New Premier Data Reveals Healthcare Supply Chain Trends, Challenges and Actionable Solutions

Key Takeaways

• Download your copy of Premier’s new 2024 Supply Chain Resiliency Report today.
• Below is a sampling of data-driven insights from Premier’s 2024 Supply Chain Resiliency survey and Report.
• For full survey results, open-ended survey responses and additional information on strategies to bolster the supply chain, download the Report via the link above.

Over the past four years, healthcare supply chains have faced an unprecedented number of complex and compounding challenges rarely seen throughout history.

The COVID-19 pandemic forced a shift to de-risk supply chains. And economic challenges spurred by ongoing inflation, geopolitical tensions, natural disasters – and more – compel leaders to focus on long-term transformation, rather than short-term gains.

Hundreds of leaders from both healthcare provider and supplier organizations (NEW for 2024) shared valuable perspective for Premier’s 2024 Supply Chain Resiliency survey and Report.

What follows are 8 key takeaways for the healthcare supply chain in 2024 and beyond, and some insights and advice about how to address.

1. Inflationary pressures.

Ongoing inflation and cost pressures for labor and products are noted as the biggest operational and financial challenge for both provider and supplier organizations over the next year (47 percent and 45 percent, respectively).

65 percent of providers also say costs or financial pressures are the most significant barrier to achieving supply chain resiliency.

Solution: Enabling both supply chain and financial resiliency, Premier’s industry-leading contract portfolio, initiatives to diversify production and sourcing, disaster preparedness and response program, and technology suite are serving as a collective shield to help our members minimize risk and strengthen their supply chains.

2. Anticipation of continued challenges.

Most survey respondents see the supply chain as in a permanent state of flux with issues like persistent product shortages/backorders, geopolitical instability and raw materials availability expected to persist or worsen over the next year.

Nearly 80 percent of providers and 84 percent of suppliers expect supply chain challenges to worsen or remain the same – an increase from the 75 percent of provider respondents asked this same question in 2023.

Solution: Investments in healthcare supply chain resilience remain vital from both a strategic and financial perspective, including diversification, automation and technology integration, and proactive risk management strategies. Premier is delivering.

3. A climate of unpredictability.

Over half of suppliers have experienced supply chain operations impacts due to geopolitical issues and severe weather events in 2023. And nearly 85 percent expect regulatory policy changes to affect their 2024 supply chain strategies.

Solution: Premier’s Disaster Preparedness and Response team offers dedicated support for members during an emergency or disruption – providing real-time intelligence and key resources to minimize impacts to patient care. And leveraging Premier data that informs our weekly product watch list (available for Premier members with log-in), Premier’s Advocacy team continues to work closely with the White House, Congress, federal and state agencies, and industry organizations on strategies to enhance supply chain resiliency.

4. Shortages impede operations and disrupt patient care.

Product backorders and shortages continue to impede organizational operations with direct impacts on employee burden and patient care.

Sixty-seven percent of providers said their teams are spending 10+ hours per week mitigating supply chain challenges and shortages. Nearly 40 percent have had to cancel or reschedule cases at least quarterly in 2023 due to product shortages.

Solution: Premier’s award-winning PINC AI™ Supply Disruption Manager utilizes AI algorithms and robust data to generate predictions of future demand and identify potential shortages for specific medical products far in advance – with over 90 percent accuracy. The integrated predictive system also recommends clinically approved equivalent products, minimizing supply chain disruptions and mitigating risks to patient safety.

5. Shortages impact an organization’s bottom line.

For a medium-sized health system (5 hospitals/650 beds), Premier data shows supply shortages, on average, increase the cost of providing care by up to $3.5 million and lead to $350,000 in lost revenue per year. In addition, shortages perpetually tie up $1 million in cash in excess inventory.

Shortages can also lead to potential revenue loss for a manufacturer by way of substitutions for a competitor’s product, cancelled orders, lower demand/consumption and year-over-year change in the manufacturer’s market share.

Premier data shows half of manufacturers lost greater than 2.5 percent of revenue due to their own shortages while a quarter lost between 2.5 percent and 6 percent of revenue from February 2023-February 2024.

Solution: Alongside benefits to providers, Premier’s PINC AI™ Supply Disruption Manager helps suppliers adequately plan production and inventory management, anticipating demand spikes and preventing shortages.

6. The rise of the digital supply chain.

Digital investments are increasing for both providers and suppliers – with many seeing data and supply chain technology as key to resiliency, competitive advantage and long-term growth.

43 percent of providers are leveraging technology and data around supply availability – an 8 percent jump and the biggest increase from last year’s survey. 37 percent of suppliers are prioritizing technology investments in 2024, with many respondents saying their organization has been making investments in technology capabilities for a decade.

Notably, artificial intelligence (AI), robotic process automation (RPA) and supply chain mapping technologies all saw an uptick in planned use by providers from Premier’s 2023 Resiliency survey – increasing by 2 percent, 4 percent and 7 percent, respectively.

And nearly three out of four suppliers say technology is supporting increased supply chain visibility, 64 percent report better collaboration and risk management, and 62 percent note improved response times to disruptions as well as cost savings.

Solution: Premier’s Digital Supply Chain solutions accurately manage contracts, automate invoicing and payments, predict supply shortages, streamline operations and manage supply chain costs all in one place.

7. Importance of domestic manufacturing.

More than half of suppliers report moderately or significantly increasing investments in domestic manufacturing. At the same time, nearly 90 percent of providers say domestic manufacturing is an important component of their organization’s resiliency strategy.

To that end, Premier recently submitted comments in response to the US Trade Representative (USTR)’s solicitation for input on a new wave of tariffs on $18 billion worth of goods manufactured in China, including medical products and their raw materials.

Premier urged the USTR to modify its proposal as well as consider augmenting supply chain resiliency efforts through additional mechanisms such as tax incentives for domestic manufacturing and the creation of trusted trade partnerships for near shoring.

Solution: Supply chain diversification includes bringing manufacturing back to the USA. Through collaborations with Prestige Ameritech, DeRoyal Industries Inc, PRINCO LLC, VGYAAN Pharmaceuticals and Exela Pharma Sciences, Premier and our members are bolstering the availability of domestically made medical supplies and pharmaceuticals for providers and patients – while supporting job creation and stronger local economies.

Via these initiatives and leveraging advanced automation capabilities, healthcare providers can diversify supply sources at a price point competitive with overseas manufacturing. In addition, these suppliers have increased their production to help protect providers from shortages.

8. Diverse strategies for resiliency.

Other supplier priorities for resilient operations include improving demand forecasting, cybersecurity enhancements, diversifying Tier 2/3 suppliers and increased collaboration with supply chain stakeholders.

Providers note SKU rationalization, monitoring supplier key performance indicators, multi-sourcing categories for redundancy and enhancing terms and conditions within supplier contracts as important strategies.

Solution: Together with our technology suite, Premier’s digital sales, purchased services and supply chain consulting solutions are allowing our members to gain efficiencies, realize cost savings opportunities and gain access to the critical, high-quality products and services providers need to care for patients.

For full survey results, open-ended survey responses and additional insights on strategies to bolster the supply chain, download the Report via the link at the top of the page.

Actionable Solutions for Risk Mitigation, Competitive Advantage and Long-Term Value

The physical supply chain interruptions of the past and potential risks over the next year should act as reminders that investments in healthcare supply chain resilience remain vital from an operational, financial and clinical perspective.

Modern supply chain leaders see a resilient supply chain as key to high-quality patient care continuity, competitive advantage and long-term value. Throughout our 2024 Resiliency Report, we highlight the trends and challenges as well as the diverse strategies and actionable solutions leaders are leveraging to move our industry forward.

Inventor and Nobel laureate Dennis Gabor once said: "The future cannot be predicted, but futures can be invented."

Together with our members and suppliers, Premier remains committed to enabling a stronger healthcare supply chain – one that supports a healthy bottom line, growth and the continued delivery of outstanding patient care.