Supply Chain Management in the Healthcare Sector

Supply Chain Management (SCM) is defined as the management of the flow of goods, data, and funds related to products or services through their various stages, starting from the procurement of raw materials to the delivery of the final product to its ultimate destination. Supply chain activities include procurement, product lifecycle management, supply chain planning (including inventory planning), maintenance of company assets and production lines, as well as logistics and demand management. Additionally, supply chain management systems can expand their scope to include global trade activities such as global supplier management and multi-national production operations.

Countless items are used in healthcare supply chains, such as syringes, medications, gloves, pens, paper, computers, and various medical tools. This chain begins at the medical product manufacturer where items are produced and sent to a distribution center. Depending on the type of product, hospitals can either purchase inventory directly from the manufacturer or distributor, or they can conduct the transaction through a Group Purchasing Organization (GPO). This organization creates a purchase contract with the manufacturer on behalf of the hospital. Subsequently, medical products are sent to the healthcare institution, where goods are stored in inventory for providers. The organization ensures that providers are not left without essential medical products, aiming to guarantee that doctors can serve patients by accessing life-saving tools in a timely manner.

Hospital administrators typically seek to acquire high-quality products at affordable prices. However, if supply chain goals within the organization are not aligned, the healthcare supply chain management process may be inefficient and unintegrated. Healthcare organizations must consider multiple requirements and opinions to meet specific product budgets. Providers may prioritize personal preferences for certain products, while financial managers work to reduce healthcare costs and minimize the use of obsolete products.

Hospitals often face challenges related to product hoarding by providers, who may stockpile items or make independent supply management decisions. This can lead to cost variance and “off-contract” spending that is difficult to track. Additionally, there is an often-overlooked invisible cost: time wasted searching for supplies or waiting for someone to provide what the hospital needs. All of this can disrupt the flow of the supply chain in many healthcare organizations.

It is recommended that supply chain focus encompasses all departments within the hospital, as well as individuals within the institution and supply partners. It is essential to determine how to achieve maximum alignment and productivity among clinical staff and supply chain workers. Involving clinical staff is also beneficial, as they can contribute to establishing cost-saving habits and reducing hoarding, enabling providers to consider cost concerns while delivering healthcare.

Therefore, awareness of supply chains and methods to increase efficiency and reduce costs—while achieving quality service in a timely manner—is crucial. This highlights the importance of training and awareness for all workers in the health sector regarding the importance of supply chain management and unifying the vision to achieve goals efficiently and effectively.

Among the most prominent tools used in studying health-related supply chains are Supply Chain Key Performance Indicators (KPIs) in the health sector. These are specific metrics used to measure and determine supply chain performance. These metrics can be used to evaluate inventory accuracy, inventory turnover rates, and the inventory-to-sales ratio. These measures also contribute to achieving sustainable growth, developing the supply chain, and ensuring success in procurement and delivery efforts. There are many examples of KPIs that can be selected to evaluate and improve the supply chain, and mastering them has a profound impact on the success of health supply chain management.

Healthcare institutions face many challenges in managing the supply chain efficiently. These challenges include:

1. Supply Shortages: Shortages can affect the quality of care provided, as necessary materials and equipment may not be obtained in a timely manner.

2. Manual Processes and Lack of Automation: Some health institutions may rely on costly and time-consuming manual processes, affecting supply chain efficiency. Processes can be improved through the use of technology and appropriate automation.

3. Blind Spots in Health IT Systems: Health institutions may find it difficult to control and gain full visibility into supply chain operations due to blind spots in the used health information technology systems.

4. Hidden Costs: Health institutions may face challenges in identifying and estimating latent costs in the supply chain, such as excess storage costs or waste costs.

5. Waste Management: Medical waste management can cause environmental and legal challenges, requiring specific procedures for safe and effective disposal.

6. Storage and Inventory Management: Hospitals may face challenges in effectively storing and managing inventory to ensure the availability of necessary medical materials and supplies on time.

7. Equipment Maintenance: Medical devices require regular maintenance to maintain good performance. Ensuring the availability of spare parts and proper maintenance on time can be a challenge.

8. Timely Product Delivery: Health service providers may face challenges in delivering products and medical materials on schedule, which can affect care quality and resource availability.

These challenges require a focus on strategic supply chain planning, using appropriate technology, improving processes, achieving cooperation with suppliers, and improving inventory management and information technology. Training human capital on the latest and best global techniques used in all stages of the health supply chain is vital to raising efficiency and effectiveness.

To improve healthcare supply chain management, the following methods can be followed:

1. Careful Contract Management: The selection and management of suppliers and partners must be done carefully, defining specific terms and goals in contracts and ensuring they are met.

2. Developing Effective Inventory Management: Inventory management should be improved by optimizing storage and distribution processes and improving optimal inventory levels to avoid shortages or surpluses.

3. Utilize Technology and Analytics: Advanced technology and analytical tools can be used to improve supply chain operations, such as using automated warehouse management systems, RFID material tracking systems, and using analytics to identify trends and improve performance.

4. Effective Pricing System: The pricing system and the treatment of actual costs for supplied materials and services must be improved, ensuring a balance between quality and cost.

5. Improving Demand Accuracy and Order Cycle Times: Health institutions must improve demand forecast accuracy and reduce inventory interruptions by improving forecast accuracy and reducing order cycle times through better communication with suppliers and analysis of past data.

6. Empowering Human Capital with Necessary Skills: This can be achieved through professional training for workers in the field, proper awareness, and achieving integration within the supply chain system through studied practical steps led by experts and specialized consultations.

Implementing these procedures can help improve supply chain efficiency in the healthcare sector, leading to improvements in care quality and cost savings.

In conclusion, the importance of achieving efficiency in healthcare supply chain management cannot be overstated, as it directly affects healthcare outcomes, patient safety, and care costs. The primary goal is to deliver essential medical supplies quickly to hospitals, clinics, and pharmacies. By optimizing healthcare supply chain management, stakeholders can overcome obstacles, reduce unnecessary costs, and enhance the value of the healthcare chain through flexibility, efficiency, and correct investment.

Elite Training Center (ECS) can provide many specialized training programs and consulting services to achieve supply chain efficiency in the health field.

References:

• Health Quality of Life Magazine (Supply Chains in the Health Sector), Elham Al-Manqashi, March 11, 2021.

• The Crucial Role of Supply Chain Management in Healthcare, Abhishek Singh, July 13, 2023.