Supply Chain must use healthcare business data effectively

Feb. 23, 2021

Many times during the COVID-19 pandemic, healthcare supply chain professionals could be heard exclaiming, “we can’t let a good crisis go to waste,” or “we will come out of this stronger and wiser.” They verbalized an unwavering commitment to go beyond surviving the onslaught of the moment and making systemic changes that would strengthen the industry going forward.

The global nature of the pandemic revealed supply chain vulnerabilities and over-reliance on foreign production. It also highlighted how little most healthcare providers knew about exactly where their products were manufactured, let alone where second- and third-tier manufacturers were located and key raw materials were sourced.

It became apparent that to build stronger, more resilient operations, supply chain professionals must gain a deeper understanding of the interconnectedness of the global supply chain and the economic factors that influenced these connections. Additionally, more expertise in demand planning, risk mitigation strategies and complex data analytics will be required.

Where to start

Healthcare supply chain professionals are no strangers to benchmarking and data analytics. They are experienced in evaluating and comparing supply spend and inventory turns with their peers. They have made great progress in understanding and educating physicians and clinicians on supply costs and their related quality outcomes per procedure. However, when it comes to gaining a deeper understanding of the global supply chain functionality, additional data sources are helpful.

Three key resources are available to provide healthcare supply chain professionals with insights that can inform their planning and decision making: The Hospital ISM Report on Business, the Services ISM Report On Business, and the Manufacturing ISM Report on Business, all of which are registered trademarks of Institute for Supply Management (ISM).

A leader in supply chain education, certification, leadership development and research, ISM was founded in 1915 as the National Association of Purchasing Agents (NAPA), which became the National Association of Purchasing Management (NAPM) in 1968 before adopting its current name in 2002. In 1931, the organization began publishing the ISM Report on Business, which is considered one of the most reliable economic indicators available. Today, it is widely referenced by financial publications such as The Wall Street Journal and is used to inform government policy.

The Hospital ISM Report on Business was developed in conjunction with the Association for Healthcare Resource and Materials Management (AHRMM) and Strategic Marketplace Initiative (SMI). These organizations collaborated to tailor a survey for the hospital industry and to identify survey participants. Data collection and validation began in April 2018 and the first report was released to the public in August 2020. The validation period was extensive to make sure the Hospital report had the same degree of reliability as the Services and Manufacturing reports. The mathematical models were validated by the arrival of COVID-19 when the Hospital report accurately reflected the associated market trends.

All three reports have been shown to be reliable economic indicators and very timely information available to supply management practitioners. The data are provided by a dedicated panel of supply chain executives standing at the nexus of supply and demand. The indexes measured in both include: Business Activity, New Orders, Employment, Supplier Deliveries, Inventories, Prices, Backlog of Orders, New Export Orders, Imports, and Inventory Sentiment. The Hospital report breaks down prices into supplies and pharmaceuticals and includes information on Case Mix, Days Payable Outstanding, Technology Spend and Touchless Orders. The indexes are supplemented with informative comments from the panelists.

Hospital inventory planning

The Hospital report provides supply chain leaders the opportunity to compare their current situation and trends with others across the country. Insight into demand patterns, inventory and pricing trends and supplier performance can help organizations with their internal planning and assist in determining strategies for engaging suppliers and distributors. For example, if a hospital were having problems with backorders and knew from the report that supplier deliveries had improved steadily for the past three months, they could approach their distributor to find out why they were an exception to this trend. Additionally, having information that showed an increase in industry wide demand and escalating prices could be the additional information needed to convince a CFO to fund increased inventory levels.

Managing logistics, transportation

The Services and Manufacturing reports are full of information providing insight into the overall health of the supply chain all industries. Medical device manufacturing information is captured within the Miscellaneous Manufacturing sub-sector. Some of the report’s most helpful information pertains to transportation and raw materials issues and examples of the interdependencies across the various industry segments. For example, port delays and the inability to quickly offload ships in California have ripple effects across industries. An early awareness of this issue would allow hospital supply chain leaders to talk with their suppliers about specific port(s) of entry for their products and strategies for managing the situation. An awareness of commodities, such as plastics and resins, that are in short supply or experiencing price increases could impact inventory planning.

Effective use of business data, such as the ISM Report on Business, is a critical tool that enables healthcare supply chain professionals to continuously improve operations and better collaborate with their suppliers and distributors to develop transparency and resiliency throughout the entire supply chain.