The global supply chain didn't see much relief in 2021. While many leaders hoped they'd be able to invest in making their supply chains more resilient, the pandemic and its ripple effects focused efforts on combatting shortages once again. Within health care specifically, 93% of provider executives still report experiencing product shortages, ranging from cleaning supplies to medical equipment.
The current supply chain challenges are partially due to current Covid-19 variants like Delta and Omicron keeping workers at home and disabling transport networks. However, these challenges also trace their roots back to the original wave of Covid-19 and its impact on the flow of shipping containers and raw material demand. Many now predict that supply chains will feel ripple effects from Covid-19 for years to come.
Today, with two years of supply chain disruption in hindsight, leaders across health care now have a unique opportunity to both learn from how these challenges have evolved and identify ways to prevent future disruptions from affecting patient care.
Toolkit: Resources to build a modern and resilient supply chain
Supply chain disruptions across the past two years have a common catalyst: Covid-19. But today's product shortages look differently than they did in 2020 in two ways:
1. Shortages today are more widespread
In 2020, providers scrambled for items like masks, testing supplies, disinfectants, and ventilators. All are critical to have in stock, but the list of items supply chain leaders had top-of-mind was relatively stable and common across the industry. Today, that list has grown exponentially.
Shortages of semiconductors are delaying medical device manufacturing. Shortages of raw materials like aluminum or APIs are creating scarcities of crutches and drugs. Trucking/shipping disruptions are reducing availability of food supplies and medical equipment. There are simply more products that supply chains leaders must track.
2. Shortages today are more unpredictable
Not only are lists of unavailable goods expanding, but disruptions are also occurring at more points throughout the supply chain – from raw material gathering, to manufacturing, to distribution. It's becoming more difficult for leaders to anticipate when and where a shortage will occur.
Furthermore, there's often steep competition when shortages arise. Hospitals, sometimes in the same system, fight for limited supplies while competitors from other industries with far greater scale and financial resources quickly deplete stock levels. As a result, the list of product shortages changes week-to-week.
Two strategies for bolstering the supply chain that have received a lot of press are buying more American-made products and stockpiling. But the latest disruptions reveal that these solutions are not nearly enough to make the supply chain resilient. Buying domestically does not make organizations immune from the impacts of unpredictable natural disasters, worker shortages, or raw material scarcities. And stockpiling, while possible for limited supplies like gloves or masks, does not protect against such widespread shortages.
For the health care supply chain for be prepared for future crises, organizations must instead invest in two areas: improving visibility, and fostering collaboration with key trading partners. By doing so, supply chains can gain foresight into potential disruptions and react with contingency plans appropriately.
1. Elevate supply chain to a more strategic function – Health care supply chains have operated as operational cogs for too long. All stakeholders must follow the lead of other industries and make supply chain a more strategic part of their business. This will allow supply chains to not only make investments that improve visibility and collaboration, but also contribute to various other organizational goals.
2. Make demand planning more adaptive – Product demand planning today is often based on historical usage trends. But in the face of crises like pandemics or international conflicts, product use becomes unpredictable. To combat this, product demand planning must become more continuous. Supply chains must implement technologies or process that help in predicting clinician product need and understanding how those needs change closer to real-time.
3. Improve inventory management across the system – Providers often manage inventory in silos – with each hospital or department typically in charge of knowing what they have in stock at any time. This fragmentation can create redundancies and unnecessary competition, however. Implementing systemness into the supply chain can allow organizations to manage inventory more efficiently and grant greater visibility into available supply levels.
4. Generate trust and transparency among trading partners – Increasing visibility will require organizations to be more forthcoming with each other. While there are legitimate legal and competitive reasons to withhold information, trading partners must find ways to share product demand, availability, and sourcing data that is of mutual benefit.
5. Reduce friction by partnering in more strategic ways – The supply chain is incredibly interconnected. No single organization can make improvements on its own and assume it will be prepared for future disruptions. Therefore, leaders must identify key suppliers or customers with whom they can build more strategic, less transactional partnerships. By building these partnerships in advance, organizations can more seamlessly communicate changes in product supply/demand and find creative solutions when disruptions occur.
For more information on these five imperatives, see our resources to build a modern and resilient supply chain.
Now is the time to invest in a more modern, resilient health care supply chain. The Covid-19 pandemic revealed the vulnerability and inflexibility of the health care supply chain. With added scrutiny also comes opportunity for innovation and investment.
This toolkit consolidates our latest supply chain research, including case studies from high-performing providers and suppliers and results from our survey of health system purchasing leaders in three areas:
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