As Covid19 shook the world, the healthcare industry found itself struggling to uphold traditional sourcing, procurement, and vendor management practices. While healthcare supply chains continue to face turmoil to this day, the collision course was in motion years before the pandemic struck. COVID-19 acted as a catalyst. Such an event has led us to suddenly reevaluate the efficacy of our practices, and forced us to reinvent inventory management, logistics, sourcing, and vendor management. Today, we reconsider, rebuild, and reinvent new best practices, to address the modern needs of the ever-evolving healthcare industry; to build more resilient and efficient healthcare supply chains.
Long before the pandemic, the healthcare industry had weaknesses that drove high supply costs, inadequate disruption resilience and inefficient systems. These problems were inherited, derived from outdated practices that include single-vendor dependency, inadequate vendor-transparency, logistics challenges and labor-intensive procurement processes.
In the pre-covid healthcare industry, buyers relied primarily on single-vendor supply channels. Sole reliance, even on the most-established, single supplier made us vulnerable. A healthcare organization’s dependence on only one supplier, as its sole source for critical supplies, meant that failure at one point of your supply chain would impact patients and providers downstream. While healthcare organizations had implemented technology to assist in inter-departmental info-sharing and collaboration, organizations lacked visibility into vendor operations, performance capabilities and real-time stock availability. Back-orders and delays were a challenge, as buyers placed orders only to later find out that the ‘stock’ was not readily available to ship.
Traditional vendor-management approaches were labor-intensive and time consuming, as they involved multiple people from each organization, across multiple departments to open and close-out orders. Additional effort required to source and negotiate with vendors, while maintaining awareness of ‘when to order’ and then determine ‘best price’ option. These outdated practices, and multi-person systems were inefficient and failed to empower problem solvers to respond to evolving demand. With such practices, healthcare organizations became strained with overhead and operational inefficiencies. We were speeding toward a collision.
With unprecedented disruptive force, COVID ripped through “traditional best practices”, exposing vulnerabilities, and calling for change in its wake. Shortage, stockouts and ultimate supply chain failure left the demand for life-saving medical supplies unsatiated. The imbalance of supply and demand drove surging prices. Desperate to refill inventories, healthcare facilities allocated more time and labor to achieve stability. Hopeless efforts to onboard new suppliers amidst increased vendor fraud and failure. Mistakes were made and time was wasted. After scrambling to accumulate stable supply, inventory was stockpiled, overstocked, and ultimately discarded as short shelf-life products expired.
While the dust has settled to some degree, for many the struggles still persist. The healthcare industry has assessed the damage, the inherent weaknesses of traditional practices and seeks new best practices. New best practices that will increase supply chain resilience and agility, while helping to optimize workflows and drive down supply prices. With valuable lessons in the rearview and new best practices ahead, new technologies will help navigate the path to reliable supplier-networks, resource optimization and durability amidst disruption.
To achieve a more robust supply chain, healthcare buyers must have visibility into the operations and practices of their vendors. This transparency, along with the comprehensive assessment of your vendor alongside alternative vendors, empower the identification of aligned operations and capabilities. A transparent understanding of a vendor’s strengths and weaknesses across pricing, availability, and timeliness, allows healthcare buyers to compare options and make better decisions. As demand changes, so can the usage of specific vendors in your network – hence the importance of prioritizing partnerships with vendors who are willing and able to share insights into their operations.
By reducing reliance on middlemen and intermediaries, including the likes of megalithic distribution companies like McKesson, organizations can instill new best practices and unlock huge benefits. Contrary to popular belief, working with a megalithic distributor earns healthcare companies the worst prices on the market – even when you get ‘contracted discount rates. Most of the products you buy from a primary supplier are manufactured and/or imported by other US-based suppliers, then bought and resold by your supplier.
Eliminating unnecessary middlemen reduces product costs, while also increasing the overall efficiency of the supply chain. While managing more vendors without technological assistance may seem less efficient, it allows the end-user of a product to by-pass unnecessary stop-gaps – promoting smoother flow of materials from source to end-user. By working directly with manufacturers/ importers, as opposed to a middle-man dinosaur distributor, healthcare organizations reduce the frequency of stockouts, backorders and completely dissolve mark-ups.
Emerging technologies coincide with the novel best practices for healthcare supply to simplify multi-vendor purchasing. While traditionally, the addition of a new vendor meant increased labor requirements, organizations are actively diversifying vendor networks to increase resilience against disruption. New healthcare purchasing platforms allow healthcare buyers to easily partner with and purchase from hundreds of vendors in one place. Digital platforms promote more collaboration, enabling real-time communication with vendors throughout the procurement process.
By harnessing just some of these new advancements across practice and technology, healthcare organizations can sustainably see-through the delivery of quality supplies to healthcare providers and patients. The pandemic accelerated the arrival of challenges, accentuating fail-points, and calling us to action. While recent disruption urged us to make rapid changes, it is essential to recognize that these challenges were inevitable. To meet the needs of patients effectively, we must have continuous, sustainable delivery of critical medical supplies to healthcare facilities. Thus, for the sake of providers and patients, we must embrace developing technologies and implement new strategies.
About the Author
Luka Yancopoulos is the Founder and CEO of Grapevine Technologies. The company was founded after Mr Yancopoulos spent significant amounts of time in research labs and Prior to Grapevine, he founded a successful startup focused on medical supplies distribution called Pandemic Relief Supply (PRS) in April 2020. In eighteen months of operations PRS delivered over $20M in critical supplies, including donations of half a million masks and other PPE to the needy through the AFYA Foundation. He was a dual-degree VIPER student at UPenn.