In the ever-evolving systems within each healthcare organization, pressures on supply chain are increasing with no end in sight. Behind the scenes of every organization, the intricately choreographed dance of inventory management, logistics, and sourcing plays out. Leaders orchestrate new motions or methods to deliver continued quality patient care in the face of increasingly obvious vendor-shortcomings.
Our industry harnesses technology to adapt, we solve problems as they become more clear. From stock transparency and supplier diversification to AI shipping and cart negotiations, novel solutions are emerging to revolutionize procurement and logistics of medical supplies at healthcare organizations. In this article we will explore the ways that leading organizations leverage innovative tech to build resilience as supply chains falter – allowing technology to power the continuous improvement of patient outcomes amidst disruption.
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Like any chain, each supply chain is only as strong as its weakest link. When a healthcare company’s upstream logistics and supply partners experience issues, those issues carry forward to medical facilities. Supply costs soar, most substantially for healthcare buyers purchasing from the larger, national distributors. These large, national, century old distributors have complex distribution networks related to overhead costs, wide geographic coverage, and managing info from thousands of vendors of their own. This complexity drives up the costs on products sold to end-users and increases the number of potential failure points in your supply chain.
Why are the prices so much higher from larger, national , megalithic distributors? The exact product, from your ‘big-brand’ distributor of choice, is initially imported and stocked in the states by smaller local suppliers (manufacturer / importer). These smaller local suppliers will then sell to your distributor – who sells to you. The biggest distributors are largely inefficient intermediaries, with high overhead costs that get packed into the prices you pay. Additional intermediary costs get packed on to the price you pay from your distributor – driving product prices from distributors 2-3X higher than the same product priced directly from the smaller, local importer or supplier.
Unbelievably, more than half of the products sold by leading distributors are actually mindlessly moved, from the US-based warehouses of the smaller suppliers (importers/ manufacturers) into the megalithic intermediary’s warehouse. Such unnecessary movement of supplies not only drives up costs, but it also is the cause of many delays. Next time you experience a “back order” from an industry giant, be wary that the only shortage is in the intermediary supplier’s warehouse. The vital medical supplies are actually available and ready to ship from the smaller supplier’s warehouse directly to the end-user – that is the original manufacturer / importer of the product has your critical supply ready to ship. But the industry giants don’t do this – and the end-user probably won’t get this product for days or weeks – Why?
It is important to industry giants, the megalithic age-old suppliers of yesterday, to keep end-users and healthcare providers in the dark. These industry giants add unnecessary complexity to the supply chain to maintain their own relevance. During a back-order, the intermediary is going to (1) place an order to the third party manufacturer/importer, (2) send trucks and (3) move that stock to their own, warehouse, before finally (4) shipping it to you. And with that, the embodied cost of the product has doubled; the time to delivery has doubled. For healthcare organizations, these additional steps not only cost time, but also money.
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Beyond costs and delays, the greatest hindrance impacting healthcare organizations amidst logistical shortcomings may actually be labor. Personnel who manage sourcing, negotiations, stock-reporting, purchasing, re-ordering and payments spend significant time in their daily routine, dependent on overly complex, decentralized procurement / record-keeping systems – systems that when compared e-commerce ordering (10-20 clicks and your order is placed, tracked and paid) , are truly cringeworthy. When products are unavailable, on back-order, overpriced or discontinued, procurement staff must find new product lines and new suppliers. To search, build trust and onboard new vendors is a labor intensive process. The salaries, training expenses, and costs that healthcare organizations take-on in searching for alternative products or suppliers amidst disruption can be grave.
Placed under the fire of a global pandemic, the outdated practices and inefficient systems suffered complete meltdown. Inefficient processes, that had previously only increased costs or drove frustration, rapidly became the center of attention for every healthcare provider. Hospitals faced price gouging, national stockouts and hopeless expansion of labor to try to sustain operations and meet patient needs. Today, the dust has settled, but for most the struggles persist — more apparent than ever before. The healthcare industry has assessed the damage, the inherent weaknesses of traditional practices and seeks new best practices.
Emerging technologies implemented alongside improved practices call forth a new generation of supply chain efficiency — to prevent breakdowns, to reduce product costs and to minimize delays. By embracing change, we can navigate the new normal and collaboratively build a robust supply chain ecosystem that ensures the continuous delivery of vital health care services; Change that begins with increased vendor transparency.
Healthcare buyers that have visibility into the operations and practices of their vendors find out that these vendors are not compatible with their needs. Those lacking visibility into vendor operations more often receive dissatisfactory service, failing to productively align compatible operations, capabilities, and product offerings. In other words, without transparency, there is a disconnect between end-user and product supplier. Given vendor transparency, healthcare buyers are capable of understanding a vendor’s strengths and weaknesses across pricing, stocking/availability and timeliness, allowing healthcare buyers to compare product and vendor options to make better decisions. With increased transparency most buyers realize that they are unwittingly purchasing resold products from large intermediaries at twice the cost they could otherwise pay – buyers who diversify their vendor network are capable of connecting with more compatible suppliers, selling the same products at 50% of the cost.
Eliminating unnecessary middle-men reduces both product costs and delayed deliveries. Seeking out and connecting directly with the original importer / manufacturer of the same products can reduce costs by up to 60%. Furthermore, avoiding mega-distributors or resellers, reduces backorders and delays while simultaneously lowering prices, allowing the stock to move from the dock (the port of entry) directly to your facility; whereas resellers require the unnecessary movement of stock from dock to reseller, to you. Disintermediation does not mean delays, as those smaller importers are often more agile, and flexible to meet your needs and delivery times than the megalithic middle-men. Thus eliminating unnecessary intermediaries reduces the number of potential fail-points within the logistics chain that can affect healthcare facilities.
Emerging technologies simplify multi-vendor purchasing, augmenting the capacity for healthcare organizations to achieve disintermediation, and comprehensively assess a multitude of new vendors. Novel supply chain network platforms and B2B healthcare marketplaces work to connect buyers to networks of hundreds of vendors, empowering buyers to cross-analyze catalogs and vendor capabilities. Vendors entering such supply-networks or marketplaces undergo vetting and negotiations in advance of exposure to potential buyers — in a similar fashion to the processes on onboarding vendors into a GPO’s network. Such digital platforms offer tech resources to assist healthcare procurement teams – to automate stock replenishment, place and track orders, and even auto-pay net invoices on appropriate schedules. Processes that have historically taken ten people, weeks to execute, now happen within a few clicks, trackable and shareable across teams and companies.
These same ‘digital supply chain networks’ offer more than just buyer-to-vendor transactions, including free-to-use inventory management, virtual warehousing and sourcing software tools. Allowing buyers and suppliers to do more than just transact, but to also automate internal operations. New digital platforms available in the marketplace allow buyers to automate custom-tailored purchasing processes by choosing products, vendors and even freight carriers for each transaction. Customizability of procurement allows buyers to adapt to real-time market forces. Such flexible digital platforms allow for digitally driven automation through disruption and turmoil, to by-pass increased labor costs and hindrances to patient care.
These same systems track vendor performance, requiring vendors to publish performance stats to their profiles offering never-before-seen insights and complete transparency. Publicized performance stats measure the time between receiving an order, and the third-party carrier successfully picking up the product to publish ‘ship out timelines’, and quantify the percentage of sales that may end up on back-order or facing delays. It is important to know the people, and the vendors behind the products. Technology that bolsters transparency allows buyers to evaluate weaknesses in their vendor network, before the vendor’s failures afflict providers and patients. This information proves most valuable when a network of alternative vendors, alongside transparent vendor insights, are made available at your fingertips. Data should not be siloed inside the walls of a healthcare facility, requiring typing, calls and paperwork to communicate or transact with vendors. Instead business leaders are adapting to use management systems that increase transparency and communication, ultimately to promote collaboration.
Novel health tech enables automation and information sharing beyond the walls of any one healthcare organization, now through that organization’s curated vendor network. Buyers are empowered by fast digital execution of previously multi-day processes and transactions between businesses. B2B problems that formerly spanned across several companies are collaboratively solved by vendor and buyer, who work in real-time, together. By re-engineering supply chain systems, healthcare organizations become more capable of meeting patients’ needs effectively, despite disruption. By harnessing just some of these new advancements in practice and technology, healthcare organizations can deliver quality supplies at lower costs while building more resilient supply chains for providers and patients.
Photo: sorbetto, Getty Images
Luka Yancopoulos is the dynamic CEO of Grapevine Technologies and a rising force in the healthcare industry. As a distinguished VIPER student at UPenn, Luka's impactful academic journey has equipped him with invaluable knowledge. With six years of research and professional experience under his belt, including groundbreaking nanopore bioanalytic research and collaboration with esteemed institutions like CHOP, Luka's passion for improving healthcare logistics became evident. Inspired by the challenges he witnessed firsthand, Luka fearlessly founded Pandemic Relief Supply (PRS) in April 2020, spearheading the delivery of over $20M in critical supplies, including generous donations to the AFYA Foundation. Now, with the founding of Grapevine in June 2021, Luka's unwavering commitment to revolutionizing the healthcare supply chain shines bright. Stay tuned as he leads Grapevine on a transformative journey to redefine the industry.
