08/19/20

COVID-19 has strained hospital supply chains in ways that no one could have predicted. As a result, improving supply chain resiliency is quickly becoming a high priority for hospitals and health systems.

Research conducted by Sg2 highlights lessons learned and innovative approaches to supply chain resilience from member hospitals. Sg2’s report also lays out short- and long-term strategies for heightening supply chain’s resiliency to protect against future interruptions and uncertainty.

“After COVID-19 hit, we spoke with some of our member organizations that took very innovative and strategic approaches to stabilize their supply chains," says Mark Larson, principal, Sg2 Intelligence, a Vizient subsidiary. “These hospitals and health systems are in a much better position to weather the challenges that the pandemic continues to pose.”

Here are the highlights:

1. Scrutinize sourcing and partnerships

Health systems have traditionally been focused on efficiency and price, relying on just-in-time inventory to keep facilities stocked. The pandemic has exposed the need to have backup suppliers – without sacrificing quality and increasing cost.

“Going forward, hospitals need to work with their most trusted partners, including group purchasing organizations, suppliers and manufacturers, to build out geographic and production redundancies,” says Larson. “Organizations simply can’t rely on just-in time practices as they’ve done in the past.”

2. Strengthen the partnership between supply chain and clinical leadership

Historically, health system leaders have viewed the role of supply chain as one that simply focuses on managing the purchase and delivery of pharmaceuticals and supplies. In recent years, this conventional view has begun to shift, as executives look beyond cost control and see how supply chain professionals can lead product acquisition efforts that can have positive impact to cost, quality and patient outcomes.

Inconsistent supply conservation and substitution practices, as well as shortages during COVID-19, have further highlighted the importance of a close partnership between supply chain and clinical leadership. When the supply of N95s became limited and harder to acquire, one Vizient member organization’s supply chain and clinical leaders came together to devise a solution. The team identified an alternative product – Powered Air Purifying Respirators – as a viable, cost-efficient alternative that was clinically appropriate.

“Organizations that have clinical leadership involvement in supply chain decisions were definitely more prepared when the pandemic hit,” says Larson. “To understand where your clinical vulnerabilities are, look to your service line leads, chief medical officer and other clinicians across the organization.”

3. Build transparency with data and analytics

Technology solutions can help organizations standardize SKUs across the system, see real-time inventory levels, and understand supply inventory turns, among other things.

Technology can also bring greater transparency into internal and external supply constraints. Having this visibility can help hospitals prioritize inventory items that are at high risk to prevent shortages and stockouts.  (See Supply Chain Reliability: Helping Members Improve Resilience and Visibility.)

“Having the transparency and data analytics to help organizations understand where their greatest supply vulnerabilities are is critical. Investing in those analytics can potentially eliminate future care disruptions and deliver a strong ROI for organizations that don’t have that visibility today,” adds Larson.

Cost and risk: a balancing act

Health systems will feel the ongoing impact of COVID-19 in the coming months. Now is the time to work toward building a resilient supply chain to address these challenges and prevent the next disruption from having the same impact.

As organizations evaluate strategies to stabilize their supply chains, it’s important to weigh the cost of the strategy against the resiliency gained from the strategy. Software that improves supply chain transparency is a relatively low-cost solution that yields high resiliency gains, for example, while manufacturing in the community as some organizations have done during the pandemic, represents a higher-cost solution.

Sg2's latest research provides additional details into strategies for building a resilient supply chain, including how to assess current practices. Read the full research insight here.