Supply Chain Resilience in Healthcare

How to Build Supply Chain Resilience in Healthcare 

Faced with persistent shortages and financial pressures, it can be challenging for finely tuned clinical supply chains of hospitals and health systems, which consolidate purchasing power through group purchasing organizations (GPOs), to pivot to alternate suppliers in a timely manner.

Knowing that challenges are far from over, it’s important for healthcare organizations to take steps now to mitigate future disruptions to their clinical supply chain. 

What is supply chain resilience, and what does it mean in healthcare?

Supply chain resilience is the ability to resist or potentially avoid the impact of a disruptive event, as well as the ability to quickly recover from any disruption that does occur. An agile and resilient supply chain is built using strategies and modern technologies that enable procurement teams with data to help them forecast accurately, anticipate any potential outlier actions and quickly respond to any risk that might occur. 

During the pandemic, hospitals and health systems that previously relied on strong relationships with their GPOs to obtain clinical supplies found that these aggregators are often unwilling to seek alternate suppliers in the event the GPO’s primary source is out of stock. Left to source their own PPI, healthcare leaders can feel isolated and procurement teams can become frustrated. The pandemic highlighted the risk of a hospital being too tied to a single GPO and of not having direct relationships with distributors and suppliers.

The risk of being over-reliant on a GPO 

GPOs are well-suited to maximize a healthcare organization’s clinical supply budget by grouping multiple organizations’ purchase orders into a single, high-value transaction and leveraging the volume to negotiate discounts with manufacturers and vendors. But hospitals that rely too heavily on their GPO risk the very shortages in a crisis as we experienced at the dawn of the pandemic. Hospitals and other care providers that want to take better control of their destinies can take a few simple steps to avoid shortages: 

1. Identify alternate suppliers: Have in place backup GPOs, distributors and, in some cases, direct relationships with manufacturers to ensure multiple sources for hard-to-source equipment. Many hospitals have found that going directly to distributors is more effective than negotiating with their GPO to source alternate products. 
2. Leverage community resources: Another way to identify alternate suppliers is to look at manufacturers not traditionally in the medical space. One hospital that could not get masks early on in the pandemic approached a local chocolate manufacturer, which was able to retool its production line to manufacture PPE. Consider local manufacturing facilities that could serve as a source in a pinch, putting in place redundancies that avoid the GPO lock-in. 

Technology’s role in supply chain resilience 

Procurement teams can also leverage modern software technologies to add resilience to their supply chains. For example, when quick decisions need to be made, nothing beats the ability to rely on strong data on which to base a decision. Nearly every healthcare organization keeps records of what they have bought, who it was bought from and how much it cost. Traditionally, this was a manual process, and no one really minded how long it took to gather and analyze the data until speed mattered. During the pandemic, hospitals regularly have to quickly and accurately determine not only those aspects of previous purchases but also identify comparable products and their source when a primary product is unavailable. 

As with many other industries, the COVID-19 pandemic exposed critical vulnerabilities in the healthcare supply chain. Moving forward, procurement teams are approaching their sourcing relationships more strategically by:

• Avoiding reliance on a single GPO, regardless of how attractive the discounts.
• Establishing relationships within their communities that enable creative solutions during extreme circumstances.
• Exploring technology that enables healthcare organizations to become fiscally independent and flexible.