Both today, as well as in the future, the key to streamlining healthcare supply chains could very … [+] well be found in digital transformation.
Hospitals justly allocate R&D budgets to clinical research, new treatments and direct patient care. But all too often, this causes supply chain modernization to fall by the wayside. As a result, the healthcare supply chain has preserved the tech infrastructure and outdated manual processes of the 1990’s — contributing to hugely inflated expenses, treatment errors and frequent shortages.
Supply chain inefficiencies impact healthcare costs, quality of care and access to treatment. In fact, 93% of healthcare provider executives said they faced some type of product shortage in 2023.
Quite often, these issues stem from poorly managed partnerships that fail to address changing circumstances and needs. Fortunately, emerging technologies and stronger collaborative partnerships in logistics offer innovative ways to modernize supply management and benefit both healthcare providers and patients at every stage of the process.
Reducing Reliance On Single Suppliers
Most hospitals purchase supplies from one or two major sources. This single-source dependency leaves many vulnerable to shortages when production falls behind or demand spikes. In contrast with this, diversified supplier networks help buyers substitute the weak links of their supply chain and reroute orders to bypass shortages before they turn into backorders.
By connecting to multiple sources, healthcare buyers promote healthy competition between suppliers, which helps lower prices on essential supplies. The benefits of diversified supply networks can be further strengthened by collaboration. One form of supply chain collaboration is using the pooled power of Group Purchasing Organizations (GPOs), which help multiple healthcare providers purchase supplies in large volumes to access new suppliers and further lower costs.
Historically, adding suppliers added complexity to billing, ordering and tracking processes. But AI procurement solutions bring together diverse specialty suppliers into a single screen, where shopping, tracking and ordering is easier than Amazon. For those with more “controlled” purchasing processes, solutions can be configured in minutes, mirroring existing workflows for multi-department teams and personalized suppliers.
Slashing Revenue Losses From Backorders
Backorders create significant challenges within clinical settings, as nurses or techs scramble to locate supplies on site or replace missing items. For patients, the lack of supplies can make a life-saving surgery impossible, forcing either cancellation or rescheduling.
Costs accumulate as the inability to locate high-value items leads to panic purchasing. Since it is fruitless to place more orders with a supplier who has caused delays and does not have stock available, buyers often attempt to quickly establish relations with new suppliers. However, this rush can lead to poor price negotiations (and higher prices), as well as redundant orders for out-of-stock supplies.
Digital inventory platforms can relieve these pains by providing visibility into delivery dates for outstanding purchase orders and proactively recommending alternative suppliers. By analyzing back-up suppliers’ performance, replacement orders can be redirected to the most promising sources. Similarly, surgical operations can be prioritized according to patient risk and available supply or rescheduled based on the expected arrival dates for the back-ordered item.
As Luka Yancopoulous, CEO of Grapevine, a tech provider that uses automatic tracking to redirect clinical supply backorders to sources with available stock, explained, “When healthcare facilities can compare an item’s pricing and availability status between all of their suppliers, they can reduce their own expenses and ensure that critical supplies are available when patients need them. Technology helps healthcare facilities take a proactive rather than reactive approach to maintaining stock, which enables them to deliver a higher quality of care to their patients.”
Entering The Age Of Effortless Inventory
Surprisingly, medical inventorying often still takes place by hand, with ordered quantities recorded on paper forms or spreadsheets and staff left to their own devices to perform periodic cycle counts of remaining stock.
With this system, records often aren’t updated promptly, leading to uncertainty regarding actual stock levels. While forgotten supplies expire, clinicians waste hours searching for supplies that are long gone. Costs grow as the inability to locate high-value items leads to more replacement purchases.
In fact, it’s estimated that the total annual cost of waste in the American healthcare system ranges from $760 billion to $935 billion. If effective interventions could cut this waste by 25%, it would likely save more than $200 billion per year. Two budding fields in health tech promise to do exactly that — warehouse vision-sensing and patient appointment baselining.
Warehouse vision-sensing is made possible through tools such as ceiling-mounted cameras and smart shelf sensors that give decision makers real-time visibility into every item in storage.
These systems automatically report depleted supplies and trigger re-orders without the need for human intervention. Real-time insights into inventory levels across locations prevents order delays, inventory waste and other unnecessary costs.
Patient appointment baselining offers a lower-cost alternative for smaller healthcare specialists, tracking supply usage based on different appointment types. This promising field aims to predict burn rates of supplies based on clinical use and patient schedules, offering real-time insights into inventory levels and automatically restocking supplies as needed.
Such digital solutions in healthcare would provide supply chain leaders real-time visibility into questions like which patients received medication doses or implants from a particular shipment, the current inventory level for specimen collection kits, the location of a delayed order of stents or the expiration status of operating room supplies across facilities.
Getting Leadership Buy-In For Big Changes
Transitioning from outdated infrastructure requires a full-scale digital transformation. While incremental improvements might provide temporary relief, only comprehensive automation can deliver long term efficiency, cost control and resilience.
To truly evolve hospital supply chain operations, healthcare facilities must become more adept at using integrated platforms that cover the full source-to-pay lifecycle by providing complete data connectivity, advanced analytics and modular configurability across purchasing, inventory and logistics activities.
Executives must commit to reimagining supply chain operations as strategic drivers of care excellence. By using technology to create more resilient and diversified supply chains, hospitals can elevate future patient outcomes as well as their own fiscal health and crisis resilience.
