Keep Your Supply Chain Strategic
Optimizing supply-chain expenses has taken on greater importance due to a continuing trend of rising prices. Hospitals face price hikes of 5 to 10 percent for some PPE categories for the foreseeable future and perhaps even higher than 50 percent for specific limited available products.
For community hospitals to remain independent, they require access to resources that reduce costs as they continue to grow. To make matters more complex, COVID-19 made it clear that supply chain efficiency and resiliency depend on many other factors besides cost. That’s why a strategic approach to the supply chain can help hospital leadership anticipate and plan for supply chain challenges.
Five Key Elements of a Resilient Supply Chain
Developing a strategic approach to supply chain management should include consideration, analysis and action items to address the following issues:
- Supply chain vulnerabilities. One major problem facing hospitals in the pandemic is that many of them relied on only one or a few suppliers, resulting in shortages of PPE and other supplies. Hospitals should instead determine whether their GPO is diversifying its product contracting strategy and developing relationships with noncontract and non-traditional suppliers. It is also wise to develop alternative means to source products in case of another disruption in the supply chain.
- Anticipate scarcity and identify means to procure supplies in times of crisis. To avoid further shortages, hospitals should adopt a hybrid model that involves stockpiling critical supplies but keep on-hand an inventory of non-PPE supplies that don’t exceed 90 days. Hospitals with available space and resources should stockpile PPE in greater volume, in order to prevent running out of supplies. Hospitals can store PPE inventory in a hospital-owned offsite warehouse, or pool resources with other hospitals.
- Assess a GPO’s ability to address a community hospital’s specific challenges. Some smaller community and rural hospitals experienced severe shortages of PPE and other scarce supplies when more of the supplies went to larger hospitals or healthcare systems during the pandemic. The situation highlighted the need for smaller hospitals to bring on a GPO that prioritizes your needs.
- Leverage technology. Vendors usually accept electronic data interchanges (EDI) that allow hospitals to automatically track orders, confirmations and deliveries. Hospitals lacking an EDI system should investigate the cost of implementation as a first step toward future automation and Item Master file optimization. Automation and good data are key to increasing supply chain efficiency. Data analysis gives hospitals an understanding of trends and cost-saving opportunities across departments. A third-party supply chain services partner can provide the data analytics technology that shows opportunities, flags issues and tracks improvements.
- Offset COVID-related PPE costs by reducing cost in other areas. A good GPO or supply chain services partner will step up and help hospitals offset those costs through savings in other areas. One such area is contracted purchased services, which touch every hospital department and represent an opportunity for significant savings. Often, this area of spend is a decentralized process, in which each department contracts on its own. Purchased services can be aggregated across multiple hospitals for volume-based savings.
Thinking strategically about supply chain management will help community hospitals plan for and offset increasing costs, which will better position your facility for the future.