We recently hosted a webinar to discuss how the health care supply chain can become more modern, resilient, and efficient in 2021. If you missed the live session, here are our three favorite questions that we received about the future of the health care supply chain.
1. How may incentives for supply chain leaders shift in coming years?
For a long time, the primary indicator of provider supply chain success was supply cost/spend reduction. This shouldn't come as a surprise given supply chain is a cost center and its leaders most often report up through the CFO. But this definition of success is changing.
Even before Covid-19, some progressive health systems elevated supply chain to serve as a strategic pillar of the organization, as opposed to a cost center that operates exclusively behind the scene. In addition to managing supply spend, these supply chain departments have goals related to improving quality, ensuring consistent levels of care across the system, and enhancing clinician satisfaction.
Moving forward, we expect more organizations to create these "strategic supply chains" given the pandemic revealed just how critical effective supply chain management is to care continuity. We'll likely see supply chains pursue more initiatives that contribute to broad organizational priorities like emergency preparedness, risk mitigation, quality improvement, systemness, and staff satisfaction.
2. What does a 'strategic partnership' between a supplier and provider actually look like?
Many providers, suppliers, and even distributors have lofty goals for forming "strategic partnerships." But these partnerships are hard to build and manage. To learn what makes these arrangements last, we spoke with a handful of organizations that successfully established this type of relationship with a trading partner.
At the highest level, both parties must work together, not just to succeed on single initiative or goal, but to continuously add value to each other's business. There are a few common elements we found within these partnerships that make this possible:
- A focus on problems that matter to both sides, not just benefit both sides: The rationale for these partnerships must be deeper than meeting volume targets or cost reduction. While these goals are certainly important to track, the partnership must also aim to address more critical, underlying business challenges and may even help each side achieve their mission statement.
- A foundation of trust: Both groups must be transparent with each other. They need to be honest about what they can and can't do.
- Approaching the relationship with a growth mindset: Partnerships that don't evolve over time risk becoming too rigid or transactional. Each organization needs to be willing to listen, learn, and adapt as their partner's market or strategy changes.
- Both sides having skin in the game: Verbal agreements to work more closely are the bare minimum in a strategic partnership. Successful relationships involve partners making some investment that commits each side to the partnership in better or worse. Such investments could be technology, staff, executive problem-solving time, or shared risk.
- Communication beyond the executive level: While strategic partnerships should involve communication at the executive/strategic level, it also must extend to a deeper, operational level. Some of the most meaningful partnership interactions occur between provider and supplier supply chain leaders, or clinicians and commercial staff.
3. Do you think the tactic of stockpiling is here to stay?
Our survey of health system purchasing leaders confirmed that providers are stockpiling larger quantities of PPE, other critical supplies, and pharmaceuticals. In the short term, this paid off. Large health systems that invested in stockpiles during the summer reported that they were better prepared for ongoing waves of Covid-19 cases in the fall and winter.
However, long-term storage of large quantities of supplies poses more operational challenges and complicates the already entangled inventory management system. This is what we're watching and asking providers to consider as they think about the long-term viability of stockpiling:
- Do you have adequate storage space? Where and how will you add storage? If you do need to invest in warehouse space, do you have financing?
- How will you manage this longer-term inventory? And how will you adjust your demand planning systems to ensure you don't waste supplies?
- How will you manage logistics of shipping supplies across sites? And how will you ensure the right quantities at the right sites?
- What new partners or types of partnerships are necessary for success?