The ongoing shortage of COVID-19-related masks and personal protective equipment (PPE) has sent shockwaves through the healthcare industry; we’ve all seen the newscasts and forecasts predicting these supply chain disruptions aren’t going anywhere anytime soon. Since China implemented its first lockdown at the start of the pandemic, it created a cascading effect of redirecting a reduced supply to their own country amplifying supply chain issues around the world – and unprepared hospitals have been caught in the crossfire.
These shortages are also undeniable proof that the benefits of proactive supply chain management in healthcare are considerable, and certainly not to be understated in our current climate. The “just in time” supply chain model – a strategy that aligns distributor orders with demand to ultimately reduce inventory costs for healthcare providers – has long been proven to be ineffective for healthcare systems interested in protecting themselves against shortages.
The “just in time” model has driven up costs of supplies, cost hospitals more money than ever before, and hampered healthcare organizations nationwide as they attempt to provide life-saving care to those who need it most. The pandemic has given a greater focus and attention to the direct sourcing and self-distribution model – and now is the time for health systems that have been on the fence about self-distribution to take action.
A Broken Model
For instance, a customer at a large medical system in North Carolina realized that their healthcare center’s distribution practices weren’t where they needed to be in the event of a supply chain disruption. It was only through a data-driven, focused effort to optimize the hospitals’ centralized warehouse operations that they were able to ensure the health system would be poised to respond well to disruptions.
It is important to consider your healthcare supply chain as if it is a business supporting healthcare. While this industry has faced supply chain disruption before, the COVID-19 pandemic crippled distributors and brought unprecedented shortages of personal protective equipment (PPE). Rather than working proactively to craft direct relationships with manufacturers, hospitals and other facilities prioritized ordering the materials they needed and did not store adequate supplies of gloves, masks, and other vital care tools and products.
Prior to COVID-19, the “just in time” supply chain model had a certain appeal; hospitals often lacked storage space to take on any more product than they felt they actually needed and preferred to use space that could be used to hold bulk quantities of PPE for more patient beds and care facilities.
However, now that the supply chain has been disrupted to an unprecedented degree, the long-term impacts of COVID-19 are making themselves apparent through the supply chain, and many health systems are realizing the benefit that direct relationships with suppliers can provide. Maintaining a pulse on the supply chain has never been more important than now – especially since lives can be on the line if your organization runs out of PPE and other vital caregiving equipment.
The Power of Direct Sourcing
While keeping a massive inventory buffer may feel inconvenient – it is, by far, the smartest and safest move for your organization. Adopting a direct sourcing model is the best way to ensure your organization gets the products it needs at a sustainable cost, while also ensuring you won’t fall prey to future disruptions.
That said, if you’re sourcing only from a single supplier, you’re still falling prey to a pre-COVID-19 supply chain mindset. The only way to be absolutely sure your organization will be able to withstand the tail end of the pandemic-caused disruption – and any other disruption that comes after – is to ensure you are minimizing your risk. Having backup suppliers in place for first, second, and even third-tier suppliers will ensure that you stay abreast of any possible disruptions that could cripple your organization now and in the future.
If you are directly connected to your suppliers, without the middleman of a distributor, then you will be better able to set aside time on a quarterly basis to review data to determine if your supply chain is working as cost-effectively and holistically as your organization needs in order to be successful.
Prioritizing these checkups is crucial to ongoing success as it allows you to continue to check in on and refine processes, both to adjust to the fluid post-pandemic supply chains, but also to ensure that your organization is poised to adapt to the next big disruption.
And if your organization feels unprepared to tackle these challenges on its own? That’s when it’s time to get help.
The challenges that the last year presented have made the best case for why the “just in time” method should no longer be the norm for health systems. COVID-19 has proven without a doubt that the supply chain industry is fragile, and health systems need extra supplies on hand to combat present and future delays and disruptions. By employing direct sourcing and self-distribution models within your organization, you will ensure that your staff and administration are equipped in the fight against COVID-19 and that your organization is prepared for any future supply chain disruptions that could otherwise hamper your facilities and employees.
About Matt Stewart
Matt is a senior executive with a proven track record of success in starting, growing, and leading consulting firms over his 20-year career. Matt’s unique ability to see what others do not yet see; predict trends before they become trends; identify, recruit, and retain the best consultants and team members; and build a culture in which top performers desire to stay long-term makes RiseNow stand out as a premier supply chain consulting firm.
Under Matt’s leadership, RiseNow has become a market leader and experienced substantial growth over the past seven years. He attributes this to unwavering faith and pursuit to be transparent, honest, and accountable with clients, partners, employees, and vendors. Some of Matt’s clients include PPG, IBM, Kaiser Permanente, Trinity Health, and McDonald’s to name a few.