No one said that healthcare supply chain management would be easy in 2020, but it appears that the challenges that supply chain leaders will be facing in 2020 and beyond will be even more challenging than we might have thought possible. I have outlined four of those challenges below for you to contemplate, prepare for, and act on before they become barriers to your supply chain success:
1. Price Savings are Disappearing. At one seminar I gave a few years back, I asked a group of supply chain managers what they would do if there were no more price savings. One participant said he would retire, another said she would beat up on her suppliers for more savings, and a thoughtful manager said he would look for new savings sources. Well, this question isn’t theoretical anymore. We estimate that hospital, system, and IDN’s annual savings (supply chain budget/annual savings) are one percent to three percent at best. This statistic considers the fact that hundreds of healthcare organizations now belong to regional group purchasing organizations. The correct answer to this challenge is for supply chain leaders to look for new savings sources – beyond price and standardization.
2. Talent Pool is Becoming Thinner. We are seeing more supply chain analysts, managers, directors, and vice presidents being hired from outside the healthcare industry. Or, individuals being promoted or hired for jobs they aren’t qualified for because the healthcare supply chain talent pool is getting thinner due to retirements, mergers, and acquisitions, thus, requiring more competent, technology savvy and analytical thinkers than previously required. The answer to this challenge is to: (i) invest in training for your current employees so they can step in when a vacancy arises, (ii) proactively search for super stars before you have a job opening, (iii) ask for referrals from colleagues, and (iv) employ social media campaigns to find the right candidate.
3. Over-Utilization and Variation of Care. As you know, we have been preaching for 15 years that your biggest double-digit supply chain savings opportunities now reside in utilization misalignments (i.e. wasteful and inefficient consumption, misuse, misapplication, and value mismatches) in your supply streams. This is one solution to your declining price savings. However, since this new savings source requires new technologies, a new mindset, and new advanced training, now is the time to make this investment in technology and training to reap the benefits of these new and better savings.
4. Globalization Has Its Downside. As we are seeing with the global coronavirus outbreak, our healthcare supply chain can be easily disrupted for long periods of time, therefore, making it necessary for healthcare organizations to develop alternative sources to replace those disrupted supplies. For instance, a friend’s company is now buying their industrial plywood from Russia at an even lower price than he used to pay from China because of the tariffs war. I would encourage that you ask your group purchasing organizations to do the same.
Our healthcare supply chain world, as these challenges suggest, is becoming more complex than ever before. Therefore, we must plan to address the foreseeable challenges in our supply chain business. That’s what a Supply Chain Annual Strategic Plan (SCASP) is all about. Otherwise, you will be blindsided with a challenge like the coronavirus, higher tariffs, and shortages of all kinds that should have been planned for, scripted, and then implemented in your SCASP.
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