most cost-effective prices. To make this possible, they should consider expanding their collaboration partners to include more local suppliers and storing products on a regional level. This helps build slack into the system so surges can be more effectively managed and allows hospitals to continue being reliable community resources. It also allows for fewer interruptions in procurement and faster delivery while avoiding a surplus.

2. Take advantage of massive shifts in commercial real estate. Reopening old warehouses or building new ones, and leveraging non-traditional spaces including shuttered retail stores and even vacant restaurants, are all strategies being employed to meet the need for stockpiling medical products. While the percentage of warehouse conversions is still small, there’s no question that unoccupied spaces are being considered, if not already being reconfigured for multiple purposes, including storing healthcare supplies.

To ensure the effectiveness of stockpiling items locally, hospitals and suppliers need to work together strategically. This includes developing idle capacity and stockpiling a certain amount of inventory that can be tapped at a moment’s notice. This is about feeding the supply chain, not building mountains of inventory. Once supplies are raised and an equilibrium is reached as demand decreases, capacity can shift back to idle mode. The use of data and analytics makes this concept a reality, supporting the best risk-based business decisions, the rotation of inventory using a FEFO (first expiry first out) approach, and ensuring zero disruptions in the supply chain.

3. Reexamine the process for determining expiration dates. Many products are discarded far too soon because of the posted expiration date. While the shelf life of all medical products shouldn’t be extended beyond their expiration date, there are segments of inventory worth revisiting to ensure hospitals are maximizing their investments. For example, consider an 18-month expiration date for cotton swabs and the waste of tossing them when they’re still useful.

To effectively manage expiration dates without compromising quality care, hospitals are applying lessons learned from a post-COVID-19 environment as they closely look at their item master data. Armed with accurate, clean and well-managed data, they’re able to make more strategic decisions about sourcing and purchasing. When providers have clean item master data, they can reduce potential miscommunication and wasted resources on both sides.

4. Invest in technology. This includes software and hardware designed for automation and closer real-time collaboration among providers and suppliers. The result is improved visibility, cost savings, and greater efficiencies. Two of the technologies that dominated the roundtable discussion were the use of ERP systems and bar code scanners to address these challenges.

The migration from on-premise ERP systems to cloud-based ERP systems is not occurring just with a handful of providers—it is with hundreds of providers of varying sizes and complexity, each making investments to migrate to the cloud to enable process automation. The approach is not a lift and shift replication of existing processes. The move to the cloud is an opportunity to enable complete end-to-end supply chain visibility supported by near-real-time data alignment with manufacturers and distributors. The mindset providers are now demonstrating is an “automation imperative” expectation. The suppliers that will be the winners will make operational efficiency, data alignment, and end-to end visibility solutions a high priority in the next 12-24 months. Those that continue operating business as usual with an emphasis on manual processes will lose market share.

While every consumer is familiar with barcodes, scanners have not been widely embraced in the healthcare industry. This is a missed opportunity as barcode scanners offer much-needed visibility for tracking products as they move through the supply chain and beyond as they ultimately impact patients. The level of detail that can be gained through more extensive use of barcodes complements a provider’s investment in a cloud-based ERP system, resulting in even greater visibility and insights into supply chain utilization and inventory management.

5. Onshore manufacturing for critical PPE. While U.S. onshoring is more expensive, savings can be found by committing to a monthly volume over several years. This gives manufacturers a known contract for commodities. It also provides an alternative to sourcing supplies and building a more resilient supply chain, resulting in even more savings.

Supporting Closer Supplier/Provider Collaboration
Hospitals know they can’t go back to their pre-pandemic way of running their supply chain. Yet, applying the critical lessons learned from COVID-19 will not help organizations gain greater control of inventory overnight. Effecting change requires collaboration among hospitals and suppliers, taking advantage of automation for greater transparency into the supply chain, and a commitment to measurable and sustainable risk management balanced with a continuous improvement mindset. Those suppliers that embrace the new mindset of an “automation imperative” will lead the transformation of the healthcare industry’s processes, improving healthcare for tomorrow. 

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Denise Odenkirk is a vice president at GHX, where she works with manufacturers, distributors and hospitals to improve their business processes. Denise brings over 20 years of experience in healthcare from a manufacturing, distribution and third-party logistics perspective. Denise’s career began in IT leadership roles at Warner-Lambert, Aventis and expanded to include Operations while at Bracco Diagnostics, Owens & Minor and Symmetry Surgical. Her passion is to improve healthcare supply chain business processes and she is committed to helping companies improve their overall healthcare supply chain efficiency.