Five imperatives reshaping the health care supply chain

Disruptions lead to challenges, complexities and eventually change.

The COVID-19 pandemic did just that — disrupted our entire health care supply chain.

From running out of essential supplies, unpredictable patient volumes and surging supply costs to staffing shortages, ineffective operations and lack of end-to-end supply chain visibility, the pandemic ripped the band-aid off an industry already ripe for transformation.

Although very well known, it still needs to be stated: gaps that occur at any point in our health care supply chain amplify the risks to availability, starting with the supplier producing the health product or medicine to the hospital supply chain to the point of care at the patient bedside. And all the points in between.

Those looking to “return to normal” will likely be disappointed; supply chain disruptions are here to stay. The future supply chain landscape calls for health care systems to think forward, to double down on innovation to remove waste, enhance efficiency and resilience and improve risk management.

I recently joined colleagues for the US Health Sector Update (October 2023) webcast to discuss five imperatives informing the future of health care supply chain. Here’s a recap:

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1. Supply chain as a strategic function Aside from major events like the pandemic, disruptions take place every day, impacting the ability for health systems to provide optimal patient care. As well, disruptions affect operational and financial performance — think costly cyber attacks, government regulations and mandates, trade barriers and conflicts, the effects of war, rising inflation and economic uncertainty, etc. That said, the role of supply chain and operations will be even more vital in the future of health care. To ensure resiliency, supply chain teams must have unwavering support of leadership and must be seen as a core business asset and strategic function. Further, supply chain will be recognized by greater investment and a seat at the table among leadership during periods of normal operations, not only disruptions. No longer will the supply chain organization be viewed as just a back-office function, it will be treated as a strategic differentiator in the future.

2. Interconnected ecosystem of trading partners Health care supply chains of today are very linear, lacking visibility and resilience; they rely heavily on direct interactions between hospitals and suppliers or hospitals and distributors to get supplies. The pandemic showed us how detrimental this linear flow can be to hospital systems.

The future looks very different. Supply chain teams of the future will evolve over time to handle significantly more requirements and channels: overcoming new challenges, requiring real-time communication, open collaboration and trust. To meet these requirements and challenges, supply chains will enhance cloud capabilities and leverage new technologies like blockchain to create an agile ecosystem (or “web”) of interconnected trading partners. A diverse and resilient network of partners will be at work to interact and engage with the common goals of improving performance and efficiency to better meet supply and demand, improving operational outcomes and increasing overall supply chain resiliency.

3. Increased number of value-share relationships The pandemic was extremely disruptive in and of itself; however, during the same time, we saw a rapid evolution of the changing care model, including telehealth/telemedicine and the current push for “hospital at home.” There was also an influx of nontraditional companies entering the health care supply chain space, creating opportunities to form new, strategic, value-sharing relationships with suppliers, distributors and other business partners to improve overall health care. Moreover, these value-share relationships share risks, outcomes and performance and put forth effort to solve operational challenges. Getting products to the end user (clinician) to provide patient care is an extremely involved operation and includes:

• Sourcing raw material
• Manufacturing sites and warehouses
• Distribution, logistics and monitoring
• Ease of use and caregiver experience
• Patient experience
• Balance of cost, quality and outcomes

To ensure the success of value-share relationships, health systems must have these three things in place: robust data, an understanding of true cost structure and a powerful supplier relationship management program to manage and monitor the relationships.?

4. Greater attention on clinically integrated supply chain With mounting cost pressures and government funding drying up, future health systems will shift toward clinically integrated supply chains focused on costs, quality and outcomes, spanning the entire care continuum — with robust, data-driven value-analysis programs at the core. This enables supply chain professionals, clinicians and other stakeholders to work together for overall value-based care:

• Manage risks
• Improve efficiency
• Remove unnecessary or harmful variation in care or use of products
• Make informed purchasing decisions
• Foster a more clinician-centric supply chain
• Collaboratively evaluate and select products
• Manage utilization and standardization, especially when it comes to new products and treatments
• Reduce waste

Given we’re in the culture of data, analytics and constant advancements in technology, this can be done better and more strategically than ever before.

5. Technology enablement to acquire talent Similar to other industries, the health care supply chain is experiencing talent shortages. And with many competitors vying for the same talent, hiring and retaining qualified talent is an uphill battle. With many supply chain leaders approaching retirement, a lack of individuals with qualified experience, preferences for remote work and the large amount of tribal knowledge needed regarding how the health care supply chain operates, the market is extremely competitive. Health care organizations will need to adopt creative strategies, elevate positions and compensation, recruit outside of the sector and compete with nontraditional compensation and job descriptions in order to attract and retain future talent. Additionally, health care systems will need to include their supply chain as they create and implement talent strategies and the capabilities necessary to support the supply chain of the future. The talent strategy should include effectively using technology to enable supply chain team members to focus on more strategic, value-added activities while simultaneously upskilling the workforce to keep pace with new and expanded roles — ultimately improving retention and optimizing resources.

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The health care supply chain is fragile, as it is subjected to a variety of disruptions. It is crucial for health care systems to build supply chains able to withstand the inevitable and the unknown, which will involve the common threads across all the imperatives: technology and talent. While there are significant costs associated with future-proofing our health care supply chain, the ROI is certainly there to fund this exciting “new and improved” supply chain of the future. As you prepare for the future of the health care supply chain, what challenges are you facing? What trends are impacting your decisions?

The views reflected in this article are those of the author and do not necessarily reflect the views of Ernst & Young LLP or other members of the global EY organization.

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