Don’t Let Healthcare Supply Chain Disruptions Hijack Strategic Sourcing

This article focuses on what healthcare providers can do to build resilience in the face of supply chain disruptions. In this piece, Curvo Co-Founder and CEO Andy Perry, shares observations and insights drawing on over 20 years in the healthcare supply chain (including on the provider side). He explains how breakthroughs in data enrichment and analysis have changed the landscape and given healthcare supply chains new digital tools to counter disruption.

The central issues and solutions discussed in the article include:

• Supply chain disruption 
• Resilience-building strategies 
• Data-driven decision-making
• Role of technology in healthcare sourcing

Healthcare Sourcing Upheavals Come with Higher Stakes

Healthcare supply chains require special handling due to the critical nature of the clinical products involved. Unlike consumer goods, disruptions to medications, supplies, medical devices and treatments can affect patient outcomes. 

For that reason, anything that helps build supply chain resilience is worth pursuing. Technologies like AI and sophisticated analytics are bringing transformation to the healthcare supply chain, and these innovations make sourcing teams more efficient and responsive.

Risk management is also vital for supply chain resilience, requiring contingency plans to handle disruptions and ensure uninterrupted care. This is where quality product data makes a difference in order to understand true comparisons and complex costs. 

Quick, trusted, cross-functional collaboration across the supply chain, clinicians and suppliers further contributes to building strong contingency policies. Again, data carries the day with credible analysis, comparisons and contract trends.

“Amid a challenging environment, leading health systems have placed a greater emphasis on risk management while continuing to build improved capabilities in their supply chains by prioritizing clinical alignment, increasing organizational collaboration and accelerating the digital supply chain.”

Eric O’Daffer, Gartner Vice President and Analyst
Gartner, Inc. Supply Chain Practice 

Sourcing Can’t Stop for Supply Chain Disruption

Q: Unfortunately, disruption has become all too familiar in the healthcare supply chain. What appeared to be a temporary issue during the pandemic has become a persistent threat. How does disruption continue to impact the healthcare supply chain?

Andy Perry: What we see during times of disruption is that higher-order sourcing work goes on the backburner. That impacts essentials like:

• Strategic work to guide and grow the supply chain 
• Building collaboration with clinicians
• Getting out ahead of contracting and sourcing efforts 
• Engaging the organization’s leadership team 
• Reporting effectively 

Those important initiatives fall by the wayside. When you cripple your strategic work in that way, you're basically paying a tax tomorrow on what you're not doing today. 

Disruption keeps you from doing all the necessary critical thinking and analysis. You just don't have time to do all of this. This is a huge problem with supply chain disruption – it hijacks everybody's day, but your sourcing work can't stop. 

Multiple Supply Chain Failure Points Put Clinical Items at Risk

Q: Data from the FDA notes that “the United States imported more than $68 billion and exported almost $59 billion in medical devices” in 2020. According to one report available through NIH, medical devices and surgical equipment manufacturers carry suppliers in over 40 countries, typically China, Mexico, Japan, Germany and the UK. That represents a lot of opportunities for something to go wrong when sourcing high-stakes clinical items like medical devices. What has been your experience with disruption? 

AP: Potential failure points can occur anywhere – from the original sourcing process, to manufacturing facilities, to transportation and logistics. Domestic manufacturing accounts for many higher end PPI items, but much of the lower end of the commodity and clinical supply spectrum is not domestically manufactured. If the supply chain gets disrupted for that kind of item, it can stop a lot of things in their tracks and hijack everyone's time. 

Staying Proactive and Getting Ahead of Future Disruption

Q: It’s unlikely that there will ever be a complete transformation and restructuring of the global clinical supply chain, so sourcing teams must plan for their own agility and resilience. Is it realistic to think hospital supply chains can proactively plan alternative sources for all the products they have to deal with?

AP: We are seeing healthcare systems try a number of things to combat or account for disruption. One is they're carrying more inventory, but this approach is not the perfect answer, because you're putting more dollars on the balance sheet. You’re constrained by physical capacity. You run the risk of product expirations that have to be written off, and just carrying more product. It is a method that hospitals are using, but it's got its own set of challenges. 

What we're hearing is that they are forming whole teams and looking daily at disruptions lists and triggering entire workflows still trying to source secondary suppliers or functionally equivalent items to find availability just in order to get product to patients. 

When you hear the words cross-references or functional equivalence, that's an area where Curvo solutions can help. Sourcing teams can build out their battery of functional equivalence, so they're better able to proactively know how a product substitutes with another. 

Self-Distribution for Costly Clinical Items Has Consequences

Q: Do health systems typically carry inventory of more expensive supplies like hip replacement or spine components? 

AP: Our clients who have self-distribution capability are doing more of that – carrying higher cost items on their own books – more often in the cardiovascular or cardiac rhythm management implant space. It’s less common with joint replacement or spinal fusion products. We've seen some clients move to more self-distribution and carry more inventory in general. They're taking lots of steps to be less lean in their inventory management, but that has big financial consequences, too, because inventory expires and you have to carry the cost of it on your books.  

Clients without self-distribution capabilities often do not carry inventory like that. Their implantable inventory is still consigned for the most part. 

Fulfillment History Data Brings Supplier Insights

Q: Health systems are watching purchasing orders closely to spot sluggish fulfillment patterns and identify sourcing alternatives. They’re expanding their overall vendor information to allow faster reactions in their agile sourcing strategy. How is technology contributing to this need?

AP: The ability to effectively predict demand and coordinate across supply partners in a reliable and resilient way still eludes the market, but it’s maturing. We're seeing disruption shape contracting requirements as the supplier's fulfillment history is becoming a factor in measuring eligibility compliance, and our tools and analytics can help with that as well. 

The Patient at the End of the Healthcare Supply Chain

Q: Healthcare supply chains are unique because, along with everything else they purchase, they also acquire high-impact, low-volume products such as medications and medical devices. Disruptions to these supplies can directly harm patients, as they affect clinical outcomes. How can the right tools help healthcare sourcing teams pivot during disruption?

AP: “Resolving healthcare supply chain disruption can be so incredibly critical because there's a patient on the other end. It's not like work-in-process inventory, where something just sits on the factory line until we get the right product. There's a patient that needs this product right now, and that level of criticality means everybody is all-hands-on-deck in some fashion to try to source the products or solve the problem. 

That's why we really take to heart providing hospital sourcing teams with the best tooling and automation to engage all of their stakeholders, both clinical and business leaders, and to automate all of that sourcing and reporting and negotiation work.

We bring resilience, so critical work doesn’t go on the back burner when the inevitable fires happen inside the operations of the supply chain. You need the absolute best automation and tooling in order to do that. 

Invest in Sourcing Technology to Build Supply Chain Resilience 

Investing in technology like data enrichment and sourcing analytics enhances decision-making and supply chain visibility. These resources help supply chains stay flexible and efficient in the face of disruptions.

Would you like to learn more about building a resilient, data-driven supply chain? Reach out before the next disruption hits. We understand the problem and the opportunity, and we've earned a reputation as an authority on best practices in healthcare sourcing and spend management.