How COVID-19 has changed forever how we think about the healthcare supply chain – 3 ways to move forward

The world’s supply chains have been tested during the COVID-19 pandemic in ways that we did not think possible – exposing flaws, vulnerabilities, and dangers that result from relying too blindly on the supposed perfect workings of the global economy. As we all know, these weaknesses have been particularly dramatic and painful in healthcare, illustrated by the inability to source PPE, the lack of life-saving devices such as ventilators, and the supply and demand driven markets that have led to usurious practices, price gauging, and unethical behaviors by organizations and nations. The illusion of the reliable global healthcare supply chain has been exposed and discarded. How can the lack of such basic and inexpensive infection prevention supplies bring leading world economies to their knees and healthcare systems worldwide to the brink of collapse? 

As we redesign and rebuild the healthcare supply chain from the ground up, we must collectively apply ourselves to avoiding the pitfalls that have been responsible for diminishing the ability of hospitals to source vital supplies needed to care for their patients and protect their clinical staff.  

Hospitals should rethink dependence on foreign manufacturing

As we now know, one of the main causes for the current shortage of PPE in the U.S. is the fact that hospitals have been sourcing these basic but essential commodity items from other countries. For a long time, healthcare supply chain personnel have had to focus disproportionately on getting the best prices for clinical supplies, driven by their hospital’s need to manage the cost of delivering care within the context of diminishing reimbursement. Healthcare organizations have prioritized finding savings through lowering the cost of supplies, rather than also seeking, for example, to save money by reducing the tremendous waste caused by expired and unused inventory. 

The COVID-19 crisis has shown us all too starkly that negotiating the best price as the only means of balancing the cost versus reimbursement equation is not enough and comes at a terrible price: manufacturers have delocalized production over the years to fabricate most lower cost items overseas, where labor is cheap and often unregulated, and where raw materials are plentiful and affordable. We have all witnessed how that market economy logic reached its limits when most of the world ran out of supplies such as N95 masks, gloves, gowns, goggles, and face shields – with life-threatening consequences. Where off-shore manufacturing seemed, until recently, like the right business strategy for remaining price-competitive, the favoring of local suppliers and producers has shown itself to be a safer and more sensible approach today, despite higher unit prices. Manufacturers that have the capacity to ramp up the production of supplies quickly and dependably in order to accommodate sudden and unexpected demands will be able to distinguish themselves from their competition. Peace of mind comes at a price, something that both hospitals and manufacturers should share the responsibility for achieving.  

Some hospital organizations are already considering investing in, buying, or building their own supplies manufacturing like some have done with pharmaceutical products, including partnering with non-traditional healthcare products manufacturers, such as 3D printing companies, in order to manage PPE and ventilator shortages.

Hospitals should rethink vendor consolidation or single-sourcing 

Consolidation has also become a common strategy of supply chain executives desiring to achieve economies of scale, negotiate more favorable terms with manufacturers or distributors, and reduce costs associated with dealing with multiple vendors. This practice has unfortunately left many hospitals at a dangerous disadvantage in their ability to receive essential products – products which are in the hands of too few vendors or distributors who themselves are likely dependent on only a small handful of suppliers. This strategy of consolidation creates a domino effect where the last tile falls the hardest. What we need is rational diversification – an approach that privileges sourcing from a wider mix of vendors, but with an emphasis on domestic suppliers based on a thorough risk analysis. Such an approach would minimize exposure to the uncertainties and constraints that we are seeing today.

Hospitals should rethink the approach of “just-in-time” delivery 

Finally, industry proponents of just-in-time (JIT) delivery who have long disparaged the “just-in-case” attitude of many clinical staff (who prefer to stockpile supplies in order to avoid stock-outs) need to revisit their approach. Not having enough supplies on-hand is an untenable situation in healthcare because the stakes are so high. After all, it can cost a patient’s life. Indeed, the straight application of JIT delivery to the healthcare industry has always felt somewhat ill-fitting and at odds with the essence of healthcare supplies and how they are used.  On the other hand, arbitrary hoarding of clinical supplies due to the lack of accurate par levels or trust in the system can create chaotic, unpredictable, costly, and wasteful inventory management practices.

Inventory management technology solutions are essential for finding an effective compromise between just-in-time and just-in-case strategies.

Inventory management solutions  – whether utilizing barcode scanning or RFID technologies – have the ability to provide accurate data on par levels and safety stocks of all inventories on-site, and also manage PPE reserves in an off-site location or warehouse (including tracking availability, levels, expirations, and recalls). Any future application of JIT will most certainly require that hospitals set aside, and manage adequately, a dependable stash of critical supplies as a safety stock buffer in order to be prepared to face the unforeseeable. 

In our opinion, as the industry reevaluates the value of JIT, the answer to this current PPE shortage crisis is not uncoordinated and unsupervised inventory stockpiling by each department or clinician, but the application of technology tools that ensure the right product composition and quantities. Visibility of their clinical inventory, combined with such tools, enable hospitals to establish smart par levels and to know which items they have available at their immediate disposal. Hospitals would be able to count on their needs being predictably met with supplies in good standing, which would ease concerns going forward about access to essential and usable items. 

Such data transparency would also enable hospitals to be able to share their excess inventory with other organizations, such as sister hospitals or regional partners, which is a tremendous advantage in times of crisis and shortage.  As evidenced by last week’s news that New York City is building its own strategic reserve of medical equipment such as PPE, test kits, and ventilators, it is likely that we will see more hospitals banding together, or partnering with governmental organizations and private companies, to collaborate on sourcing and building dedicated reserves of PPE stocks and other essentials.

In conclusion…

The acute importance of the healthcare supply chain has never been as obvious as it is today. In the current pandemic, the supply chain did not just trip and skin its knees; it broke down and now requires a complete rethinking of how it functions. It will take a dramatic redefinition of the roles and responsibilities, and relationships between, vendors/suppliers and hospitals for the supply chain to be successful going forward – a redefinition that is driven by accurate data, inventory transparency, extensive contingency planning, better communication, and a more collaborative and coordinated approach. 

Most importantly, in a post-COVID-19 world, the healthcare supply chain will require technology solutions to modernize it and enable it to fulfill its role in ensuring quality patient care as well as staff safety – innovative technologies that manage inventories, eliminate waste, predict usage, and ensure right-sizing and availability of safety stocks through reliable real-time data.

For information about how VUEMED’s advanced barcode scanning or RFID solutions can help you gain control over all of your clinical supplies, devices, and assets, including PPE and ventilators, please contact us at info@vuemed.com.