The path towards efficient, resilient healthcare supply chains

It is easy to forget that the supply chain is often as much a part of the patient care team as the provider or hospital. Secure, resilient, efficient supply chains are essential for every patient encounter as well as our national security. 

Supply chain leaders were thrown into dangerous and unfamiliar conditions during the pandemic. Their challenges required heroic and unusual efforts to ensure that the right products got to the right patients at the right time.

It is important that we take stock in the lessons learned over the last year so that we can transform this important, undervalued, foundational component of our healthcare delivery system.

Supply chains are complex, global and prone to disruption

When infections surged in our communities last year, the rush on critical supplies broke the inventory systems, tracking systems and other processes that had been optimized for predictable demand and delivery. 

Trinity Health’s Senior Vice President of Supply Chain, Ed Hisscock, is responsible for supply chain at 92 hospitals across 22 states. The pandemic forced Hisscock to think differently about his job. He quickly realized that little viable product was coming from state or national stockpiles. He had to figure it out locally. 

Soon, a Ford subcontractor was supplying face shields and a local brewery was providing hand sanitizer. He collaborated with traditionally competitive local health systems on sourcing supplies. He helped start a consortium focused on sharing resiliency data. His ability to collaborate and innovate became a critical skill that saved the lives of patients and caregivers.

Hisscock sees his team differently now. It includes a web of suppliers, manufacturers, raw materials sources, and stock locations. The value chain is focused on the patient and includes many internal, external, local, domestic and international stakeholders. So the members of his team rely on different software platforms and different sources of truth. 

As a result, hospitals and suppliers struggle to understand how to tactically and strategically optimize what they do. “We are all duplicating each other’s work trying to curate what is true about a product or a vendor… it doesn’t make sense,” said Hisscock. “These duplicative, redundant, analogue processes are inefficient on a good day and crippling during a crisis.”

Supply chain has always been a team-sport, but we play it without sharing the information the other members of the value chain need to be successful. We don’t typically share demand, utilization, and inventory data that would help plan production. We don’t share outcomes and patient experience that would help the community understand performance. We lack the incentives to share this and other valuable data with trading partners, often out of fear for leverage. Traditionally we have valued information asymmetric over transparency. That must change.

The new supply chain model

A growing number of providers and suppliers see a new, more collaborative approach on the horizon that re-balances the relationship between cost, security, and resiliency. And a growing chorus of public and private stakeholders, startups and investors are jumping to meet the challenge. 

In June, the White House recently released its report EO 140171 which described the vulnerabilities of critical US supply chains and laid out a roadmap for building resiliency. Among the findings was the erosion of the “industrial commons,”2 too much focus on short term cost savings, and the absence of cooperative mechanisms that align supply chain stakeholders.3

Outside of Washington, health systems have been organizing into new networks designed to promote transparency and trust. The Healthcare Industry Resilience Collaborative (HIRC)4 is an award-winning resiliency initiative led by Spectrum Health, Mayo Clinic, and dozens of other health systems and suppliers who want to address the impact of supply chain disruptions on patient care. 

“We have to learn to collaborate around data and the supply chain jobs to be done,” says Bill Selles, Senior Director of Procurement at Spectrum Health and a founding member of HIRC. “These are not supply-side problems or demand side problems… they are industry problems that require an investment in industry solutions.”

HIRC is actively developing the network and tools required to collectively address supply shocks, backorders, and supply chain transparency concerns using a variety of high tech and low-tech approaches.

Venture capital funding seems to be increasingly focused on supply chains as well. Supply chains have never attracted the same level of investment as other sectors in healthcare and life sciences. However, in 2020, venture capital poured a record $12.6 billion into supply chain technology startups in North America.5 

A transformation has begun. 

Trends show that leading providers and suppliers are maturing from an internally focused, centralized approach that stresses unit cost and volume aggregation, to an external and patient-focused approach that stresses value creation with external stakeholders. Whereas most providers and suppliers have been focused on cost and efficiency, supply chain leaders are increasingly focusing on strategic collaboration and patient value.

This transformation from internal trust towards external trust requires new thinking, new technologies, new processes and new incentives for sharing data across companies. Successful transformation will take time, investment and leadership. Until recently, there’s been too little funding for supply chain modernization, too little reward for supply chain innovation, and too few incentives to be a healthy supply chain partner. 

That’s changing. Prepare for a flurry of new initiatives and collaborative networks designed to shore up our supply chains. The transformation has begun with initial efforts focusing on the sharing of data and improved communications. Over time the infrastructure and incentives for data sharing will mature towards a truly patient-centric, decentralized model.

“Sudden supply chain disruptions are a growing threat to patient care,” says Selles. “It’s exciting to see our dozens of leading providers and suppliers coming together to reimagine how we operate as an integrated ecosystem to solve problems proactively and collaboratively. Now is the time to push the industry forward.”

(1) https://www.whitehouse.gov/wp-content/uploads/2021/06/100-day-supply-chain-review-report.pdf?utm_source=newsletter&utm_medium=email&utm_campaign=the_white_house_plan_for_efficient_resilient_healthcare_supply_chains&utm_term=2021-06-30

(2) https://hbr.org/2021/05/the-challenge-of-rebuilding-u-s-domestic-supply-chains

(3) https://hashedhealth.com/efficient-resilient-healthcare-supply-chains/

(4) https://hircstrong.com/

(5) Pitchbook Q4 2020 Emerging Tech Report: Supply Chain Tech

(6) Adapted from 2015_Deloitte_HCLS_Predictions_2020_Supply_Chain_Supplement.pdf