Eight key trends of the future healthcare supply chain
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In conjunction with the company’s 15-year anniversary, Global Healthcare Exchange (GHX) interviewed provider and supplier customers to explore their vision for the healthcare supply chain of the future.
As the healthcare industry continues to change, organisations are seeking new ways to remove waste, cut costs and improve patient care. GHX spoke with a select group of customers, from large- and mid-sized hospitals to some of the biggest suppliers in the world, for their perspectives on how the supply chain will help usher in healthcare transformation and its role in the coming two decades.
Based on those interviews, eight key trends emerged that illustrate the strategic role the healthcare supply chain of the future will play in delivering value and insight to all areas of the organisation.
Bruce Johnson, CEO and President of GHX, said: “For the past 15 years, the industry has been laser focused on basic cost-cutting initiatives. Today, healthcare has the opportunity to build off of those foundational changes to not only help solve the cost-quality equation, but also to influence the industry’s future effectiveness.
“Our interviewees strongly believe that when we look out 10-to-20 years, the supply chain is the answer for creating long-term industry viability and ensuring quality patient care. GHX is committed to a Future Supply Chain that continues to deliver solutions that help both providers and suppliers successful navigate future technology-driven supply chain opportunities.”
1) The future supply chain will be a goldmine for data
The value of clean, accurate data is undisputed, but many healthcare organisations have a long way to go to realise its full potential. The data coming from the future supply chain will not only be transaction-focused, but also leveraged business wide.
Many interviewees noted the future supply chain will sit on a ‘goldmine’ of outcomes data that will be documented, recorded and used to make better decisions for patient care. As more data is collected (down to the patient level), every department within an organisation will have an unprecedented understanding of where there is real value.
2) It will be part of the C-suite and involved in strategic projects across the company
Thanks to the value realised across the organisation, the future supply chain will have a more prominent seat in the C-suite and be a linchpin in projects across different areas of the business. One provider-side interviewee noted: “Gone are the days where the supply chain was relegated to the basement; we are becoming a pillar of the organisation.”
3) It will lead the standardisation of care
One of the most significant ways healthcare will become sustainable is by focusing on the standardisation of care, particularly consistency from a patient perspective. The future supply chain will support and guide this change, as it sits on valuable data that can help determine not only the best price, but also the best outcomes, which will help change long-standing, inefficient and wasteful processes.
4) It will be in lockstep with clinicians
Customers predict a “clinically integrated supply chain” where supply chain professionals and clinicians work closely and side by side. Physicians, recognising they need to adjust their processes for the greater good of patients, will look to the supply chain for guidance, support and knowledge on product price points, outcomes and alternatives.
In turn, supply chain professionals will gain clinician trust by demonstrating the value the supply chain and its data can deliver. Supply chain specialists and clinicians will meet regularly to help ensure continuous improvements, share ideas, compare products/outcomes and they are always making the informed decisions.
5) It will be predictive and rarely, if ever, falter
The healthcare supply chain data will not only be used to make better decisions, but also leveraged for predictive analytics. To be fluid and fast in getting products to clinicians, supply chain professionals will use data to better anticipate what will be needed, and not falter or lose speed if a product is discontinued or backordered.
One interviewee commented that a nurse within his organisation likened the future supply chain to water, saying: “I don’t care how the product gets here, I just want it when I need it. It’s like water from the tap; I don’t care where it comes from, as long as it’s there when I turn it on.”
6) It will be based on long-term, mutually beneficial relationships between trading partners
For years, healthcare trading partners have talked about creating better, more transparent and communicative relationships with each other, but few have actually walked the talk. In the future supply chain, these ideal relationships will come to fruition. Providers and suppliers will work toward the mutual goal of improved patient care and find ways to better align incentives to succeed.
7) It will expand to wherever the patient goes
The future healthcare supply chain will no longer solely reside within the in-patient/out-patient facility, but rather expand to wherever the patient is physically located. This is due to greater consolidation and collaboration among health systems (telemedicine networks, homecare/nursing home partnerships, etc.), as well as because reducing patient readmission rates has become more critical with the advent of healthcare reform.
The healthcare supply chain of the future will be extended past the four walls of the hospital to help ensure patients get the care they need wherever they are and that they do not return to the hospital.
8) It will adapt to personalised medicine and the more-informed consumer
With disruptive technologies on the horizon like 3D printers and improved imaging and diagnostics, the future supply chain will adapt with new manufacturing and buying processes around “personalised medicine.” This is also the case with more connected healthcare consumers, who are increasingly researching the best hospitals and products for them. The future supply chain has to be prepared for and eventually allow consumers to shop for products and implants like they do online or at a brick and mortar store.
Global Healthcare Exchange, LLC (GHX) is driving costs out of healthcare by transforming the healthcare supply chain. In November 2014, GHX acquired Vendormate, a leader in vendor credentialing and procurement cycle management software and services for healthcare providers and suppliers. For more information, visit www.ghx.com and The Healthcare Hub.
NTT DATA Services, Remodelling Supply Chains for Resilience
Joey Dean, the man with the coolest name ever and Managing Director in the healthcare consulting practice for NTT DATA and is focused on delivering workplace transformation and enabling the future workforce for healthcare providers. Dean also leads client innovation programs to enhance service delivery and business outcomes for clients.
The pandemic has shifted priorities and created opportunities to do things differently, and companies are now looking to build more resilient supply chains, none needed more urgently than those within the healthcare system. Dean shares with us how he feels they can get there.
A Multi-Vendor Sourcing Approach
“Healthcare systems cannot afford delays in the supply chain when there are lives at stake. Healthcare procurement teams are looking at multi-vendor sourcing strategies, stockpiling more inventory, and ways to use data and AI to have a predictive view into the future and drive greater efficiency.
“The priority should be to shore up procurement channels and re-evaluate inventory management norms, i.e. stockpiling for assurance. Health systems should take the opportunity to renegotiate with their current vendors and broaden the supplier channel. Through those efforts, work with suppliers that have greater geographic diversity and transparency around manufacturing data, process, and continuity plans,” says Dean.
But here ensues the never-ending battle of domestic vs global supply chains. As I see it, domestic sourcing limits the high-risk exposure related to offshore sourcing— Canada’s issue with importing the vaccine is a good example of that. So, of course, I had to ask, for lifesaving products, is building domestic capabilities an option that is being considered?
“Domestic supply chains are sparse or have a high dependence on overseas centres for parts and raw materials. There are measures being discussed from a legislative perspective to drive more domestic sourcing, and there will need to be a concerted effort by Western countries through a mix of investments and financial incentives,” Dean explains.
Wielding Big Tech for Better Outcomes
So, that’s a long way off. In the meantime, leveraging technology is another way to mitigate the risks that lie within global supply chains while decreasing costs and improving quality. Dean expands on the potential of blockchain and AI in the industry.
“Blockchain is particularly interesting in creating more transparency and visibility across all supply chain activities. Organisations can create a decentralised record of all transactions to track assets from production to delivery or use by end-user. This increased supply chain transparency provides more visibility to both buyers and suppliers to resolve disputes and build more trusting relationships. Another benefit is that the validation of data is more efficient to prioritise time on the delivery of goods and services to reduce cost and improve quality.
“Artificial Intelligence and Machine Learning (AI/ML) is another area where there’s incredible value in processing massive amounts of data to aggregate and normalise the data to produce proactive recommendations on actions to improve the speed and cost-efficiency of the supply chain.”
Evolving Procurement Models
From asking more of suppliers to beefing up stocks, Dean believes procurement models should be remodelled to favour resilience, mitigate risk and ensure the needs of the customer are kept in view.
“The bottom line is that healthcare systems are expecting more from their suppliers. While transactional approaches focused solely on price and transactions have been the norm, collaborative relationships, where the buyer and supplier establish mutual objectives and outcomes, drives a trusting and transparent relationship. Healthcare systems are also looking to multi-vendor strategies to mitigate risk, so it is imperative for suppliers to stand out and embrace evolving procurement models.
“Healthcare systems are looking at partners that can establish domestic centres for supplies to mitigate the risks of having ‘all of their eggs’ in overseas locations. Suppliers should look to perform a strategic evaluation review that includes a distribution network analysis and distribution footprint review to understand cost, service, flexibility, and risks. Included in that strategy should be a “voice of the customer” assessment to understand current pain points and needs of customers.”
“Healthcare supply chain leaders are re-evaluating the Just In Time (JIT) model with supplies delivered on a regular basis. The approach does not require an investment in infrastructure but leaves organisations open to risk of disruption. Having domestic centres and warehousing from suppliers gives healthcare systems the ability to have inventory on hand without having to invest in their own infrastructure. Also, in the spirit of transparency, having predictive views into inventory levels can help enable better decision making from both sides.”
But, again, I had to ask, what about the risks and associated costs that come with higher inventory levels, such as expired product if there isn’t fast enough turnover, tying up cash flow, warehousing and inventory management costs?
“In the current supply chain environment, it is advisable for buyers to carry an in-house inventory on a just-in-time basis, while suppliers take a just-in-case approach, preserving capacity for surges, retaining safety stock, and building rapid replenishment channels for restock. But the risk of expired product is very real. This could be curbed with better data intelligence and improved technology that could forecast surges and predictively automate future supply needs. In this way, ordering would be more data-driven and rationalised to align with anticipated surges. Further adoption of data and intelligence and will be crucial for modernised buying in the new normal.
These are tough tasks, so I asked Dean to speak to some of the challenges. Luckily, he’s a patient guy with a lot to say.
On managing stakeholders and ensuring alignment on priorities and objectives, Dean says, “In order for managing stakeholders to stay aligned on priorities, they’ll need more transparency and collaborative win-win business relationships in which both healthcare systems and medical device manufacturers are equally committed to each other’s success. On the healthcare side, they need to understand where parts and products are manufactured to perform more predictive data and analytics for forecasting and planning efforts. And the manufacturers should offer more data transparency which will result in better planning and forecasting to navigate the ebbs and flows and enable better decision-making by healthcare systems.
Due to the sensitive nature of the information being requested, the effort to increase visibility is typically met with a lot of reluctance and push back. Dean essentially puts the onus back on suppliers to get with the times. “Traditionally, the relationships between buyers and suppliers are transactional, based only on the transaction between the two parties: what is the supplier providing, at what cost, and for what length of time. The relationship begins and ends there. The tide is shifting, and buyers expect more from their suppliers, especially given what the pandemic exposed around the fragility of the supply chain. The suppliers that get ahead of this will not only reap the benefits of improved relationships, but they will be able to take action on insights derived from greater visibility to manage risks more effectively.”
He offers a final tip. “A first step in enabling a supply chain data exchange is to make sure partners and buyers are aware of the conditions throughout the supply chain based on real-time data to enable predictive views into delays and disruptions. With well understand data sets, both parties can respond more effectively and work together when disruptions occur.”
As for where supply chain is heading, Dean says, “Moving forward, we’ll continue to see a shift toward Robotic Process Automation (RPA), Artificial Intelligence (AI), and advanced analytics to optimise the supply chain. The pandemic, as it has done in many other industries, will accelerate the move to digital, with the benefits of improving efficiency, visibility, and error rate. AI can consume enormous amounts of data to drive real-time pattern detection and mitigate risk from global disruptive events.”