When It Comes to the Supply Chain, Healthcare Companies Need to Think Like Retailers

July 13, 2016 Peter Edlund

38090236_M-1.jpgHealthcare is a complex industry with many moving parts, from the doctors and nurses who provide care, to the orderlies stocking shelves, to the pharmaceutical companies and medical device manufacturers creating products.

Add to that, healthcare reform which is driving massive amounts of change, including the rise of healthcare consumerism, in which patients are becoming more accountable for their cost of care and expect more from the care experience.

The result: a system that’s ripe for supply chain transformation. 

Steps to an Optimized Healthcare Supply Chain

But where do you start? There’s not only complexity, but significant fragmentation in healthcare. Today, hospitals, pharmaceutical companies, and device manufacturers have their own systems for ordering and managing supplies, which can lead to a variety of challenges, including supply shortages, redundant inventories, slow response to product recalls, and ultimately inefficiencies and higher costs.

And in healthcare, the stakes are high.  The product has to be at the right place, at the right time, 100 percent of the time.  A patient can’t move on to another hospital if the medicine or device is out of stock. Problems in the supply chain won’t simply result in poor customer satisfaction, they can jeopardize lives.

But when it comes to supply chain transformation, healthcare companies don’t need to reinvent the wheel. Healthcare can take several lessons from the retail industry – which has been focused on supply chain transformation since the 1970s.  Some of the most important best practices are:

1. Standardize.20676247_M.jpgDeploying a global standard to track drugs and devices would cut costs and improve inventory in healthcare. When retailers adopted GS1 standard barcoding, they and their suppliers gained real-time data visibility into product movement, which was a huge step forward. Stores that were once regularly out of stock on the most popular items were able to reduce or eliminate out-of-stocks.

 

With the fragmentation in healthcare, standardizing is a much bigger lift, but it’s an important step. And some hospitals are already seeing benefits from implementing standards at the enterprise level, using radio frequency identification (RFID) to order and track shipments and track the movement of items in-house. See how Neiman Marcus implemented change throughout its supply chain.

 

2. Collaborate14054700_M.jpg

In retail, it was the stores that led the transformation, working with manufacturers to create effective forecasting and replenishment plans, and creating new solutions. Progress was accelerated because several large retailers drove the plans.

 

The healthcare market is decentralized, with many providers and manufacturers. More collaboration will be critical, with manufacturers leading the way to adopt order forecasting and inventory planning that can be leveraged by providers. See how today's organizations transform their supply chains with collaboration [2016 University of Tennessee study]

 

3. Drive Transparency

23709471_Medical.jpg

A big part of building trust along the supply chain comes from better visibility and data sharing. It retail, data sharing enabled retailers to quickly replace products that weren’t moving with those that were, ensuring satisfied customers. 

 

By utilizing supply chain solutions available today, healthcare organizations and players can effectively track and monitor inventory of products with instant access to product, pricing and order information, as well as enhanced inventory visibility and tracking. A cloud-based visibility dashboard will enable all players to understand how products are moving throughout the extended supply chain. See how companies drive visibility throughout their supply chain

 

4. Hire Talent34712419_M.jpg

 

Not only does the healthcare industry need to improve its supply chain, but it also has to expand the skills to develop and manage it. For several decades, the retail companies have invested in educating and training supply chain leaders, ensuring they have skills to manage materials, purchasing, and warehousing. For supply chain transformation to succeed in healthcare, talent is needed. And in addition to training, it may require companies to recruit from outside the vertical. Start connecting to experts in supply chain today.

 

Transforming the healthcare supply chain is a major undertaking, with many challenges. Today, supply chain represents 40 to 45 percent of hospital or healthcare system operating costs. And many organizations see that number continuing to rise. Despite the challenges to bring providers, pharmaceutical companies and device manufacturers together, the imperative is clear.  And there are real opportunities – demonstrating that not only reduced cost, and better patient care, even in the short term.  I’d love to hear from you on this topic. What do you think about the opportunity for supply chain transformation in healthcare?  Are there additional lessons from retail that can be applied?

 

Peter Edlund

As DiCentral’s head of global marketing and a founding member of the company’s executive team, Peter truly understands the power of an effectively managed global supply chain. He’s worked with both large and small companies, in retail, healthcare, automotive and a variety of other verticals. 

 

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