Healthcare supply chain issues and how to solve them with technology

One of the critical issues in the medical supply chain is ever-rising unnecessary spending. In fact, a Navigant’s study of 2,127 US hospitals found that unnecessary spendings on supply chain operations have 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 involving 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, applying 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.

Technology can tackle the inventory management issues in the healthcare supply chain in a variety of ways. The following two, we think, drive the most impact: increasing visibility into the inventory and bringing in fresh insights driven from historical inventory data. Improving inventory visibility Statistics and the experience of our customers prove: 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 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 into the inventories helps keep track of the quality of the delivered items, thus facilitating compliance and the management of expired or recalled products. 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.

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.

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:

Another key healthcare supply chain challenge that is expected to carry over throughout 2022 is 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 the times of COVID. Secondary shortages occur when products are tied to the 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.

Technological advances can help supply chain workers better understand risks occurring at 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 on 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.

Healthcare experts state: 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 to support supply chain executives in strategic planning and provide access to insights that were out of reach before.

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

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.