If anything, the 2020 pandemic inflicted three wounds on the healthcare supply chain: Stockouts, followed by shortages due to unexpected demand surges and the grim realization that the industry may not be prepared to handle the next big – and potentially worse – pandemic.
Thankfully, none is mortal or fatal to operations.
For the last two years, Healthcare Purchasing News explored the possibilities of a future-ready supply chain through available and emerging technology, including the promise of the latter’s conceptual applications.
To access the 2019 story, visit https://www.hpnonline.com/21105835/.
To access the 2018 story, visit https://www.hpnonline.com/13001355/.
Yet sources showed HPN it remains painfully obvious that technology may not be enough. Of course, it never was (sorry, 3-D printing, which did come in handy for making face shields and masks this year).
At best, technology represents a means to an end – but what about the end from the means?
This year, HPN sought to explore the end game sought and the process – humans with ingenuity augmented by technology ... from raw materials to manufacturing to distribution to warehouse to hospital to bedside to the patient’s home or trash bin.
A recent study found that nearly 50 percent of businesses say it will take a year or more before supply chains return to pre-pandemic levels and that higher costs will continue even as supply ramps up.
This raises at least five noteworthy questions: Will the Future-Ready Supply Chain call for:
- Access to more warehouse or storeroom space?
- Some type of hybrid hub-and-spoke system for suppliers to meet demand spikes?
- More investment in and implementation of cloud-based, real-time computer tracking?
- More investment in and implementation of voice recognition and real-time image capture?
- Fluid exchange of information that accelerates the adoption and implementation of blockchain capabilities among suppliers, providers and payers?
At minimum, experts agree that Supply Chain must master four areas to emerge from 2020’s challenges a more responsive and visionary profession. They are, in random order, supply chain visibility; real-time data accessibility, analysis and transparency; supply network mapping and effective demand management. (See figure 1 for explanations.)
Figure 1
4 areas healthcare supply chain must master
- Supply Chain visibility: Everybody recognizes and values Supply Chain (including its data) as the go-to experts on sourcing and negotiations, including the C-suite and even if the C-suite doesn’t invite Supply Chain within its executive ranks.
- Real-time data accessibility, analysis and transparency: This precludes that data on evaluation, ordering, contracting, purchasing, usage, outcomes and disposal patterns are accurate and reliable, and that colleagues trust and value the conclusions derived from them.
- Supply network mapping: This encompasses way more than just information technology. It involves tracing product development from raw materials as well as labor elasticity and flexibility throughout the production, usage and disposal channels.
- Effective demand management: This includes understanding consumption/usage patterns and being able to pivot (proactively versus reactively) during crises and disasters that could initiate demand spikes (short-term) and surges (long-term).
What should Supply Chain do?
You might surmise that products represent the primary responsibility of Supply Chain because, after all, people stereotype Supply Chain as the mover of stuff.
Technically, Supply Chain does that … and more.
By and large, one of the key elements of Supply Chain’s success is data – pure and simple. Supply Chain requires access to accurate data that can be shared conveniently to enable and drive decisions – including managing demand as has been demonstrated this year amid the pandemic.
“Data accessibility, accuracy and transparency are key areas of focus in today’s fast-moving supply chain,” Halligan told HPN. “Leaders routinely utilize data to help make efficient and effective decisions about how to manage procurement, inventory placement and order fulfillment. Successful supply chains, and most progressive leaders in the industry, are continuously looking to improve the accessibility, accuracy and transparency of their information by digitizing activities and capturing data.”
All four are closely related and interwoven, according to Steve Downey, Group Vice President, Supply Chain Operations, Vizient.
Supply chain visibility means supply chain has the resources, alignment, data and access necessary to do the best job they can, Downey explains, detailing successful organizations amid the pandemic.
“In working with our member hospitals during this pandemic, those with the most successful supply chains have C-suite access, alignment with clinical teams, and a single executive leader who is managing all of the supply chains within the health system with integrated data and technology. This structure and level of visibility with key stakeholders brings the right tie to strategy and organizational support,” he said.
Downey calls for a cohesive fusion of supply mapping, demand management and real-time data, something on which Vizient has been working. “Other industries have leveraged these sorts of third-party network solutions to help supply resiliency, and that has proven itself to help solve all these together,” he added.
Supply Chain first must focus on correct and timely data on which to base contracting and purchasing decisions, according to Downey. “Accurate, real-time data showing on-hand inventory is key to enabling health systems to adjust par levels as necessary to meet shifting clinical demand,” he said. “If categories are set improperly, it’s hard to source without price and spend.
“If demand management is wrong, then you will not have enough supplies no matter what,” Downey continued. “Being able to predict needs and work with suppliers to establish agreements to meet those needs, leads to greater resiliency.”
Downey also cautions providers to learn whether products are made or stored in a single facility located in a high-risk area because that should motivate Supply Chain to invest in additional inventory or work with a secondary supplier approved through a value analysis process.
“To me it starts with visibility,” Pleshek said. “Once key supply chain assets are visible they can be tracked and monitored. Visibility information is great, but if it isn’t transparent and shared across the supply chain it doesn’t do much good. I believe data analysis, including predictive analytics and [artificial intelligence] is the key to harness visibility data to enable proactive demand management.”
But Jody Hatcher, Director, PartsSource, and former President, Supply Chain Services, Vizient, further qualifies the nature of data needed.
Reliable data and advanced analytics can identify future potential supply bottlenecks and prevent shortages, as well as equipment and staffing needs, according to Hatcher. This includes forecasting bottlenecks and addressing them before they materialize or become acute, which requires precise information about the inventory available in the entire supply chain, not just an organization’s own inventory, as well as the capacity of suppliers, demand patterns and rates of consumption.
“Clearly, getting that data requires transparency and visibility into channels with honest and open communication between providers, suppliers and distributors to support inventory planning,” Hatcher said. “Without that visibility, healthcare organizations end up, as they did in the early days of COVID-19, ordering product not knowing how much was available and where it was going, which led to either under-ordering or hoarding.”
“Without reliable, repeatable real-time data from the edge, the rest of the supply chain planning and optimization will be suspect,” Wheeler said. “If the decision support systems prove over time to be unreliable due to poor data, they won’t be used. With reliable data, analytics engines can transform this data into useable information. This is what supply chain visibility is – useful information about the supply chain status. Once this visibility is established, information is distilled to key metrics tracking demand signals and the overall supply chain network.”
“In order to be effective, supply chain professionals must first have transparency into the totality of the supply chain, including the upstream raw materials that go into finished products and ancillary supplies. Absent this vital information, the supply chain gets relegated to purchasing and logistics.”
Powell attributes 68 percent of disruptions to “poor demand signaling to suppliers,” which is why effective demand management and supply network mapping are critical components of supply chain preparedness.
“Alongside an understanding of any potential risks with their suppliers, supply chain professionals can then apply real-time data demand signals to accurately identify the intersection of their demand and sustainable supply,” Powell said. “The icing on the cake is real-time access to usage, inventory and location information – rounding out the necessary improvements to transform the healthcare supply to the same level of sophistication that we see in the automotive, electronics and food sectors.”
Hatcher warns providers, which may be trapped in a data quagmire, against casting blame on suppliers.
“The onus of supply chain opacity during COVID-19 is not resting on the shoulders of the suppliers alone,” he argued. “Greater supply chain transparency requires open communication by all parties. Providers can help by being willing and able to provide better inventory visibility, better demand forecasts, faster order placement, and greater collaboration with their suppliers. For their part, suppliers can work with distributors and providers to manage to their historical ordering patterns and avoid stocking up outside of the norm, including previous spikes in demand.”
Ultimately, Hatcher defines the future-ready supply chain as requiring visibility into the location, quality and availability of inventory across various members of the supply chain. “To accomplish that, providers need more sophisticated data, automation and analytics, and ideally an online marketplace to consolidate the hundreds of supplier relationships that most providers maintain,” he added.
Standard foundation
“Drastic improvements in data management must be achieved before anything else can move forward,” Owens noted. “Universal data standards have to be widely adopted and implemented throughout the healthcare supply chain verticals. Without the data standards, data integrity will never be achieved, thus falling short of any goals for transparency, trust or value. Despite best efforts for organizations to normalize this non-standard data, there will always be doubt and problems that will hamper the real-time data accessibility.”
Owens points to mapping out the supply network channels as the logical next step or ground floor of the solution.
“From raw goods to the end users, this map tool now provides a complete picture of the path the product takes,” he continued. “Having this information, an organization can now start to evaluate where risk points could occur should a disrupting event present itself. This exercise will help identify the needed contributors for data sharing when building out the visibility infrastructure.”
Once an organization centers on standardized data with all collaborators identified from the mapping exercise, then it can build on the foundation and ground floor to reach the next level - visibility.
“Linking all the data together to gain visibility into the complete healthcare supply chain is a lofty goal,” Owens admitted. “However, it’s been something the healthcare industry has needed for a very long time. Many other supply chain sectors have been successful in achieving this goal. Why hasn’t healthcare? Is it because of rapidly changing technology, the complexity of clinical preferences, or is it about transparency causing issues with insurance reimbursement? Regardless of the reasons, the healthcare supply chain sector is extremely behind. Considering we are literally talking about ‘life or death’ in some instances, we should have these visibility tools in place to mitigate risks where the stakes are high.”
Owens also questions the hubbub around demand management without an effective framework in place.
“Each organization has its way of managing demand,” he said. “However, despite the best efforts and methods, understanding high-level usage patterns cannot be fully achieved without all of the preceding steps in place. Data management must be solid, and considerations for all factors impacting production or demand must be mapped. Additionally, unobscured visibility to the complete supply chain must be present to fully understand consumption patterns and to nimbly determine strategy for mitigating any disruptions.”
Healthcare isn’t retail
While some may see managing demand as the destination once other elements in the journey are implemented, Redding begins with demand and works backward.
“The priorities for implementing change starts with effective demand management and knowing what the customer needs, wants and uses on a daily basis as well as variability of demand,” Redding indicated. “Since healthcare delivery does not mimic a ‘retail transaction,’ the ability to readily capture and collect information for planning purposes is many times limited. To effectively manage the supply chain, it is critical to understand the demand side of the equation since it drives many of the upstream decisions, such as manufacturing and distribution.”
With effective demand management in place, sharing data transparently with others for analytical, cataloguing and decision-support purposes represents the next outcome, which enables optimal supply chain visibility, he noted. Anything short of that may lead to visibility that may not be in a positive light, he added.
“Taking the supply chain to the next level with end-to-end track-and-tracing once the foundational elements are in place enables health systems to realize long-term value and position themselves to be a leader in the industry,” Redding said. “Supply network mapping will require a broader industry perspective and support to realize the inherent benefits – it goes beyond the internal circle of influence to building the case for industry change.”
Dawn of a black swan
“COVID-19 has been a black swan event of historic proportions and has opened the eyes of procurement officers and supply chain professionals who quickly realized they had limited information about their suppliers’ global operations, and most dramatically, they learned they had little visibility to their suppliers’ suppliers,” Rose noted. “Many woke up to the fact they needed greater visibility into their second, third or fourth-tier suppliers. It took many unprepared companies more than three months to react to the impacts of COVID-19 and get their mitigation efforts stabilized and moving forward.”
Rose insists that by analyzing data extracted from continuous monitoring of world events, supply chain experts can increase their visibility and get ahead of their competitors during major disruptions.
As with travel, the road to greater visibility requires a map that extends beyond the overt, Rose recommends.
“Supply chain mapping provides this visibility, which provides greater predictability on how to get materials from point A to point B, and, most importantly, identifies risks and failures in the supply chain while giving recommendations on how to mitigate them,” she continued. “Mapping is critical for identifying where suppliers are located, the origins of parts and locating qualified and vetted alternate sites. Many companies manage their suppliers by giving priority to their highest-spend tier 1 suppliers. However, 80 percent of the largest disruptions in the supply chain stem from lower-spend and single-sourced suppliers. This is why mapping is so critical to ensuring greater visibility across all tiers of the supply chain.”
For example, a $1 part may be the cause of the delay of a billion dollar product, Rose asserts. “This is one reason why Resilinc advocates for prioritization of suppliers based on revenue impact versus spend,” she said. “By identifying tier 2 and tier 3 suppliers used by multiple tier 1 suppliers, the company can add any bottlenecks to their 24/7 monitoring to better prepare for an effective and speedy response.”
Using monitoring and mapping tools effectively can provide Supply Chain leaders with the “peace of mind” that stems from real-time data accessibility, analysis and transparency, Rose surmises.
“In the context of the COVID-19 pandemic, some of the supply chain monitoring and mapping tools for risk monitoring and mitigation purposes involved early warnings via news monitoring, ‘what-if’ simulators, part-site mapping, alternate site recommendations and pandemic readiness supplier assessments,” she noted.
Rose shared the example of an unnamed healthcare company that looked to supply chain mapping during the Mexico earthquake and Puerto Rico hurricane season in 2017 to predict the trajectory of hurricanes Maria and Irma. The company also developed “what if” scenarios to establish the various factors that might affect the supply chain, she recalled. Hurricane Maria threatened to disrupt materials provided by suppliers in Puerto Rico as the hurricane wrought power outages on the island. The healthcare company faced the possibility of production delays of IV bags made on the island. Supply chain mapping enabled the company to make advance purchases to avoid this delay and ensure there were enough IV bags for life-saving procedures needed during the hurricane’s aftermath.
As the hurricane continued to swell, a massive earthquake struck Mexico. “By knowing how impact zones and their suppliers were affected, potential risks were mitigated in the same company’s supply chain. Impacted employees were located and confirmed safe,” Rose indicated. “The healthcare company was also able to identify the universities conducting the company’s drug trials, facilities where manufacturing vials were stored, and any distributor warehouses in the impact zone. This gave the company the data and analysis necessary to mitigate potential risk caused by the earthquake by moving to alternate sites located outside the affected area.”
Before an organization can effectively manage demand it must excel in mitigating risks from event disruptions, Rose advised. “Because just-in-time inventory is still the most prevalent practice among supply chain managers, it is critical to implement digital risk mitigation tools to provide effective demand management,” she added.
The invisible supply chain
Real-time data accessibility, analysis and transparency drive accuracy and reliability, she noted.
“This includes operating with accurate data from supply product cost and acquisition standpoint from two perspectives: Ease of use for the customer without delays in patient care and the fiduciary responsibility of the supply chain to ensure expense management, including aligned contracting and purchasing channels as well as efficient distribution systems,” Templeton said. “This builds trust and confidence in the supply chain. The best supply chain in this regard is the ‘invisible’ supply chain; a clinician doesn’t have to wonder how the supply gets to where it is needed and doesn’t fear that the supply will not be there when needed. They have what they need when and where they need it and don’t really give much thought to the process that got it there.”
With the fundamentals in check, forecasting supply accessibility and availability to cover emergencies that cause spikes in demand naturally follows, according to Templeton. “Being able to anticipate needs is far more desirable than having to scramble during events that already are putting pressure on the organization and its resources,” she added.
Templeton also urges Supply Chain to concentrate on data accuracy that can then be connected to patient outcomes coupled with supply utilization trends and supply costs as a piece of the total cost of care. “Tying supply chain data to quality outcomes data turns the focus to improvement of patient care, not just the unit cost of a supply,” she said.
One key element Supply Chain must master is the ability to build and cultivate relationships with other members of the care team, including physicians, nurses, clinicians, revenue cycle and finance, all of whom play a part in determining the total cost of care, she recommends.
“Being able to contribute to driving successful risk-based healthcare models will make supply chain a valuable organizational asset,” she noted. “Being able to tie supply information enabled by global trade item numbers to claims data becomes even more powerful in looking at supply performance.”
Supply network mapping from raw materials through finished goods, consumption and recall can help Supply Chain “anticipate far in advance shortages” and enable them to “look for alternatives or to pivot to other sources,” Templeton continued.
“Having flexibility to move as needed is not only necessary, but critical to manage in supply chain today,” she said. “Resiliency can be enhanced by shortening the supply chain and operating on selections of products by specifications versus on brand or a sole manufacturer. Risk assessments on source of the supply will become a routine part of supply management.”
Mastering all of these skills will lead to supply chain visibility, Templeton insists. “The supply chain doesn’t have to be part of the executive suite in order to drive change and contribute value to an organization,” she added.
LeMaster served for 31 years at BJC HealthCare as Vice President, Supply Chain Operations, and as Vice President, Supply Chain Transformation.
“Once we improve the ability to forecast demand, then it is important to have visibility across the supply chain to be more proactive in identifying and making adjustments related to disruptions caused by raw material shortages or global demand fluctuations,” she said. “The importance of supply network mapping was brought home when hurricanes ravaged Puerto Rico, and we had no idea which manufacturers’ facilities were impacted – and they refused to be transparent about the impact.”
Data in the details
Charlie Miceli, C.P.M., Chief Supply Chain Officer and Network Vice President, University of Vermont Health Network, remains stark but resolute, calling for meaningful informatics as Supply Chain “has a seat at the High Table by default,” visible to the general public, boards and C-suite.
“If we do not have data accessibility, analysis and transparency we need to pick up our supply chain and go home,” Miceli concluded. “We need to know and monitor our ever-changing demand signals, from analog to digital, and align with our suppliers. Knowledge and transparency of the manufacturing locations of our first-, second- and third-tier suppliers are critical. New suppliers may come from the third tier, leapfrogging primary [suppliers] as we have visibility.”
“In our industry, data is king, and supply chain leaders are lost without it,” he said. “Real-time data accessibility, analysis and transparency are therefore a fundamental priority. Whether you’re after supply chain visibility, supply network mapping or demand management, the quality and reliability of the data input is a precursor to meaningfulness of its output. Quite simply, garbage in, garbage out.”
Reliable data then buttresses visibility.
“Only once your data is solid and trustworthy can we earn a spot at the table,” Turner cautioned. “The supply chains of yesteryear were backroom cost centers. Today, supply chain is rightly positioned to guide strategy and lead digital transformation. Supply chain visibility plays a central role in that pursuit. Having true visibility is what gets us into the C-suite and keeps us in the conversations that matter to the patients. The visibility you afford your organization enables you to become a dependable resource for strategic business decisions and cost control initiatives.”
From there, a health system’s end-to-end visibility ushers in effective demand planning, according to Turner.
“Being able to successfully manage your organization’s demand is something way too many supply chain departments simply cannot do,” he observed. “Unlike supply chain departments in non-essential industries, we have to be able to adjust to every situation no matter the size and scope, including a global pandemic. The days of tribal knowledge for setting order levels and being reactionary to physicians’ demands are gone. We have to be able to use all that rich data that we have been working on. With a pulse on all the moving parts from a real-time and responsive supply chain control center, the integrity of the demand chain can be trusted, and pivoting from spikes and surges becomes a data-driven effort rather than a ‘gut feel.’”
Turner casts supply network mapping as something of a Holy Grail.
“Supply network mapping is an idea that eludes the vast majority of healthcare supply chains,” he noted. “Most rely on a distributor to keep up with this, but with the growing number of health system IDNs adopting a [consolidated service center] model, they are becoming more aware of the possibilities. Some health systems are even managing their own sourcing directly from overseas manufacturing, but this remains the exception, not the rule. My perspective is that mastering the other three areas first enable to you to get more value out of supply network planning. Once the house is in order, supply chain leaders are better positioned to look at external dynamics.”
Turner previously served as part of the award-winning supply chain team of Greenville (SC) Health System, which earned HPN’s 2013 Supply Chain Department of the Year award.
