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Four Ways to Build a More Resilient Healthcare Supply Chain

The healthcare industry has relied on a just-in-time (JIT) distribution model for more than a decade. While JIT helped the industry control costs and reduce waste, the processes and technology systems supporting it were unable to meet the demands of a global pandemic.

The first wave of COVID-19 saw healthcare providers devise stopgap measures to deal with the shortage of personal protective equipment (PPE) and other critical supplies. These approaches will likely be in place long after we return to pre-pandemic levels of activity. In fact, the virus has challenged the industry to reconsider its definition of supply-chain resiliency.

Based on insight gained from the first half of 2020, here are the four areas of focus to build a more resilient healthcare supply chain.

Use data and automation to ensure you have sufficient supplies of critical PPE and medications. As healthcare suppliers and providers take a hard look at how they can minimize risk and prepare for a potential second wave this fall and winter, many are focusing heavily on data and automation to ensure they are adequately prepared for spikes in demand for critical supplies involved in patient care.

New requirements set by providers’ supply-chain teams include having access to current and consistent item-level detail on products, including cost, quality, on-hand inventory levels, and standardized substitutions. In support of this, they are building alternative supplier lists and virtualized item masters, which are then integrated into their I.T. systems. The lists are based on AHA and AHRMM vendor-sourcing intelligence, and are integrated into flexible cloud-based systems that make it easy to quickly pivot and procure the same or equivalent products from new vendors. From an automation perspective, they’re prioritizing order-to-cash processes which create the foundational data to power demand-planning models and secure collaboration with disparate groups, such as supply-chain administrators and value-analysis teams, in order to make data-driven decisions in rapid fashion.

Ultimately, these data requirements, coupled with automation, help guide purchasing decisions and readiness that balance the best interest of patients with supply-chain resiliency and potential financial impacts.

Establish and enforce effective facility access procedures. This has become trickier due to COVID-19. Protocols are highly fluid based on evolving government mandates, as well as the type of facility and its associated entry requirements. All of these factors affect how, when and where providers and suppliers interact.

If you haven’t already, evaluate the effectiveness of your current facility-access procedures and lessons learned earlier this year. Update your policies to reflect COVID-19 requirements, and make sure they’re easily accessible online to avoid any confusion when vendors arrive. Leading providers are deploying a mix of health check attestations, temperature screening and mobile capabilities, to be prepared to quickly shift gears in order to respond to changing dynamics presented by health crises.

Streamline and digitize essential procurement processes. Everone knows that manual procurement processes, involving paper, e-mail and fax documentation, slow supply-chain activity, especially during unexpected peak demand. Yet some processes still haven’t caught up to the latest technologies.

At the height of the crisis, manual processes led to a lack of clarity on order status, anticipated delivery timeframes, and supply-allocation needs. Providers who had previously invested in automation were more capable of understanding these factors that drove care delivery and purchasing decisions.

Knowing this, now is the time to implement a complete transaction management strategy to streamline provider and supplier communications in a compliant fashion, and automate order placement, confirmation and payment processes. In addition to time savings, streamlining transaction management processes offers greater visibility into the status of orders and supplies, supports remote working environments, and creates a foundation of data to drive planning and allocation algorithms.

Prepare your financial system for crisis. Earlier this year, canceled surgical procedures due to COVID-19 put financial pressure on healthcare providers. At the same time, a higher demand for PPE led to unexpected costs. As healthcare providers and their suppliers have noted, proper planning relative to supplier-payment processing and working capital is critical to ensuring operational integrity. Armed with knowledge and experience, providers are preparing their financial systems. Suppliers and providers are looking to use technology to facilitate the exchange of payments in a more expedient fashion — one that creates a balanced financial equation for both parties.

While many in the industry admit that a more resilient supply chain comes at a higher cost, providers and suppliers can leverage financial automation to help offset some of the increase — for example, through the adoption of electronic invoicing. Along with offering a touchless invoice-processing solution, electronic invoicing facilitates remote working environments, provides greater visibility into payment liabilities, and ensures that payables meet invoice deadlines, to avoid any holdups in product delivery.

Also, consider expanded payment options such as dynamic discounting and variations on credit cards, for more flexible and efficient management of cash and capital. The flexibility of expanded payment options can make a big difference in a time of crisis to both providers and suppliers.

The supply chain will continue to evolve and respond to the needs of healthcare providers and suppliers. While nobody wants to repeat the difficulties resulting from the pandemic, the crisis led to the adoption of new strategies and approaches that will create a more resilient healthcare supply chain.

This can be achieved by embracing modern technology and refining how products are sourced, vendors are managed, processes are streamlined, and financial systems are reinforced. The greater the transparency throughout the process, the more resilient the healthcare supply chain will be.

Chris Luoma is senior vice president of product management at GHX.

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