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A network-based supply chain approach has the potential to improve resilience and performance.
The weaknesses in global healthcare supply chains, like diseases in the human body, may go undetected for years, even decades. They surface when a major disaster or pandemic happens. For healthcare supply chains, nothing in history has exposed those vulnerabilities as vividly as the COVID-19 pandemic. In the time of the pandemic, it has become apparent how stretched, fragile, and disconnected many supply chains are. The lessons learned from COVID-19 highlight the importance of stress testing the resiliency of the global healthcare supply chain so it will be better prepared in the event of major demand surges or supply shortages.
The lack of preparedness for many countries has been exacerbated by brittle supply chains, lack of visibility to inventory, and an inability for hospitals and suppliers to collaborate effectively. Demand and supply for many products was out of sync, with supply chain technology unable to provide crucial information, or the means to address the critical imbalances.
The Center for Infectious Disease Research and Policy (CIDRAP) reports that 60 of the 156 drugs on its list of drugs used in acute care were already in short supply before the COVID-19 crisis (1). The pandemic has shifted demand and exacerbated the shortages, and amplified and focused shortages around COVID-19 treatment. According to CBS News, The University of Minnesota's Resilient Drug Supply Project indicates that 32 out of 40 drugs deemed critical for treatment of COVID-19 patients are in short supply (2).
Like most industries, pharmaceutical supply chains have seen a sharp increase in both globalization and specialization. Although both trends have delivered incredible benefits, they have also expanded supply chains to include many more intermediaries and partners, all of which introduced more touchpoints, blind spots, dependencies, and points of friction.
The focus on “lean” supply chains, imported from automotive supply chains, intensified the problem. It paired down inventory to essential, “just-in-time” inventory to remove waste from the system, but also left supply chains more vulnerable to unexpected spikes in demand. The result? Steep shortages of critical products.
In an unpublished survey, performed in conjunction with a major healthcare services company, of hospital and supplier executives and managers, nearly three out of four said their number one concern was supply shortages (74%). Respondents also overwhelmingly agreed that greater inventory, demand, and manufacturing capacity transparency would increase supply chain resilience.
Jim Tompkins, chairman of Tompkins International, a global supply chain consulting firm, summed it up best when he recently said, “There is so much uncertainty now that there is no synchronization of supply to demand, and thus, we have inventory overages of discretionary products and supply shortages of essential products. We have apparel stores full of inventory that are closed and open grocery stores with near-empty shelves” (3).
To address this unfulfilled demand, counterfeits and substandard products began to encroach on the supply chain. For example, in March, Interpol’s “Operation Pangea” seized potentially dangerous pharmaceuticals valued at US $14 million (4). Substandard and defective equipment is also a major problem. The Wall Street Journal reported in March that the Netherlands recalled 600,000 defective N95 masks they bought from a Chinese supplier, and more than half a million substandard Chinese testing kits ordered by Spain had to be returned (5).
New trends in healthcare are forcing companies to re-evaluate their supply chains, with the focus on patients and outcomes driving the need for better visibility and data sharing across the extended supply chain, from point-of-care to raw material suppliers. There is the increasing complexity of products, such as biologics-drugs that are derived from or contain components of living organisms. Biologics include vaccines, blood, tissues, and proteins. Biologics are sensitive and can lose their efficacy or become unsafe if they are not carefully handled, packaged, stored, and delivered under the right conditions. Some may need to be stored at very low temperatures, and all must remain sealed, throughout their journey right through to the point of use.
Then there is the emergence of new manufacturing regions and new markets around the globe. As economies shrink and grow, and diseases emerge and migrate, healthcare needs and strategic sourcing priorities will continue to evolve. Healthcare and life-science companies need to become more agile to adapt to these shifting conditions. All these trends put strains on the supply chain and increase its vulnerability to disruption.
What is clear is that disjointed supply chains, managed with multiple siloed systems, with point-to-point connections to select trading partners, and even hub-and-spoke portals, are just not working. The healthcare supply chain is one of the most vital and complicated supply chains, carrying life preserving and enhancing products, from complicated manufacturing processes, across tiers of suppliers, layers of distributors, and warehouses, to clinics, hospitals, and consumers. Yet, it is one of the least connected and coordinated industries, creating hurdles, cracks, and friction at every junction. Adding to the complexity, healthcare is one of the most highly regulated industries.
For instance, spikes in demand are not communicated across the healthcare chain quickly. Instead they’re batch processed serially down the line, link-by-link over time, until it’s too late to do anything about them. Supply quickly becomes out of sync with demand, resulting in shortages of critical products at some locations and overstocking at other locations. Without this visibility and coordination, there’s no way to rectify the imbalance. Shortages occur, and patients and care providers pay the price.
To overcome this fundamental flaw, the first step is to connect all participants on a single network. Equipped with a multi-enterprise master data management system, the network helps normalize and harmonize the data across partners and systems and can auto-translate master data to enable the seamless communication of vital changes to all parties. The network maintains a real-time single version of the truth, synchronized across parties on the network and their systems. Visibility to information (inventories, orders, forecasts, and plans) and the ability to manage data and execute transactions is under the control of each organization, and only they have the power to grant a range of permissions to their relevant trading partners.
Implementing a single platform for all parties is revolutionary in healthcare. It transforms the serial, disconnected, and confused conglomerate of systems, into a single real-time ecosystem working in harmony to serve patients. Instead of passing data down the line manually or by batch processes, everyone sees consumption and changes in demand, supply levels, and constraints as they occur. They can even see the logistics links in between. So, when a problem arises anywhere in the network, the relevant parties can respond immediately. If a pharmaceutical plant goes down in Puerto Rico due to a hurricane, the downstream network is alerted immediately, and the affected parties can assess the impact and switch over to another location or find alternative sources.
In today’s environment of high uncertainty and variability, long-term planning must give way to more agile, responsive, and resilient supply chains. A real-time network helps by dampening all major sources of variability:
Transparency across the global network, with data driven decision-making and patient/clinician driven demand, also enables supply to be rebalanced to meet demand so supplies can be shared among nearby hospitals and sites, or more remote locations. A network approach significantly enhances resilience, because all parties get early warnings to projected stockouts and issues, and they have visibility to many more alternative sources of supply.
For example, clinics and hospitals can collaborate with adjacent facilities, distributors, and suppliers to execute their plans and source supply from the nearest and quickest available supply points. Inventory transfers can be authorized, committed, and tendered to carriers, tracked in transit, and confirmed on delivery. Finally, artificial intelligence and intelligent agents can be used to monitor supplies, inventory, and rates of consumption, shipment lead times, and so on to predict shortages and problems in advance. This provides network-wide, always-on, precision monitoring, and alerting at a scale that is difficult, if not impossible, to match with manual processes. These intelligent agents can also use machine learning to develop better arrival time estimates for shipments.
Like Uber, which offers those in need of a ride many more options and quicker more efficient service, a network connects those in need of a product or service (buyers), with the providers of that product or service. Think of it not as “ride sharing” but as “supply sharing,” and you will start to see the power of the network for healthcare.
Another advantage of using a network approach is that products can be tracked across all participants and their journey-from source to consumption. Companies can use serialization, product authentication, and chain of custody services, to provide a digital passport for products flowing through the network, documenting its journey from origin to destination. It also helps to protect the integrity of the supply chain, increase product safety, and secure patient care. This is especially important with sensitive products, such as biologics, which as mentioned earlier, require special packaging, handling, and conditions to maintain their efficacy. It also supports full traceability, which is particularly important in regions where counterfeit products are a problem.
Serialization and chain of custody services are also supported and are invaluable in the event of a problem or a recall. They enable hospitals, suppliers, and distributors to identify affected product and remove it from the supply chain quickly, eliminating the possibility of using recalled products on patents.
A network-based approach to the healthcare supply chain not only improves resilience and supply chain performance, it also provides better patient care and lowers costs. Many time-consuming and tedious chores that occupy healthcare providers today, such as trying to calculate orders, can be optimized and automated. This brings more precision to processes and frees up hospital staff and care providers to focus on their patients. All this is enabled through the strengthened collaboration and greater information sharing between hospitals and their suppliers.
Healthcare providers, drug manufacturers, and medical device manufacturers do an incredible job of saving, enriching, and extending our lives. It’s time they had the support of modern technology to streamline supply chains, make their lives easier, and help ensure that life-saving products reach patients quickly, efficiently, and in optimal condition. A real-time digital network enables that and more and may be the lifesaver needed especially when time is of the essence.
1. CIDRAP, “Experts Say COVID-19 Will Likely Lead to US Drug Shortages,” cidrap.umn.edu, Press Release, March 27, 2020.
2. CBS News, “Pandemic Exposes Drug Supply Shortages Doctors Have Grappled with for ‘More than Two Decades’,” News Release, May 7, 2020.
3. Tompkins International, “Impacts of COVID-19: Uncertainty and the Flow of Goods,” Blog Post, March 26, 2020.
4. Interpol, “Global Operation Sees a Rise in Fake Medical Products Related to COVID-19,” interpol.int, Press Release, March 19, 2020.
5. The Wall Street Journal, “Commentary: Solving the Health-Care Equipment Supply Shortage,” wsj.com, Logistics Report, April 10, 2020.