Future-ready supply chains linked to data, sourcing, real-time visibility strategies

Sept. 28, 2021
Pandemic sparks process revolution to ignite procedural evolution

As hospitals and healthcare organizations continue to grapple with the ongoing pandemic, their supply chain future vision focuses more on palpable and realistic options than on some of the manufacturing and retail technology that has turned heads and gained popularity over the years.

Augmented and virtual reality for education, training and stock location purposes may draw attention; drones and self-driving vehicles may elicit oohs and aahs; warehouse robotics and 3-D printing may raise eyebrows even as 3-D printing was used to create personal protective equipment (PPE) components to satisfy COVID-19-driven demand spikes.

Against the backdrop of the global pandemic crimping and crippling supply chain fluidity, healthcare supply chain leaders and professionals have been forced to concentrate on short-term problem solving for product access as well as long-term horizon scanning.

If the aftershocks of COVID-19 taught supply chain practitioners one thing about their industry and its resilience, it’s this: Know where available product is at all times up and down through the entire supply channel among a network of companies. The outlook emphasizes enterprise planning to extend beyond a single organization, no matter how large.

In no uncertain terms, healthcare supply chain experts told Healthcare Purchasing News that future-ready supply chains command and control data, sourcing and real-time visibility as fundamental and foundational tenets of standard operating procedure. Any technology tools simply should reinforce those aims. Period.

“While healthcare is one of the most noble, exciting and innovative industries in the world, COVID-19 has also exposed its sprawling, fragmented and often inefficient operations,” observed Chaun Powell, Group Vice President, E-Invoicing & Payables, Premier Inc. “The pandemic has been instrumental in changing not only the way providers deliver care, but also the way they do business.”

Tom Redding, Senior Managing Director, Healthcare Services St. Onge Co., emphasizes the stark lesson learned from the coils of COVID-19, that of layering operational nuances to the process.

“If we’ve learned anything from the pandemic, predicting and managing demand is a critical component to operating a highly effective supply chain,” he noted. “The pandemic-induced bullwhip has and will continue to impact manufacturers’ and distributors’ ability to meet the needs of their customers. As a result, most healthcare systems no longer trust that the end-to-end supply chain will function properly when it is needed. Therefore, health systems are building another layer to the supply chain to absorb fluctuations in demand and product availability.”

Communication, transparency and visibility are critical to building trust and a stable, responsive supply chain, according to Greg Colizzi, Vice President, Marketing, Health Systems, McKesson Medical-Surgical.

“When it comes to emergency preparedness efforts, building trust and increasing collaboration between clinical, supply chain teams and distributors is key,” he said. “We’ve all had to adapt, and we’ve learned that with greater visibility and transparency into each other’s supply chain operations, providers and suppliers can better manage the flow of supplies from the manufacturer all the way to the patient’s bedside.

“Transparency is critical,” Colizzi continued. “Providing our customers with more frequent communications and visibility to shared data were among the first things we implemented to help our providers avoid potential disruptions to patient care, including allocation updates, alternative product lists, critical product availability reports, quality and compliance standards and direct sourcing recommendations.”

While available to the general public for the last three decades, the internet and World Wide Web in which to conduct electronic commerce has proven to be a consumer and business convenience as well as a reliable part of life, according to Bill Kopitke, General Manager, Amazon Business Healthcare.

“E-commerce provides the opportunity for healthcare providers and manufacturers to globally, in real-time, access an expanded source of suppliers to meet their evolving needs,” Kopitke told HPN. “While this technology is no longer a new subject, its adoption into mainstream procurement continues to grow at a pace faster than traditional sources of supply.”

Ongoing technological developments facilitate growth and progress, he observes.

“Both cloud and AI-enabled e-commerce technology help customers access new feature innovations to make it easier and more effective in deployment,” he continued. “The access for business speed solutions outpaces the traditional, confined sourcing methods for individually negotiated contracts. It is an everyday industry flaw that healthcare providers are forced to manage backorders, to the point where it impacts patient care. This does not need to be the expectation of our present supply chain.”

Three by two

Healthcare companies should be adopting technologies that require moderate investment and provide return-on-investment (ROI) quickly, according to Bindiya Vakil, CEO and Co-founder, Resilinc, which has emerged within the last two years as one of the go-to subject matter experts and software evangelists for crisis management. Vakil points to three key solutions that should be adopted now and why, followed by two that have been in the pipeline for at least a year.

Leading Vakil’s priority list? Supply chain monitoring and mapping.

“Companies that invest in technology-based supply chain risk management tools, particularly monitoring and mapping their supplier networks, have an unmatched visibility and a clear picture of how any evolving disruption will affect their supply chains in the weeks to come,” she said. “This kind of technology-driven visibility allows companies to conduct what-if analyses for different regions and work with suppliers in these regions preemptively to protect supply lines.”

This strategy shouldn’t break the bank as others might, Vakil insists.

“The investment required in supply chain monitoring and mapping is considerably lower than some of the other technologies – 3-D printing, for example, requires millions of dollars in investment – but provides an almost immediate ROI. What’s more, mapping and monitoring capabilities already exist, and for a few hundred thousand dollars, you can have a thoroughly mapped supply chain.”

Up next? Artificial intelligence (AI).

“AI has tremendous potential to impact the global supply chain,” Vakil continued. “It can do this by taking over time-consuming and error-prone manual work." AI can more efficiently predict demand, improve delivery times, reduce costs and take over customer support roles. When it comes to supply chain monitoring and risk mitigation, AI is able to scan through millions of news sources to identify disruptive events and from there, identify the region or suppliers that could potentially be impacted.

“To ensure supply chain resiliency, companies need to be able to detect problems promptly, understand the impact and act quickly,” she added. “The way to achieve this is by leveraging AI and machine learning to ultimately reach a level of automation where decisions are made, based on data by machines, in a split second.”

Completing the trinity? Predictive analytics.

“Much like AI, predictive analytics can and is having a positive impact on the supply chain,” Vakil said. “When it comes to supply chain risk management, with predictive risk capabilities, organizations can prepare in advance to avoid allocations and idle production lines, as well as protect their Order Fulfillment Cycle Time and Perfect Order Fulfillment Metric, ultimately saving tens of millions of dollars.”

It’s all about timing, according to Vakil. “In a typical supply chain disruption scenario, all mitigation activity happens after the disruption occurs; the chances of recovery are significantly reduced,” she noted. “By leveraging predictive analytics, companies can get alerts about a new, potentially disruptive event anywhere in the world, predict impact likelihood, predict which suppliers are most at risk of delivering late and by how long, identify how affected suppliers will perform and propose a risk-mitigation action plan.”

But Vakil remains realistic about what’s really first and foremost on supply chain minds: Distribution strategies that involve multi-sourcing and safety stock access as well as domestic sourcing to avoid global shipping and transport challenges.

“For healthcare systems that relied on one primary supplier for their main products, COVID likely halted production facilities at one or several points, leaving the organization scrambling,” she said. “This is why we’re currently seeing procurement professionals working closely with suppliers. A 2021 Gartner study revealed that companies are very actively investing in more profound and more collaborative supplier relationships. According to the report, 77% of companies said they are investing in the short term for supplier relationship and resiliency.

“The shift to domestic sourcing is currently happening as well, with many companies investing in manufacturing PPE and other products in the United States,” she continued. “COVID-19-induced supply chain disruptions in China – which led to the inability for the U.S. to receive critical shipments of PPE – brought the conversation mainstream. However, there have been growing business reasons to have a diversified strategy since well before the pandemic: Rising labor costs, human rights issues, tariffs and geopolitics are all playing a role.”

Chris Luoma, Senior Vice President, Global Product Management, GHX, maintains his own longer-term triple aim with shorter-term dual targets hitting the ground first.

Luoma recommends healthcare organizations modernize data management practices by creating a solid foundation of data that is continuously updated to improve operational efficiency and performance. “This is particularly important as hospitals and health systems could face a total revenue loss between $53 and $122 billion this year due to the pandemic,” he said. “They simply can’t afford to make decisions founded on bad data.”

Healthcare providers also must leverage tools and approaches to help minimize and avoid supply chain disruption, such as predictive analytics and sharing data with the organization – between supply chain, financial and clinical teams – and with other local healthcare providers, he suggests.

Further, they must implement technologies, such as bar codes, smart labels, robotic process automation (RPA) and AI to help automate manual and tedious processes, according to Luoma. This, in turn, will enable highly skilled supply chain professionals to focus on more value-added tasks like patient care transformation, he adds.

Realistically, however, Luoma believes supply chain professionals will rally around two areas: Revamping distribution practices and tapping into the power of RPA, because the others require the creation of “net-new infrastructure” that involve resources and time, both in short supply.

“The industry is looking for quick wins after the setbacks it experienced throughout COVID, and these actions can help deliver,” he assured.

“On the distribution side, providers are exploring how to better avoid stockouts or backorders that affect or delay patient care without carrying costly, excess inventory. The most common strategies are leveraging multiple distributors and requiring allocations,” Luoma said. “However, we’ve also seen the creation of regional collaboratives where geographically close providers trade supplies to help build up safety stock. Living stockpiles are also being explored and there has been renewed interest in domestic production, such as HCA Healthcare’s venture with A Plus International. And providers have become their own manufacturing source, such as Ochsner Health, which will now make its own PPE.

“On the technology side, RPA isn’t new to the healthcare supply chain, but COVID has undoubtedly accelerated the need to automate,” he continued. “We saw firsthand the crippling effects of a rigid infrastructure that was unable to quickly pivot when operations had to move virtually. As the healthcare supply chain focuses on improving agility and resiliency, there is a lot of conversation around digitization and the need to improve quality, operational efficiency and productivity. This is why RPA is one of the fastest-growing software markets.”

Shawn McBride, Vice President and General Manager, Cardinal Health WaveMark Supply Management & Workflow Solutions, opts for three approaches that should be among the first to be adopted during the ongoing pandemic but be enabled two other priorities.

Radiofrequency identification (RFID) represents the “most effective” tool to automate significant data capture, according to McBride. “It also enables workflows that support clinical and supply chain teams to capture and document product disposition throughout the supply lifecycle from receipt to use,” he noted. “This turns your supply chain into a strategic asset with accurate, real-time data, and gives you access to insights that support decision making.”

With more intensive reliance on automation comes the need for data protection, McBride insists. “Cybersecurity software is a requirement to operate in today’s digital world and to ensure business resilience,” he said. “Equally as important, health systems must work with vendor partners that make data security a top priority, going above and beyond all standards to protect vulnerable PHI [protected health information] that travels through their systems.”  

McBride calls distribution strategies that involve multi-sourcing and safety stock access as a response to the product shortages experienced during the pandemic as vital. “Automated inventory management technology is critical to the successful execution of this strategy,” he insisted. “Automation tracks that inventory and provides insights to its most effective use, enabling staff to reallocate products where needed most, which is critical for hospitals, especially during COVID-19 surges when products need to be strategically utilized to ensure the health and longevity of inventory levels. In addition, this automation helps identify any expired or recalled product and keeps it away from patients, supporting critical patient safety initiatives.”

Solid data infrastructure buttresses these three areas, McBride emphasizes.

“It is critical to have clean and reliable data, adhering to global standards, to drive actionable insights and improve supply chain effectiveness,” McBride said. “Given multiple and disparate systems and the speed of expansion at many institutions, data sets have not been maintained and the capture and curation of data is ineffective. Ensuring all products are tracked using a consistent, globally adopted standard (like GS1), supports that enterprise visibility to inventory throughout the health system.”

Workflow optimization and automation remains key, too, he adds. “Many health systems still manually track product inventory at the point-of care, which leads to errors and missed revenue capture and lack of insights that drive improvement,” he added. “The right automated technology helps ensure clinicians have the products they need – when they need them – without stocking unnecessary inventory. This means millions in potential savings for hospitals and great satisfaction with employees.”

Crossroad continuum

The sheer volume of pandemic-related supply disruptions has led providers and suppliers alike to explore “practical, new supplier resiliency solutions,” according to David Gillan, Senior Vice President, Supply Chain, Vizient. Such solutions aim to foster end-to-end supply chain transparency to improve forecasting, product availability and consumption of goods.

“Blockchain could take this to the next level, providing more accurate data and visibility throughout the supply chain,” he predicted.

But if greater transparency for increased resiliency remains the top pursuit, supply redundancy clocks in at a close second, Gillan insists.

“Healthcare organizations are looking for ways to still drive standardization in key supply areas for cost optimization without eliminating options for allocation from alternative suppliers,” he said. “Creating and maintaining safety stock of certain equipment and supplies for use by an individual organization is also being evaluated. Nearly every hospital organization that we have surveyed has indicated a significant shift towards the creation of their own stockpile of essential products. This shift comes with a lot of challenges, including cost, distribution, local storage sites and ongoing management.”

St. Onge’s Redding contends that healthcare remains at a “critical juncture” where demand management and predictive analytics should be implemented to assure the entire supply chain continuum works more effectively and seamlessly. 

“We continually speak with supply chain leaders about their vision for the future, and demand management is always one of the top items,” Redding noted. “With the goal of achieving success in demand management, it starts with building the digital infrastructure – bar-code scanning, voice-activated capture, vision capture, etc. Health systems will need to take the important step of evaluating their digital supply chain strategy to ensure they are prepared to meet the ever-changing needs of patient-centered care. If they don’t, they will continue to struggle to capture the appropriate information to properly predict demand. To become more predictive, supply chain systems will need to establish the product usage relationship for clinical commonality, preference and patient uniqueness to truly predict product demand.”

Cory Turner, CMRP, Senior Director, Healthcare Strategy, Tecsys Inc., and a former supply chain executive within Greenville (SC) Healthcare System, HPN’s 2013 Supply Chain Department of the Year, agrees that demand planning and predictive analytics will drive technologies on the cusp of widespread adoption.

“These are the things that healthcare organizations simply cannot succeed without,” Turner said. “The pandemic has proven that our antiquated ways of forecasting are no longer enough to provide the clinical support that our roles demand. From the largest IDNs to small rural hospitals, we must be able to accurately and timely know the needs of our clinicians. More effective demand planning calls for more robust analytics systems, but it also means we need to get better at feeding those analytics systems with better data. After all, junk in, junk out. So I think that processes, tools and technologies that automate – or at least streamline – demand chain data will play a pivotal role as well.”

Demand management and predictive analytics software reinforced by AI must be implemented as part of routine operations, according to Pete Bennett, Vice President, Global Planning, Cardinal Health Medical Segment.

“Demand management and predictive analytics software is mission critical for a few reasons,” Bennett contended. “First, it creates a collaborative environment with common processes and technologies to get better insights and align with our customers. It also creates a common infrastructure for demand, deployment, inventory and supply for all product lines with common processes and technologies to operate. Finally, these are crucial in providing end-to-end visibility in our supply chain, which we know is more important now than ever amid the ongoing pandemic. Part of that visibility includes being able to use data for more common and consistent practices, it outlines ‘What If’ scenarios so supply chain leaders can be prepared for what may come, it offers predictive indicators and helps outline new KPIs [key performance indicators].”

Meanwhile, AI should be deployed “to monitor and learn from patterns, anticipate delays due to external factors – weather, congestion, capacity, etc. – and provide options to overcome delays, and recommend options to move products faster to the customers,” Bennett added.

Pete Brennan, Regional Vice President, Operations, Cardinal Health U.S. Medical Segment, agrees that AI can help resolve supply chain issues before or as they happen, but he points to Amazon as proving the essential importance of demand management/predictive analytics software.

“[Amazon’s] predictive analytics when placing an order are key when determining delivery – how fast, when and what route it will ultimately be on that week,” Brennan said. “With more uncertainty in the supply chain, having better predictive analytics can help you reduce costs and improve service. Predictive analytics take the guess work out of the equation [and] helps you understand customer patterns. In fact, this technology could help you know them better than they know themselves.”

Brennan also believes domestic sourcing will be pursued to avoid shipping and transportation issues and decrease backorders. He also supports robotic process automation (RPA), which “helps you complete repetitive tasks with bots, which means less headcount needed [that] could be passed to customer as savings.”

Realistically, Brennan anticipates AI, automated guided vehicles (AGVs), bar coding, handheld/wearable technology and robotics being implemented first because “these are easier to get in place. We are already using and seeing these initiatives in market.”

Still, demand management, predictive analytics and AI go hand-in-hand, according to John Freund, CEO, Jump Technologies.

“I believe that the entire healthcare supply chain, from manufacturing to distribution to consumption, will need to implement more advanced AI = to better predict swings in demand based on outside indicators,” Freund said. “Using historical data to create demand plans would not have been helpful in avoiding the supply constraints that occurred when COVID hit. Pulling in more comprehensive demand indicators from the market to be able to predict the surge will be required. To accomplish this across the entire healthcare supply chain will require a substantial effort in data normalization, which this industry has traditionally struggled with.”

Throughout the pandemic, real time inventory visibility of critical items in the healthcare supply chain was lacking at a time when it was most needed, according to Jason Rosemurgy, Senior Vice President, Sales and Marketing, Terso Solutions.

“There have been so many stories about missing, misplaced, or diverted PPE, ventilators, key therapies and drugs that it exposed the lack of controls that were in place,” Rosemurgy said. “It became so prevalent that a new understanding seems to have been generated within many health systems that ‘we can never let this happen again.’”

Strategies being implemented with more fervor include Item-level tracking with radiofrequency identification (RFID), real-time location systems (RTLS) and inventory management software platforms that work together to share data and provide healthcare systems with information so that they know where key products are, if they have been used, what temperature they have been stored at, if they are not where they are supposed to be and who had them last, he explains.

This information is so essential in effectively managing the complexity of a hospitals’ inventory,” Rosemurgy noted. “Without the technology in place, people become reliant on old data and manual systems. RFID should be and will be the first technology adopted because not only is it addressing a real concern that has been magnified due to the pandemic, it is also able to be adapted to current workflows and existing technologies, making it the next logical step in inventory automation and security.”

The big picture

Premier’s Powell urges healthcare facilities to extend their scope beyond traditional supply chain areas, such as procurement and sourcing but also incorporate finance to streamline the procure-to-pay (P2) process and root out cumbersome manual tasks that generate massive inefficiencies and waste.

“Take, for instance, that healthcare finance – including accounts payable/receivable – still largely comprises manual, paper-based processes,” he said. “As many as 70 percent of all invoices in healthcare are paper-based and nearly 85% of all healthcare purchasing is still done manually via paper checks. Across the industry, these transactions can add as much as $18 billion to $22 billion in unnecessary annual expenses for providers and even the simplest errors can lead to an average delay in supplier payment by 61 days. Not only is paper inefficient and expensive compared to digital alternatives but it also leaves room for errors when all of those paper forms are entered into purchasing systems.

Peter Saviola, Vice President, Logistics and Supply Chain Optimization, Medline Industries, views low-risk but high-speed maneuvering as essential.

“Process changes will come first because they typically require little to no capital investment, and provide speed to value, and in today’s constantly evolving environment, rapid change and rapid deployment is essential,” he said. “Technology will be quick to follow especially where proven technologies versus evolving technologies exist – specifically, technologies that address and simplify the labor effort.” These include wearable devices that provide digital and voice-activated capabilities and automated guided vehicles. 

Workflow improvements from wearable technology can make a difference, according to Mark Wheeler, Director, Supply Chain Solutions, Zebra Technologies. 

“Implementing wearable technology can help accomplish a number of operational objectives that are critical to success in the healthcare supply chain,” he observed. “These objectives include optimizing labor productivity and effectiveness, meeting customer service level agreements, and controlling and improving visibility of lot-controlled and serial-controlled inventory. Wearable technology can make scanning and data capture of every materials transaction efficient and ergonomic. In doing so companies can ensure item-level traceability and process accuracy. Wearable tools are also an ergonomically sound option for workers who need the technology to work with them as they perform their tasks and not add to their burden. I can see this being the first to be adopted and implanted due to the impact the technology can have on improving processes and its proven success to date.” 

From weather events to geopolitical policy changes, supply chain has seen its share of disruptions within the last few years, but the global COVID-19 pandemic “opened a lot of eyes to inherent fulfillment challenges and exacerbated them for many,” according to Ken Fleming, President, Logistyx. 

“Exploding e-commerce order volumes, increasing carrier capacity crunches, shipping surcharges and price increases, and, of course, heightened customer expectations for rapid and inexpensive shipping have all complicated order fulfillment and logistics for shippers around the world,” he observed. 

“To effectively manage these and keep them from destroying both customer satisfaction and the bottom line, companies should implement a cloud-based multi-carrier parcel shipping solution, replete with advanced business intelligence,” Fleming said. “By integrating a multi-carrier shipping solution into a supply chain tech stack, companies no longer have to ship with just one or two carriers. Instead, they can tap into an extensive carrier network that includes dozens of regional carriers, making it easier and faster to add and maintain carriers’ rates and services and enabling them to quickly react to carrier capacity limitations, surcharges and rate increases to better control costs and maintain on-time deliveries. 

“The ability to make business decisions based on shipping data has never been more important, especially considering the challenges of the last year,” he continued. “As companies strive to meet the demands of consumers, they must harness and leverage shipping data to identify and gain control of parcel shipping opportunities.” 

Some companies will turn to a full multi-carrier shipping solution, but Fleming acknowledges that others likely will add one or two carriers to their network. “While this may help, the reality is most major carriers are already facing capacity crunches, putting shipping quota caps on customers, and implementing significant surcharges,” he said. “Relying on the quartet of FedEx, UPS, DHL, and the U.S. Postal Service will only take shippers so far in current – and future – conditions.”

See Also

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About the Author

Rick Dana Barlow | Senior Editor

Rick Dana Barlow is Senior Editor for Healthcare Purchasing News, an Endeavor Business Media publication. He can be reached at [email protected].