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Empty shelves, longer lead times, workforce issues and higher prices characterized the supply chain in 2021-2022, where large-scale disruptions and record-breaking inflation affected every sector of the economy – including healthcare.
In some welcome news for the supply chain, global transportation and freight indexes are showing downward trends to pre-pandemic rates, reacting to the current environment of stabilized demand for supplies and ample inventory. Projections indicate easing logistics constraints could lead to inflationary relief in 2023.
Yet even with these bright spots, the supply chain worldwide remains fragile alongside ongoing disruptions, labor challenges and costs that have not returned to normal levels.
What follows are three main trends for healthcare supply chain leaders that could usher in change, and some insights and advice about how to prepare.
COVID-19 was the wakeup call that logistics is lagging other industries in digitization and technology enablement. Real change is necessary across the supply chain information technology ecosystem – beginning with access to robust and timely data.
Increasingly, healthcare organizations are turning to solutions for supply chain mapping and risk scoring as well as real-time data on demand and hospital/supplier inventory levels. And innovative technology, leveraging machine learning (ML), is enabling predictive capabilities to help pinpoint product shortage risks.
Predictive and actionable data can aid supply chain teams in identifying at-risk supplies, understanding the level critical to operations and viewing key, clinically appropriate substitutes. Coupled with transportation and logistics tools to help manage product location, speed of movement, estimated arrival and local atmospheric conditions, these offerings can reduce staff time needed to manage supply stock issues, reduce costs and reduce canceled procedures due to inadequate supplies.
The combination of tight labor markets and advanced technology is also accelerating automation in logistics. For instance, a partnership between Premier, DeRoyal Industries and 34 U.S. health systems is supporting a state-of-the-art isolation gowns production facility, completely vertically integrated, outside of Knoxville, TN – transforming a traditionally human-made process to automated production, with the capability to produce two gowns every second. In this collaboration, gowns are designed to health systems’ specifications and consider care delivery requirements. Annually, the partnership is expected to produce more than 40 million domestically manufactured gowns.
Investments in automation can help our nation produce goods and compete with low-cost countries in an environment where labor is hard to come by. Automating the manufacturing process helps create a smarter supply chain, driving greater efficiency by increasing capacity, reducing costs and allowing domestic companies to compete more effectively on a global scale.
Over the past three years, international logistics tie-ups strained availability of vital healthcare supplies.
From production to delivery, we must take a holistic view of the entire healthcare value chain and help make it more reliable and dependable. Key strategies include diversification of suppliers, production capabilities and transportation processes, including direct-to-manufacturer sourcing, forward buys and special distribution arrangements.
Geographically diverse and U.S.-based manufacturing can help reduce overreliance on any single country or region – but sustainable domestic solutions must decrease barriers to entry, namely the time and cost to enter the marketplace.
Today, replicable investment models are building market competition and offering domestic options for providers where they didn’t exist previously. For example, Premier, S2S Global and leading health systems are partnering with U.S. manufacturers to provide the up-front liquidity, aggregated demand forecasting and buying commitments – creating the surety needed to expand U.S. production, modernize facilities and drive innovations. This helps ensure that providers have cost-effective, domestic supply alternatives.
Direct-to-manufacturer sourcing is prime for advancement both globally and here at home. With direct sourcing, healthcare organizations can possess full line of sight on production and deliveries and receive critical, heads-up updates for any issues, mitigating the risks of shortages due to logistics problems and other disruptions.
During the pandemic, transportation challenges became a major healthcare issue as ports, rails and roads clogged and suffered from worker shortages, among other issues.
Globally, medical device manufacturing and distribution are treated as critical, meaning these goods are prioritized so that the production of and flow to the U.S. can continue as uninterrupted as possible. However, over the past year, we saw challenges play out at our own ports, where once the healthcare supplies arrived, they’re in the same queue as other goods coming in, regardless of type. Because this is a commodity service, there is minimal to no prioritization of what types of goods are offloaded first, and no ability to pay a premium cost to deliver certain types of goods over others.
Healthcare organizations and government entities have made strides in this area, including a Health Industry Distributors Association (HIDA)-recommended “fast pass” pilot program at U.S. ports to prioritize critical medical supplies for container access and sea freight space and for priority handling of medical supplies. These efforts should extend across the supply chain – aligning transportation operations to support expedited delivery of healthcare products during public health emergencies.
We look forward to continued collaboration with public and private sector partners to evaluate the program’s successes and put forward recommendations for Congress to consider as part of the Pandemic and All Hazards Preparedness Act (PAHPA) reauthorization in September. Our continued charge is to fortify the U.S. healthcare supply chain with collaboration and coordination across federal, state and private entities.
Healthcare organizations require future-forward supply chain and logistics strategies for long-term success and sustainability – to enhance preparedness, optimization, cost mitigation and resiliency.
Edin Dulic is Senior Director of Operations & Global Logistics for S2S Global, a direct sourcing wholly owned subsidiary of Premier, Inc.
This article ran in the February issue of Healthcare Business Review.