4 challenges impacting the healthcare supply chain

How technology can make a difference

By | 3 minute read | February 24, 2021

young woman in pharmacy

COVID-19 has highlighted structural weaknesses in the healthcare system and, most notably, a persistent issue with the capacity and resilience of healthcare supply chains. Between 59-83% of organizations have reported delays or increased lead times in acquiring supplies since the onset of the pandemic. In response, 81 percent of these organizations adjusted their inventories, most by increasing inventory levels, to weather the demand fluctuations and disruptions.

Several major risk factors or underlying challenges have come into focus for healthcare supply chains:

  • Lack of resilience – COVID-19 exposed a need for greater supply chain resiliency. IDC emphasizes the importance for healthcare organizations to have greater adaptability to shifting pandemic conditions while positioning for the “next normal” post-pandemic. Of course, mitigating supply chain disruptions in healthcare have significant consequences for the bottom-line and patient care. Perhaps that’s why a recent survey showed that supply chain disruptions are now healthcare CEOs second-highest priority behind patient safety.
  • Lack of visibility – The lack of resiliency across healthcare organizations often stems from poor visibility, specifically a lack of quick access to centralized, consumable, real-time data from dispersed data sources and siloed systems. This makes it difficult to determine what’s needed, what’s in stock, and the scope of future demand. Ultimately, you can’t manage what you can’t see and measure.
  • Cost management – During the pandemic, as demand increased for personal protective equipment (PPE) and medical supplies, costs soared. Now, supply expenses are forecasted to surpass personnel costs as the biggest expense in healthcare. Studies show that most inventory decisions made to adjust to a disruptionare suboptimal and nearly half are unnecessary. This isn’t surprising, given the lack of visibility and that health systems typically order supplies based on historical models and physician preference, rather than actual utilization and expected demand. This leads to waste, delayed procedures and high inventory and carrying costs.
  • Integration and interoperability – Integration challenges— from an organizational, process, and technology perspective — also contribute to cost increases and visibility issues. Data integration across disparate ERP, legacy supply chain systems, and external sources, along with interoperability across tools such as RFID barcode readers that feed product data back into these systems, is needed to connect the dots.

Integration challenges are further exacerbated by mergers and acquisitions (M&A) – and the fallout from COVID-19 is expected to accelerate M&A in healthcare. M&A provides significant upside potential for growth and cost savings, but it also leads hospital systems to manage fragmented teams, technologies, and processes. Improved integration and interoperability enable better decision-making and allow an organization to better collaborate and get ahead of disruptions.

Despite these challenges, advanced technology solutions offer an expedited path to transformation and resiliency. Healthcare and supply chain leaders are already acting to address these challenges and improve their organizations in the process. According to IDC, 62 percent of hospitals increased spend on supply chain applications and 64 percent of executives called their cloud-based supply chain management applications “business-critical.”

AI-enabled supply chain control towers are garnering particular interest. In fact, 88 percent of healthcare executives identified AI as a ‘critical’ technology for their supply chains in the next three years. AI-backed control towers can help an organization gain dynamic visibility across the network, improve the ability to sense demand changes and disruptions, and support inventory management and decision-making to improve patient care.

AI-enabled supply chain control towers can help meet the challenges presented by the pandemic by leveraging five key capabilities:

  • End-to-end visibility
  • Intelligent forecasting and demand sensing
  • Touchless planning and improved productivity
  • Elevated planning and automation
  • Creating a collaborative ecosystem

Deploying control towers is not just about meeting the challenges exposed by the pandemic. They’re also a key component in transitioning to a more digital and data-driven environment and meeting the challenges and opportunities of the future. Combining visibility, automation and integration across the supply chain with a control tower unlocks the next frontier: a healthcare ecosystem where supply chain connectivity and collaboration make it possible to better manage through, and even get ahead of future crises and healthcare challenges.