Commercial risk will be a critical catalyst of progress – it’s complicated, but is it possible? We think so.

Blog Post

The supply chain is broken. Now what?

August 13, 2020

    The global health care supply chain failed us in spectacular fashion. Not only have hospitals and providers faced life-threatening shortages of personal protective equipment, ventilators, and Covid-19 testing supplies and pharmaceuticals—shortages that are far from resolved—but the promise of safe and effective Covid-19 vaccines is tempered by serious questions about our ability to produce and distribute the supplies necessary to administer such vaccines at scale.

    How Covid-19 is disrupting your supply chain (and what to do about it)

    This crisis has demonstrated that the entire health care supply chain must evolve. But the underlying challenges are complex and interrelated—often with a compounding effect. To help members across the health care ecosystem understand what they can and must do differently to build a resilient supply chain, we launched a multi-phase research initiative—and we want to hear from you:
    1. If you work at a hospital or health system and have 5-10 minutes, take our quick survey via this link or below. The survey consists of 15 multiple choice, opinion-based questions about your organization's supply chain priorities moving forward. Responses are confidential, and results will only be shared in aggregate. We welcome responses from any hospital or health system leaders, including those in strategy, operations, supply chain, purchasing, or finance.

    2. If you have 30-45 minutes and have opinions or experiences to share, participate in a research call. Email me for more information.

    Early research findings: Up against a set of complex, competing forces

    Throughout our early research, we've uncovered two sets of complex, opposing forces that leaders across the health care ecosystem must address to build a truly resilient supply chain.

    1. Resiliency versus efficiency.

    Today's health care supply chain is largely designed to maximize efficiency, reduce redundancy, and create goods at the lowest possible price—particularly for commodities such as gloves and gowns. Practices aimed at cutting costs, such as sole-sourcing and just-in-time inventory, create inflexibility and an overreliance on manufacturing and materials concentrated in specific regions.

    To enable greater resilience, stakeholders must create "slack" in strategically important categories like PPE. This slack may come from practices such as expanded lists of suppliers, more flexible manufacturing lines, greater stockpiles, or more proximate distribution centers, all of which require financial investment and raise the specter of increased unit prices. Health systems and their trading partners must evaluate investments in resiliency at a time of incredible financial instability within the U.S. economy overall and the health care sector in particular.

    Key questions that we're asking:

    • Where is resiliency non-negotiable and therefore worth the added price?

    • What are the most cost-effective ways to add resiliency?

    • Who will bear the costs of such risk-mitigation investments?

    • What new strategies, analytics platforms, or creative partnerships are emerging to help organizations balance resiliency with efficiency?

    2. Trust versus control.

    In times of uncertainty our instinct is to seize control. We're seeing this play out as provider organizations look to move further upstream in the supply chain, considering options such as large-scale warehousing, self-distribution, and even in-house manufacturing. Organizational or governmental policies to increase local purchasing are also rooted in this desire for greater control.

    While practices like increasing stockpiles of critical supplies during a pandemic certainly make sense, taken past a point, this quest to control more of the value chain distracts from providers' core competencies, creating new challenges without resolving the old underlying issues. Instead, health systems must determine how far to move upstream, how much control they truly need, and where to rely on trading partners like suppliers, distributors, and/or third-party analytics companies.

    To truly mitigate risk, such reliance on others requires trust—the very trust that eroded during the spring surge. As a result, health systems and their trading partners must actively look for ways to not only rebuild but deepen trust. To be effective, those trust-building strategies must be rooted in honest conversation, greater data transparency, and shared efforts to reduce unnecessary spend.

    Key questions that we're asking:

    • What aspects of supply chain operations make sense for providers to control?

    • What must providers do to ensure adequate visibility and control of their in-house supply chain operations?

    • What gestures, activities, and disclosures are most effective in building trust among trading partners?

    • What kinds of increased visibility and data sharing are necessary to deepen trust and reduce friction across the supply chain?

    Over the next several months we'll share key learnings from our survey and showcase how innovators are evolving their supply chain strategies and operations.  

    How Covid-19 will impact the financial outlook for the health care industry

    As the country unfolds various plans to slowly reopen, health care leaders are shifting their focus from the short-term effects of the Covid-19 pandemic to the downstream impact they can expect in the months ahead.

    To help health care leaders assess what the Covid-19 pandemic will mean for their organization, our team analyzed the critical factors that will determine the financial outlook for various industry sectors.

    Download Now

    Have a Question?


    Ask our experts a question on any topic in health care by visiting our member portal, AskAdvisory.