Preserving hospital supply availability during a disruption regardless of your primary distribution methodology

by Jim Richardson, PE, LSSGB, Vizient Senior Consultant, Consulting Supply Chain services
Molly Ehrlich, CMRP, LSSBB, Vizient Senior Director, Consulting Supply Chain Services

During the COVID-19 pandemic, you’ve lived the stories and heard of others—hospitals reprocessed supplies marked “single use only.” Personal protective equipment (PPE) such as masks and gloves were in extremely short supply. Construction workers donated their N95 masks. Distilleries made hand sanitizer. Neighbors sewed face masks. Distributors went on allocation for those items needed most urgently. Hospitals and health systems experienced significant supply chain interruptions and increased costs.

Common supply chain tenets like just in time (JIT), lowest cost, standardization, inventory turns and competition have been reevaluated during the pandemic. Some organizations are considering extreme measures to address the supply chain challenges that they experienced, such as moving from JIT to a consolidated service center (CSC), for example. During the last year, maintaining appropriate stock of pandemic PPE and respiratory supplies was a challenge for every hospital and health system, whether their primary distribution methodology was JIT with their distributor, or if they had a CSC with room to spare for storage of extreme demand items.

Before you consider throwing in the towel on your distribution methodology that’s worked up until this point, here’s three common distribution methods and ideas about how to preserve supply availability during a disruption.

Just in time (JIT)

You may want to reconsider what you maintain as stat inventory and your general pandemic supply. Whether required by your state or directed by your leadership, creating and managing your own PPE and critical item stockpile will provide additional safety stock when demand spikes. If necessary, lease or purchase off-site space for such supplies like several Vizient members in the Northeast did, where buildings were land-locked and there was no room for onsite storage expansion. Ensure, however, that the storage location selected allows you to maintain supply integrity by offering the proper storage conditions, that items are on a perpetual inventory, that you have a plan to rotate and use the stock with replacement in order to avoid expired items, and that the location is secure. Do not make the jump to a CSC only for the sake of housing pandemic supplies. As health care organizations with a CSC will tell you, the transition is a difficult and time consuming process, which requires much planning and resources to be successful.

Bulk, on-site warehouse with low-unit distribution

As with JIT, supplementary storage should be set up to house your stockpile of critical items and to allow you to efficiently store and account for bulk purchases. A Vizient member in the Midwest was able to supplement near-site storage by setting up leased trailers in its parking lot. If this storage location is near-site or off-site, ensure the same safeguards of site and product. Bake site personnel, inventory accounting technology, material handling equipment and transport of product to hospitals and clinics into your disaster preparedness planning so it becomes only a means of activating a tested set of processes when you must implement the plan.

Consolidated service center (CSC)

CSCs generally store and distribute supplies to many hospitals and other providers within a health care network. You likely had an easier time absorbing larger quantities of PPE and respiratory items than some of your counterparts. You may have already had some pandemic supplies stockpiled, along with a process of counting and cycling through the inventory, like one Vizient member in Alabama who managed through the recent pandemic without any backorders to its customers. Having a sourcing infrastructure in place to manage a larger diversity of suppliers needed during shortages of certain supplies is a clear benefit of a strong strategic sourcing team, often found when a health system has a CSC. Taking advantage of bulk buys and spot buys, whenever available, improves your ability to assure product availability to your customers. If you don’t already have one, a warehouse management system should be in place to manage the CSC inventory. These systems are generally scalable and flexible enough to handle larger volumes of SKUs and transactions required during a disruption or spikes in demand. The visibility of a centralized real time inventory management and distribution system allows for easier allocation and deployment of scarce products to a variety of departments.

If you do have a CSC with some additional storage capacity, earmark that space for pandemic and other critical item supply storage. Use your pandemic experience, along with recommendations from suppliers and group purchasing organizations (GPOs), to store additional quantities of those products which will be needed as back up during another disruption. Maintain and manage that inventory in a separate account, as you would not expect it to move (e.g., inventory turns or days on hand) in the same way as your day-to-day supplies do.

Considerations regardless of your distribution

No matter your distribution method, all health care organizations are encouraged to consider the following if not already doing so:

  • Do not make an extreme change to your primary distribution methodology because of the pandemic. Any major change should be accompanied by the business case to do such, like the supply chain strategic plan, and fit your organization’s risk tolerance.
  • Stay in touch with your GPO. They are validating vendors, managing large purchases of supplies and in some cases investing with manufacturers to increase U.S. PPE and critical supply production.
  • Take the time to mark your critical items in your Enterprise Resource Planning system. Then, have value analysis and clinicians identify substitute items, clinical equivalents and alternate suppliers. Maintain this data in your item master file. And remember that critical items can change based on the disruption—pandemic, seasonal sicknesses or weather-related disruption of normal activities.
  • Use a surge demand calculator. These are generally available through your GPO and professional organizations, such as the Association for Healthcare Resource & Materials Management. The calculators can aid you in planning for scenarios of different capacities, like ICU beds, ventilators, or isolation gowns. Vizient’s surge demand calculator is available online.
  • If your PPE stockpile is not on a perpetual inventory accounting system—even if it’s lining your halls instead of conveniently arranged in a warehouse—put it on one now. You need to be able to report on-hand inventory and consumption, reacting, in some instances, with barely a moment’s notice.Having this information at your fingertips will save you the time of having to count it over and over again.
  • Keep tabs on the PPE in each hospital unit and create rules for obtaining additional critical item stock from any storage area (stat room, onsite warehouse or CSC). You do not want an imbalance of supply in those areas where you no longer have visibility to on-hand inventory.
  • Know your state’s process for requesting and obtaining scarce product resources from the Strategic National Stockpile
  • Consider products other than PPE for your organization’s critical items list. Expand your inventory to include respiratory, pharmaceutical, lab and any other items you are having a difficult time sourcing or maintaining in stock.

For more information or help with evaluating your supply chain resilience readiness or distribution methodology, contact us.

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About the authors:

With more than 30 years of experience in the health care industry, Jim Richardson has partnered with GPOs, manufacturers, distributors and service providers to implement new agreements, business processes, programs and technology solutions, bringing millions of dollars in savings to health care organizations. He has managed a variety of successful supply chain projects for more than 100 hospitals and IDNs in the U.S. and Canada. He is particularly experienced in logistics and inventory management solutions, including warehouse management systems, PAR level department inventory management, and transportation management solutions. Richardson is a member of AHRMM and holds a Professional Engineer (PE) certification, as well as a Lean Six Sigma Green Belt (LSSGB) certification.

Molly Ehrlich is a senior consulting director in supply chain operations for Vizient and a 30-year supply chain, production and operations management veteran, having worked in the food, pharmaceutical and health care industries. Her areas of expertise include supply chain reengineering, distribution center layout and design, inventory management in med/surg and clinical departments, process analysis and operations improvement, cost optimization and control, and implementation planning and coordination. She is a Lean Six Sigma Black Belt, a CMRP and has been a featured speaker on Lean Six Sigma and O.R. inventory management topics with Vizient member groups and professional organizations.

Published: March 16, 2021