Healthcare Provider Supply Chain Resiliency: A Four-Step Approach

Ongoing disruptions are driving supply chain leaders at healthcare providers to build supply chain resiliency. This is hard work and supply chain leaders are looking at all possible options to modernize their supply chain.  Achieving supply chain resiliency requires a concerted effort. We have recently published a research note to help guide health systems with steps they should be implementing.  

It involves modernizing data management practices, optimizing information systems, developing performance dashboards and building collaboration with suppliers. The purpose of this blog is to share insights and drive more health systems to adopt supply chain resiliency practices.

Background

The importance of supply chain function for healthcare providers was brought to the forefront by the pandemic. For several years, the supply chain function was viewed as transactional with a focus on buying the right product at the right price and making sure it arrives at the right time and right location for the clinical areas to function. There was minimum investment done in making the supply chain resilient with a focus on data, systems and collaboration with suppliers.

Since the pandemic, there have been several supply chain disruptions that have affected healthcare supply chain and the frequency of these disruptions is increasing (as shown in Figure 1 below). Pandemic related disruptions, port disruptions, energy crisis, and geopolitical issues across the globe have been the primary causes of shortages. This has also put a heavy inflationary burden on healthcare providers. In such tough environments, supply chain leaders need to build a short-term and long-term plan focused on resiliency.

Findings

Our research showed that healthcare providers face several challenges:

• Healthcare provider supply chain departments struggle with constantly changing item-level data, lack of accurate inventory view and several downstream systems that rely on accurate supply chain data as the primary source.
• Healthcare provider information systems are built for transactional processes. They are not optimized for sharing data or for conducting analysis. Most health systems have not utilized demand planning modules and forecasting capability within their enterprise resource planning (ERP) systems.
• Providers struggle with access to dynamic supply data from suppliers to develop a supply chain health dashboard. This prevents providers from being proactive with their demand planning and causes last-minute cancellation of surgeries thus impacting revenue.
• Collaboration between providers and suppliers is at a transactional level. Traditionally, there has been a lack of trust between providers and suppliers that has prevented sharing of supply chain data such as demand and forecasting data, shortages in supply, and inventory visibility.

Only those supply chain departments that are data-dependent and have the right combination of people, process and technology will be able to withstand supply shocks, demand changes and price pressures. It is critical that healthcare provider supply chain leaders invest in infrastructure to deliver a resilient supply chain.

Recommendations

In our research note focused on resiliency, we have recommended a four-step approach for healthcare providers to build a resilient supply chain (see Figure 2):

Supply chain leaders at healthcare providers should:

1. Achieve supply chain data accuracy by building data from multiple sources to address inventory issues and to optimize all supply chain functions. This should be implemented by upgrading data management systems, integrating data between supply chain and clinical systems, and building partnerships with solution partners, suppliers and group purchasing organizations. 
2. Assess strengths and weaknesses of information systems and implement resiliency capabilities for supply chain and clinical systems. Providers should evaluate critical functional capabilities of information systems such as Enterprise Resource Planning (ERP) system, Inventory Management system and Electronic Health Record (EHR) system that help in monitoring spend, providing an accurate inventory view, and documenting accurate usage.
3. Develop a supply chain performance dashboard by focusing on important metrics related to contracting, requisitioning, purchasing, inventory management and supplier performance. Selecting right indicators and metrics is critical in monitoring disruptions and coming up with remediation plans to deal with the impact.
4. Build collaboration tools with suppliers for critical data (such as past purchase history, future changes in demand, and inventory visibility). Supply chain can react quickly in the event of a supply risk or a major disruption with increased sharing of data.

The bottom line is that building a resilient supply chain is not a short-term project or initiative. It is a multi-year journey that every healthcare provider supply chain department needs to undertake.

Gartner members: For a link to the research note, please use this link: https://www.gartner.com/document/4017435

If interested in this or other supply chain research related to healthcare provider supply chain, please email me at salil.joshi@gartner.com

Salil Joshi
Senior Director Analyst
Gartner Supply Chain
salil.joshi@gartner.com