How to build a resilient healthcare supply chain
Supply chain management is a core aspect of most business strategies, combining diverse functions including procurement, manufacturing, logistics, resources management, and distributions. Following high-profile disruptions like the 2020 COVID-19 pandemic and the 2021 Suez Canal blockage, it’s increasingly apparent that any business that relies on these functions should take steps to improve the resilience of its supply chain.
Healthcare supply chains face unique challenges, from sourcing critical medical supplies to managing sensitive data and adhering to regulatory requirements. In a sector where supply chain disruptions can impact patient outcomes, resilience isn’t just a competitive advantage—it’s often a matter of life and death.
In this guide, we’ll examine these challenges and explore best practices for building a resilient healthcare supply chain that can withstand uncertainties and unexpected conditions while supporting efficient, effective patient care.
Current challenges facing healthcare supply chains
As with businesses in other industries, healthcare organizations are susceptible to supply chain disruptions from a variety of sources:
Global health crises
Global health crises like the COVID-19 pandemic can lead to heightened demand and subsequent shortages of critical medical supplies, exposing vulnerabilities and creating supply chain bottlenecks. Furthermore, labor shortages due to widespread illness or burnout from difficult pandemic working conditions can slow or halt supply chain operations.
Natural disasters and climate change
Extreme weather events like hurricanes and earthquakes can damage infrastructure, render shipping routes impassable, and disrupt logistics across the board. Changing climate conditions not only make some natural disasters more common, but they can also affect the long-term availability of resources and impact the viability of living and working in areas that may be essential for certain functions.
Shifting regulatory environment
Healthcare providers and drug and device manufacturers face strict regulations to ensure patients’ safety and privacy, which can complicate supply chain management. Additionally, regulations often change following shifts in political power, resulting in a moving target for organizations relying on the healthcare supply chain.
Data interoperability
Fragmented data systems between manufacturers, distributors, transporters, and customers can lead to communication gaps, hindering decision-making and real-time responses. In some cases, even a short communication delay can cause cascading slowdowns across a supply chain.
Build a more resilient healthcare supply chain in 5 steps
Supply chain resilience can help healthcare organizations maintain operational continuity in the face of these challenges and other disruptions. Most importantly, operational continuity in healthcare supports patient safety and access to essential treatments and supplies. But it also helps to reduce supply chain costs, minimize waste, and avoid penalties associated with regulatory noncompliance.
Here’s our five-step guide to improving the resilience of your supply chain.
1. Enhance supplier relationships and diversify sources
Your supply chain is ultimately dependent on the efficiency and reliability of its primary suppliers. By cultivating strong supplier partnerships, you can get more out of these critical relationships.
Work with suppliers to develop flexible, transparent contracts that can meet demand surges and, ideally, provide some forecasting insight into expected disruptions or other complications. A close relationship with your supplier can give you an edge in negotiations and may provide other useful insights.
Relying on a single supplier, however, is a surefire way to increase your business’s vulnerability. Try to diversify your supply chain by partnering with multiple suppliers across different regions. This will reduce the risk of complete supply disruption if a single supplier falls through.
Where possible, opt to source the most critical supplies locally. Not only does this reduce your reliance on long, complex international logistics chains; it also supports your local economy and cuts the environmental impact of shipping.
2. Give your inventory management system a boost
Shortages and overstocking can have very different downstream effects for a healthcare organization, but both circumstances should be avoided when possible. To maintain optimal stock levels, consider these strategies:
- Adopt demand forecasting tools that leverage artificial intelligence and machine learning algorithms to predict future demand based on historical data, demographics, diagnosis propensity, and other factors. These will help you adjust your inventory levels in real time to meet evolving needs.
- Determine appropriate safety stock levels for essential supplies using historical demand and keep enough buffer inventory around in case of unexpected demand surges.
- Utilize just-in-time (JIT) and just-in-case (JIC) models in tandem rather than relying on one or the other. The JIT approach minimizes stock levels and optimizes resources at the cost of higher risk during periods of high demand. Incorporating a JIC approach for essential supplies gives your business the flexibility to adapt on the fly.
3. Pump resources into logistics and distribution networks
For patients and/or other healthcare organizations, your product is only as useful as long as it’s there when it’s needed. A relatively minor delay can have outsized impacts on your users and thus on your brand reputation. Improving logistics and distribution can be resource-intensive, but it’s usually worth it to prevent delays and ensure that your product is in the hands of the people who need it most.
When possible, establish warehouse locations near target healthcare facilities or other key client bases to reduce lead times and maximize access during emergencies. Within the warehouses themselves, establish organizational practices that make it easier to move materials in and out. You’ll also want to maintain high standards for staff—warehousing work is far from unskilled labor; a fully trained, professional team can have a massive effect on your bottom line.
At your warehouses and along your logistics chains, consider investing in real-time tracking and Internet of Things (IoT) technology. RFID, GPS, and blockchain technologies can provide a window into shipment locations and potential delays, allowing you to respond to problems as they arise.
IoT devices offer insight into warehouse conditions like humidity and temperature, enabling real-time management of storage climate for sensitive materials. Also keep in mind the maintenance requirements of your warehouses, equipment, and shipping fleet. AI tools can help you automate a maintenance schedule and even predict the need for repair or replacement.
As with your suppliers, try to partner with a diverse array of logistics providers to reduce the impact of disruptions. This is especially important when you’re moving essential and perishable items like vaccines, biologics, or lab samples.
4. Keep up—and comply—with regulatory requirements
Healthcare supply chains are held to strict standards to protect the safety and privacy of patients and providers alike. Here are a few ways to ensure your company stays compliant from procurement through distribution:
- Maintain comprehensive records and documentation of all supply chain transactions to stay compliant with the FDA’s Unique Device Identification System and HIPAA requirements.
- Conduct regular audits among suppliers, warehouses, and distributors to uncover vulnerabilities, identify safety concerns, and prevent legal issues before they attract the attention of regulators.
- Build a risk management framework that routinely assesses risks and provides contingencies for emergencies including cyberattacks, data breaches, or sudden regulatory shifts.
- Do your due diligence by researching suppliers and other partners to ensure they meet industry requirements and conduct business in a way that supports human rights and sustainability.
5. Embrace environmental sustainability and social responsibility
Implementing sustainable practices isn’t just about doing what’s morally and ethically right—although that doesn’t hurt. Sustainable supply chain practices reduce waste, cut costs, and support overall resilience. And the long-term effects are beneficial too: after all, a protected environment is a more stable environment, which means fewer natural disasters, less pressure on labor forces, and a healthier economy.
Where possible, opt for eco-friendly suppliers who prioritize sustainability and reducing their carbon footprint. Use green logistics practices like energy-efficient transportation options, recyclable packaging, and renewable energy for warehouses. It’s also worthwhile to consider opportunities to recycle, repurpose, or reuse materials across your supply chain, reducing costs and reliance on suppliers.
Consider your social impact, too. Work with organizations that prioritize human rights and fair labor practices. If you’re partnering with an organization with a problematic approach to labor or the environment, it may be possible to leverage your relationship to encourage them to improve their standards—or risk losing your business.
What it all means
The healthcare supply chain is the backbone of the industry, with impacts on patient safety, operational efficiency, and regulatory compliance. Whether you’re a life sciences developer selling drugs or devices to providers, a medical supplies manufacturer stocking hospitals with necessities, or any other organization doing business in healthcare, the resilience of your supply chain should be among your top concerns.
Definitive Healthcare’s data products and services can help you predict demand, identify business opportunities, and keep up with the evolving market. To see our healthcare commercial intelligence at work, sign up for a free trial today.