Healthcare Supply Chain Issues and How to Solve Them with Technology

Crystal Evans, a 40-year-old with a progressive neuromuscular disease, fears bacteria will grow inside the silicon tube that connects her windpipe to a ventilator that pumps air into her lungs. As she told the Washington Post, she used to have a thorough routine before the pandemic. It involved changing the plastic circuits several times a month to keep them sterile.

Now that the pandemic has caused a shortage of silicon and plastic needed for the tubing and made these materials harder to supply, Ms. Evans has to go by just one new circuit a month. What it means is that she and many patients like her have, strictly speaking, fallen prey to the disrupted supply chain. And estimates of those affected are in the tens of millions.

The scale of disruption is rampant. According to Kaufman Hall, the healthcare consulting firm, since the beginning of the pandemic, 86% of US hospitals have reported such medical supply chain issues as complicated sourcing of supplies and 85% complained of price surges.

And while in 2022, the healthcare industry seemed to have ground out a steady victory over the virus, the major fallout COVID-19 had on the healthcare supply chain (which is now being aggravated by Russia’s invasion of Ukraine) is still to be tackled. The key healthcare supply chain issues to be addressed span:

• Limited availability of critical pharmaceuticals, especially those involved in the treatment of acute respiratory illnesses, and personal protective equipment
• Troubles in procuring materials used for manufacturing pharmaceuticals
• Limited availability of base metals and raw materials used for manufacturing medical equipment
• Difficulties in producing and supplying semiconductors (used for MRI machines, blood pressure monitors, and other medical equipment) caused by disrupted access to such rare materials as neon gas and C4F6 chemical
• A surge in procurement and operational costs fueled by rising crude oil, gas, plastics, and energy prices
• Limited visibility into the global supply chain and the healthcare supply chain as a part of it
• Failed offshore procurement and the need to redesign sourcing strategies to nearshore

As experienced healthcare solutions development vendors, we at ITRex believe that it is high time healthcare supply chain leaders rethought their management strategies and started responding to the medical supply chain issues highlighted by COVID-19. We also believe that technology can become a strong ally to those who are ready to embark on a transformation journey.

To help you navigate change, we are pointing out key healthcare supply chain issues and spotlighting technology solutions that help overcome these challenges.

Critical healthcare supply chain issues to tackle in 2022

Issue 1. Unnecessary spending attributed mainly to poor inventory management

One of the critical issues in the medical supply chain is ever-rising and unnecessary spending. In fact, a Navigant study of 2,127 US hospitals found that unnecessary spending on supply chain operations has reached about $25,7 billion a year. And a large share of those spendings, $11 million per facility annually, can be freed up by optimizing inventory management.

Hospital inventory management is a complicated process that involves predicting optimal inventory volumes, tracking deliveries, designing appropriate storage strategies, managing recalls and expired products, and more. It is often difficult for the supply chain employees to simply get the needed products to patients and physicians, let alone optimize the process. However, with the application of recent technological advances, supply chain executives may overcome acute inventory management issues in healthcare supply chains, realize potential savings, and set back the spike in operational costs.

Solution: Optimizing inventory management

Technology can tackle inventory management issues in the healthcare supply chain in a variety of ways. The following two, we think, drive the most impact: increasing visibility for the inventory and bringing in fresh insights driven from historical inventory data.

Improving inventory visibility

Statistics and the experience of our customers prove that it is not always easy for hospital workers to keep an eye on inventory and make sure they have all the needed items on hand. What is more, 85% of medical workers claim they have trouble documenting supplies and 25% of them say that they don’t always check product expiration or recall info.

What could help address the healthcare supply chain issues related to inventory is, switching to a more transparent, technology-enabled inventory management. Keeping track of inventories via a secure, cloud-based platform and bringing in the elements of the Internet of Things, such as beacons or sensors, for real-time tracking drastically increases inventory visibility. It also makes it easier for supply chain employees to calculate optimal inventory volumes, handle suppliers, track deliveries, and get the needed items to patients and medical staff on time. Having a real-time view of the inventories helps keep track of the quality of the delivered items, thus facilitating compliance and the management of expired or recalled products.

By increasing visibility into the inventory, hospitals can recover a share of the lost revenue stemming from inventory data loss and flawed inventory management practices. Annually, this lost revenue amounts to a whopping $7 billion.

Tapping into predictive insights

Bringing in technology, artificial intelligence (AI) in particular, into their supply chain management mixes, healthcare organizations can use the insights generated from predictive analytics to overcome such healthcare supply chain issues as uninformed decision-making and limited knowledge about the inventory.

AI algorithms can, for example, improve demand forecasting based on historical demand data and the information about external factors influencing the demand, optimize inventory distribution across multiple storage locations, streamline the management of expired and recalled products, and more.

As a result, hospitals can save money by right-sizing their inventory and improving their purchasing and storage strategies.

Issue 2. Supply chain talent crisis coupled with mundane manual operations

Another acute challenge in the healthcare supply chain is the talent crisis — healthcare organizations are struggling to recruit, develop, and retain supply chain management workers.

According to McKinsey, the crisis traces back to more than 15.9 million people relocating within the US since the start of the pandemic and 1.7 million people taking early retirement. Moreover, a 1.3 percent drop in the net immigration rate has had an impact on labor supply, which is set to last.

The lack of supply chain management professionals is amplified by the fact that much of healthcare supply chain management is still carried out manually. According to a recent survey of 100 hospital supply chain leaders, nearly half of the respondents rely on somewhat manual tools, like Excel spreadsheets.

While a good fit for managing supply chains of a smaller scale, when applied to more complex operations, manual tools are slow, expensive, and prone to error. What technological advances can do is digitize and even automate a larger share of supply chain management operations, thus compensating for the lacking talent and freeing workers from completing routine tasks.

Solution: Automating manual operations

Beyond basic digitization of supply chain management via cloud-based platforms powered with tracking and analytics capabilities, technologies can help automate a share of operations, allowing supply chains to go by with less human force. The technologies in question span blockchain, robotic process automation (RPA), and intelligent process automation (IPA).

Blockchain, for example, has the potential to fundamentally transform the way healthcare approaches contract, price, and transaction management.

In turn, RPA that involves creating, deploying, and managing bots emulating certain human actions can take over the following tasks:

• Processing orders
• Handling invoices and payments
• Overseeing inventory volumes
• Reading and comparing vendor quotations
• Communicating shipment statuses, and more

And while RPA is used to perform repetitive tasks with minimal variation, intelligent process automation — which combines RPA and artificial intelligence — tackles more complex end-to-end processes, like:

• Shortlisting suppliers
• Assessing inventory stock levels
• Addressing backorders and managing recalls
• Reviewing vendor contracts

Issue 3. Complicated assurance of supply and difficulties in predicting supply shortages

Another key healthcare supply chain challenge that is expected to carry over throughout 2022 is the complicated assurance of supply.

The industry is dealing with primary and secondary shortages of medical commodities, equipment, and essential medicines.

Primary shortages take place whenever demand is spiking for products that are directly related to disruptions, like ventilation-related products or testing supplies in times of COVID.

Secondary shortages occur when products are tied to disruptions indirectly. A raw material plant shutting down and affecting the manufacturing of products used in operating rooms is an example of a secondary supply shortage.

While supply chain management tools allow predicting primary shortages to a certain extent, they do not provide visibility into secondary shortages. What advanced technologies can do is help healthcare organizations better understand how pandemic, geopolitical, transportation, labor, financial, cybersecurity, and other factors dynamically affect the supply chain.

Solution: Predicting supply disruptions at all tiers

Technological advances can help supply chain workers better understand risks occurring at the secondary supply tier and beyond, as well as predict supply shortages.

Promising tech innovations span AI-based medical solutions that pinpoint products that become critical in various disruption scenarios and then, cross-reference equivalent products across a broad network of suppliers without competitive bias. Other solutions that are winning in popularity are advanced analytics and event monitoring systems that help predict primary and secondary shortages of supply.

Demand sensing tools and tools connecting trading partners also help address the problem of supply shortages.

Applying the solutions above, supply chain experts can significantly improve visibility into all supply tiers, gain a better understanding of the potential risks, and weigh out the alternative sources of supply.

Issue 4: An overall lack of supply chain resilience

Healthcare experts state that the current healthcare supply chains are reactive in their nature. The pandemic has highlighted the need for healthcare organizations to reconsider the way they approach strategic planning and risk prevention.

What technology can do is support supply chain executives in strategic planning and provide access to insights that were out of reach before.

Solution: Proactive planning with risks in mind

Technology can change the very approach to managing the flow of products in healthcare, facilitating the three key aspects of a resilient supply chain:

• Reliable supplier relationships Integrated into supply chain management solutions, AI algorithms can help shortlist suppliers, run automated supplier evaluations, screen supplier contracts, as well as optimize supplier management by weighing out costs and lead times.

• Transparency of workflows Technology helps enable the transparency of workflows with products being tracked in real-time along the supply chain, as well as the transparency of communication — with all the nodes within the supply chain having access to the same real-time information.

• Just-in-time, lean inventory management Leveraging the opportunities of IoT, AI, and RPA, healthcare organizations can predict perfect inventory volumes to meet the demand without the risk of overstocking or stockouts, manage the quality of delivered items, and set automated replenishments for quicker and easier restocking.

  
  

  As a result, healthcare supply chain managers may develop far more balanced management strategies and prevent risks, rather than react to disruptions.

Things to keep in mind when giving your healthcare supply chain a digital overhaul

Prompted by the pandemic, healthcare organizations are stepping up their tech investments. According to a recent study, nearly 81% of healthcare organizations indicated they increased their investment in technology in 2021.

However, to make sure the hefty investments do pay off, it is important to remember that adopting advanced techs — including AI, IoT, and RPA — has its specifics. We recommend keeping the following aspects in mind:

• Scaling technology solutions company-wide

  The healthcare supply chain is a complicated mix of nodes connected by multiple workflows and people, and it is hardly feasible to roll out technology that covers it all. Therefore, when digitizing your supply chains, we advise taking the iterative development path.

  
  

  Say, you choose to roll out an RPA solution to automate a share of day-to-day operations. Start with running a thorough analysis of your organization’s workflows, pinpoint what can and cannot be automated, and prioritize possibilities for value creation across supply chain segments and workflows. Start rolling RPA to those segments that have the highest value-creation potential and drive faster ROI. Once the initial solution is up and running, you may start building on it and evolve the technology further — both vertically and horizontally.

  
  

• Ensuring compliance with relevant healthcare IT regulations and standards

  Rolling out technology in the field as regulated as healthcare is not easy. When doing so, ensure that your technology partner has a deep understanding of the complexities and specifics of the healthcare system. It is crucial that they thoroughly study the context in which the technology will be used, including organizational settings and relevant stakeholder groups, before actually designing the solution.

  
  

  During development, make sure that your technology vendor thoroughly documents the entire process — from ideating to designing to engineering and testing your software solution. That would make it easier to communicate with regulating authorities.

  
  

  Finally, before rolling out technology company-wide, consider carrying out an external audit to bring potential compliance risks down to a minimum.

• Maintaining IT infrastructure security When adopting healthcare supply chain management technology, you have to be on the lookout for threats. Therefore, it is imperative to design a thought-out cybersecurity strategy at the beginning of the development process and reference it throughout development for built-in safety. Make sure to lay out an action plan for preventing, detecting, and mitigating security risks, as well as consider running external security audits for extra safety.

  
  

If you have your mind on addressing healthcare supply chain issues by giving your supply chain a digital overhaul, contact our experts. We will answer your questions and plan out further steps.

Also published here.