by Judi Proctor
Senior Consultant, Supply Chain Management Operations
10/06/20

Every day of our life is a learning experience. Learning through life lessons gives us knowledge and foresight for use in future experiences. This type of learning allows recognition and response preparation and it begins by asking questions that start with the words “what,” “why” and “when.”

I believe the COVID-19 pandemic has many lessons it can teach us about the health care supply chain. As an industry, we would be wise to ask ourselves those questions and then use the answers to develop solutions that lead to sustainable improvements.

What did COVID teach us about the health care supply chain?

The primary lesson learned is how fragile and unprepared the global health care supply chain is for a crisis of the magnitude of COVID-19. With all countries and providers vying for the same products concentrated in one geographic area or from a small number of manufacturers, demand seems to have increased exponentially. The demand spikes put raw materials in short supply, which further disrupts manufacturing capability and capacity. This problematic scenario doesn’t enable much flexibility when supply disruptions occur.  

The second lesson learned is the lack of visibility in the supply chain, to the point of zero visibility for end users. The supply chain starts with the raw materials at the manufacturer, moves to the distributor and on to the facilities and departments of the health care providers before arriving bedside. Much of this lack of transparency is based on a dearth of digital information coming from segments of the supply chain, manufacturing, distribution, and the provider facilities but more importantly, the bedside. In the health care industry, supply chain data is seldom placed in a digitized stream, which enables predictive information, unlike other industries such as automobile and grocery. In other words, digitized data is not available to users in one visible dashboard. Overwhelmingly, suppliers and health care providers have not made significant investments in this technology.

Supply redundancy is the next lesson learned and it is not a strategy that health care supply chain professionals have used due to cost and lack of efficiency. There is a failure to seek out and set up backup, or redundant, suppliers for critically needed products. If a backup scenario is put into play, it would require warehousing duplicate SKUs, which does not allow for efficiency and may have cost implications.

Why has the lack of transparency and supply redundancy not been addressed within the health care supply chain? 

Transparency is a concern because we do not know the capacity and potential constraints of what is happening upstream within the supply chain. Nor does upstream know what is happening downstream, at the bedside where product and device utilization has a need to be tracked and trended.  Determining the velocity at the end of the supply chain stream is a key variable for predictive analysis.

Visibility in the supply chain can identify and predict risk, and it allows concerns to be addressed before that risk turns into a shortage situation that dramatically impacts patient care. To have transparency, there must be a way to rapidly move information from point A to point Z with data visibility for stakeholders at all points in between. This requires digitization of the data from manufacturers, distributors and health care providers. There are many barriers to digitizing data and the top three are cost, resources and integration.

Why is redundancy a problem? Because redundancy has been deemed inefficient, costly and wasteful by supply chains. Redundancy is generally brought up when there is a disruption in the supply chain. It can relieve the post-pandemic disruption but only as a stopgap measure given the expense inherently built into redundancies and stockpiles of products that would be needed.   

When are we going to have the technologies available to carry out the vision of a resilient supply chain?

To be able to look upstream and downstream in the supply chain, and share information between adjacent stakeholders, is instrumental in any improvement process and resiliency, and digital transformation is the fastest way to create a resilient supply chain. The good news is that the type of technology needed to resolve the historical challenges of the health care supply chain is currently available. It provides and uses both AI and blockchain to assist the ecosystem it supports in digital information of the supply chain.  

Health care providers should look internally to see if they are using available technology that will provide supply data down to the patient level, which produces actionable information. To be able to generate data at the point of use will determine the velocity of products used. The information should also be integrated into the enterprise resource planning (ERP) system, which can be trended, tracked, traced and documented.

There are many different types of automated technology to select from, including barcode scanning, closed cabinetry, weighted bins, radio frequency identification, tagged shelving and Kanban with analytics. Different automated solutions for different services within the facility or system can be used. Recent studies of an automated solution show a return on investment to be greater than a 4:1 ratio. 

These types of technology reduce labor cost, provide data-driven predictability, reduction in waste, is scalable and allows for immediate action on data. If an organization lacks the ability to track the products to the unit or the bedside, consideration of this technology should be given to realize the full benefit of transparency and visibility.

By creating high visibility within the supply chain, the lack of efficiency built into redundancy can be avoided. Knowledge redundancy describes perfectly the networks created by digitized data. Knowledge redundancy has its roots in supply chain resilience, and focuses on three areas — redundancy, flexibility and visibility — and as a strategy will be successful in transforming the health care supply chain.

The COVID-19 pandemic taught us many lessons, but one of the most valuable and important is the need to ensure a health care supply chain that is resilient and dynamic for all. 

About the author. Judi Proctor is a senior consultant with Vizient and brings more than 30 years of experience exclusively in health care supply chain. She leads initiatives in supply chain assessment and optimization, supply and inventory automation, strategic sourcing, value analysis and operational cost improvements. She holds the designation of certified materials resource professional from AHRMM and is a master instructor in process management. Her educational background is in finance with a Master of Business Administration and Health Law.