Basic Components of Healthcare Supply Chain and Ways to Strengthen Them

Recent world events, such as the pandemic, the Suez Canal obstruction in 2021, Russia's invasion of Ukraine, and the Israel-Hamas conflict, have vividly exposed the vulnerability of global supply chains. The healthcare industry, heavily reliant on a worldwide network of suppliers, has been no exception. Around the world, people have witnessed skyrocketing prices, life-saving supplies running low, and delivery hiccups. These and other painful challenges underscore the urgency for healthcare to rethink its processes and become more resilient.?

Stay with us as we delve into the fundamental components of healthcare supply chain management. Learn ways to strengthen it and ensure better stability in the face of future uncertainties.

Procurement

An efficient procurement process ensures that healthcare providers have the right products, in the right quantities, and at the right time. This directly impacts not only patient safety and the quality of care but also cost and operational efficiency. The best way to improve procurement operations is through standardizing processes and automating them as much as possible to reduce errors.

Imagine a hospital that requires a new batch of specialized syringes for an upcoming vaccination drive. Without efficient systems in place, they might grapple with lengthy approvals, miscommunications, incorrect order volumes, or a lack of transparency in inventory and order status. Automation, on the other hand, makes the procurement process straightforward and transparent for everyone involved. Here’s how it works in Precoro:?

• Users can leverage simple and customizable PR templates that can be converted into a single PO in a few clicks.
• Instead of long, manual approval chains, Precoro sends email notifications to the necessary personnel for swift approvals. Rules can be set up to automatically approve orders below a certain value, further speeding up the process.
• Once the PO is approved, the purchasing team can send the document to the supplier in one click right within the system.
• All stakeholders, from department leaders to financial experts, can engage in real-time discussions on the platform by tagging relevant individuals and commenting directly under documents.
• Throughout the order's lifecycle, the hospital gets real-time order updates, allowing them to coordinate with other departments.

Inventory Management

Supply shortages caused by COVID-19 led many healthcare units to reconsider their reliance on the Just-in-time (JIT) inventory model. This is because JIT amplifies the risk of medical product shortages, potentially endangering patient safety. Conversely, the strategy of stockpiling inventory as an alternative isn't without drawbacks; it not only leads to financial waste due to expired items but also poses health risks if patients are treated with recalled or obsolete products. In fact, new research has revealed that operating rooms have in their inventory an average of 13% of products that expire on the shelves.

The optimal strategy isn't about rejecting JIT entirely but fine-tuning its application. Reliability is paramount; JIT should be employed with trusted suppliers who can guarantee timely deliveries. At the same time, it’s a good practice to maintain a strategic reserve of essential items. Such foresight ensures that, in the event of a sudden spike in demand or a supply chain hiccup, patient care isn't compromised.?

Accurate demand forecasting also plays a crucial role when it comes to having a balanced inventory. And while predicting this demand is no small feat, it’s become more common to use modern solutions that can help. With features like real-time inventory tracking, low-stock alerts, and insights from past purchase data, tools like Precoro facilitate the maintenance of optimal stock levels and better demand predictions.

Shipping

The stringent rules and regulations governing the shipment of medical supplies place a heavy emphasis on proper packaging and labeling. Each package must prominently display the sender's and recipient's names and addresses. Furthermore, to differentiate from other shipments and avoid potential confusion, each package should be clearly marked as medical supplies.

Temperature considerations are also crucial, especially for sensitive items like vaccines or certain medications. Supplies requiring specific temperature ranges should be packaged with thermal insulation and equipped with temperature monitoring devices. This ensures the products maintain their efficacy during transit.

Once a shipment arrives, it's vital for healthcare units to meticulously examine the contents and any accompanying documentation. Only after verifying that everything is in optimal condition and properly documented should the medical supplies be approved for use.

Supplier Management

In an industry where timely delivery of quality products can mean the difference between life and death, having a robust supplier management strategy is paramount. Diversifying suppliers is a crucial step in this strategy. When healthcare units rely on a single vendor, they get exposed to vulnerabilities, like disruptions from natural disasters or political issues. Diversification helps mitigate risks and ensures the continuous availability of essential products and services.

However, expanding supplier sources is just one piece of the puzzle. Equally as important is to create well-defined supplier evaluation criteria. Nowadays, many organizations are transitioning from a singular focus on cost-effectiveness to the overall value a supplier brings to the table. Key parameters to consider include product quality, reliability, adherence to rigorous healthcare standards and regulations, and timely delivery. Moreover, assessing a supplier's financial health, technological advancements, and market reputation can provide a more rounded perspective on their potential as a long-term partner. Read more on how to evaluate potential suppliers in one of our latest newsletters.?

Digital procurement systems can further enhance supplier management in healthcare. Take Precoro, for instance. It offers healthcare organizations a unified platform for all supplier-related data, coupled with a contract repository and product catalogs. Precoro also allows users to:

• Send personalized registration forms to potential suppliers.
• Set up a customizable process for approving new vendors.
• Receive notifications for contract expirations.
• Collaborate with suppliers within one platform.
• Invite vendors to the Supplier Portal where they can receive POs, send invoices for received orders, and engage in the RFP process.

Regulatory Compliance and Quality Assurance

The healthcare supply chain is subject to strict regulatory oversight to ensure patient safety and product quality. Compliance with regulations, such as the Food and Drug Administration (FDA) guidelines, Good Manufacturing Practices (GMP), and Good Distribution Practices (GDP), is mandatory. While these regulations are essential, they alone aren't enough to guarantee the utmost safety. A great way to protect against fake or low-quality products entering the healthcare system is a thorough quality assurance (QA) program. QA ensures that healthcare services meet established standards and deliver safe, effective, and consistent patient care.

As healthcare costs continue to rise, implementing QA processes can help organizations provide better care at a lower cost. They can significantly help in reducing expenses by preventing errors, reducing wastage, avoiding legal problems, and steering clear of regulatory penalties.

Moreover, today's patients are better informed and have high standards for their care. They want the best, and they're quick to compare providers. By adopting robust QA processes, healthcare organizations can showcase their dedication to excellence, ensuring they meet the expectations of their patients and maintain a competitive edge in the industry.

Risk Management

The unpredictability of demand is a major concern in the healthcare supply chain. Factors like epidemics, natural disasters, and societal shifts can lead to abrupt changes in supply needs and associated costs. According to the American Hospital Association, medical supply shortages and unprecedented inflation have caused drug expenses to soar by 36.9% and medical supply costs to increase by 20.6% compared to pre-pandemic figures.

Yet global incidents aren't the sole threat to healthcare facilities. Maintaining product quality and integrity are equally as challenging. Medical supplies often come with stringent storage and transportation requirements, and any deviation can compromise their effectiveness. Additionally, the complexities introduced by globalization mean that healthcare units are often dependent on international suppliers. This reliance introduces obstacles such as customs hold-ups and lengthier transportation routes.

Given the challenges, it's imperative for healthcare professionals to remain agile and adaptable. Healthcare supply chain managers should prioritize advanced forecasting techniques, leverage technological innovations, broaden their supplier networks, and emphasize agility in their supply chain approaches. Collaborative efforts among hospitals, suppliers, and other stakeholders can also help in creating a more responsive and resilient healthcare system.

Educational Materials

For the ultimate guide on supply chain metrics, click this link.?

If you want to learn about the importance of supply chain visibility, refer to this article on our blog.?

To find best practices of supplier onboarding, click the link to our blog post.

If you want to learn how to better analyze spend, click here.

To learn about expense reports, follow the link to our blog.

For a complete guide on procurement contracts, check out this material.?

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