Editor’s Note: Eric O’Daffer is VP Analyst, Gartner Supply Chain Practice
The global pandemic continues to place an enormous strain on healthcare systems around the world. Nearly all providers were caught off guard by the resulting demand for PPE products, many of which have been typically considered commodities, sourced at the lowest price available globally that met desired standards.
When the coronavirus outbreak first occurred, the challenges of protecting staff and testing patients caused many healthcare providers to hold all non-essential procedures, impacting the availability and economics of providing care. Eight months into the pandemic, many healthcare providers are still struggling to source essential protective equipment like gloves which were not as large an issue initially. While not all manufactured products were impacted, the pandemic should serve as a wake-up call for the need for supply chain resiliency.
When considering a course of action for building greater resiliency there are four aspects that healthcare supply chain leaders need to focus on.
Interconnect Demand Forecasting
According to Gartner data, 70% of healthcare providers indicate they have full responsibility for demand forecasting (Gartner Org Design Survey 2020). Yet the maturity of this capability is still woefully low. To gain visibility into demand through point of use inventory management tools requires a systemwide investment on behalf of the providers along with the ability for distributors and manufacturers to use that data to support improved service. To achieve maximum benefit, demand forecasting needs to be interconnected and interdependent to the healthcare supply chain.
As healthcare providers know all too well having experienced shortages of critical supplies such as PPE and ventilators, global supply chains are fragile networks. To establish greater supply chain resiliency, healthcare providers need a diverse strategy incorporating multi-sourcing, nearshoring and manufacturing elements that can all work together in segmented mission-critical product categories. This will involve trade-offs with the contractual, low cost globally sourced models that incent line item savings at the expense of supply chain agility.
Reimagine Integrated Delivery Networks
Inventory and capacity buffers are changing the way integrated delivery networks (IDNs) look at their distributor partners. Many healthcare providers are being asked by senior leadership for additional pandemic/risk management warehouse space to ensure supply.
One new warehouse each for the 300 IDNs in the U.S. does not seem to be the right solution for most. Relying on a combination of distribution and 3PL models may be the best path to explore until there is another viable, healthcare-friendly solution in the market.
Invest in Resiliency Leadership
Many healthcare providers are adding supply chain resiliency positions to their supply chain leadership teams with the goal of achieving better upstream availability from understanding suppliers’ inventory strategies, business continuity plans, distribution and production networks. These roles are not just in sourcing or logistics or clinical alignment, but coordinate the resiliency efforts of all three with responsibility for providing continuity. Manufacturers and distributors would be well served to have a similar role to speak the same language across the end-to-end supply chain.
With CEOs aware that supply chain issues can prevent their organization from providing patient care, greater attention is now being paid to supply chain operations. CSCOs need to make the most of this moment and find opportunities to engage CEOs with a strategy to make the supply chain more resilient.