The COVID-19 pandemic showed many problems in healthcare supply chains. Hospitals quickly ran out of important personal protective equipment (PPE) like N95 masks, gloves, gowns, and face shields. Many healthcare groups bought supplies quickly without following usual rules. This sometimes caused them to get too much of bad products or miss needed items completely.
Research says a usual regional health system in the US buys between 30,000 and 60,000 different stock-keeping units (SKUs) every year. Managing this many items is very hard. It is not just about ordering supplies but also guessing needs, planning deliveries, and checking quality. These problems got worse because of inflation, political problems, and travel delays caused by events like the Ukraine conflict.
McKinsey found that supply chain leaders who acted fast during crises made decisions about using key supplies in four to five days. Others took about two weeks. Making quick choices helped reduce shortages and control expenses.
Healthcare groups often face money problems. Costs went up during the pandemic because of more expenses, higher wages, inflation, and pricier supplies. Being able to handle money problems without hurting patient care means planning costs carefully.
Cutting costs does not mean buying the cheapest items. It means building a steady and strong cost system before problems happen. This gives protection during hard economic times. William Weinstein from McKinsey says it is important for healthcare to spend the right amount on being ready—not too much or too little.
One way is to sort supplies by importance. Health systems put items in high, medium, or low groups based on how much harm missing the item could cause, how often it is used, and if there are other options. Keeping extra stock of high-risk supplies, even if they cost more now, can stop big shortages and expensive emergency buys later.
A big cause of wasted money and supply shortages is poor knowledge of what supplies are available. Not knowing how much of each item is at different places leads to storing too much or rushing to order last minute.
Health systems now collect supply data into one place, using technology like RFID tags and barcode scanners. This helps managers and buying teams see supplies in real-time across hospitals, clinics, and labs. They can make better buying decisions.
Also, partners like Group Purchasing Organizations (GPOs) and manufacturers warn about shortages early. GPOs gather data from many hospitals. They use this data to predict shortages and change orders before problems grow bigger.
Eric Bishop from McKinsey says systems with strong supplier relationships and shared inventory data can notice issues faster and act earlier.
How quickly and well teams decide during supply problems affects costs and work. Clear rules and management plans help healthcare groups respond fast and smart to supply issues.
One good method is a central emergency center with leaders from medical, admin, and IT teams. McKinsey shares a story of a large health system that made such a center after Hurricane Katrina. This allowed fast agreement on problems and decisions in as little as five days during crises.
Planning for different crisis situations and running practice drills helps health groups improve how they react. Clear roles and step-by-step plans save time and money when shortages happen.
The pandemic showed the risks of relying on only a few suppliers, especially ones based in other countries. Political conflicts and travel problems made healthcare groups rethink how they buy supplies.
Many now use a multisource policy, working with several suppliers instead of one. They use both offshore and nearby suppliers to balance cost and supply safety. Local suppliers may cost more per unit but help get stock faster and cut delays.
Keeping extra stock of key items is also important, even though it costs more at first. If planned right, stockpiles lower the need for expensive emergency buys and keep care going without interruptions.
Technology is playing a bigger part in improving healthcare supply chains. AI and automation help with managing supplies and making work easier while saving money.
Sean Harapko from EY says digital tools during the pandemic helped keep supply chains steady. EY’s 2024 report shows 92% of companies kept or increased spending on AI, automation, and data analysis during supply troubles.
Financial resilience means a health system can handle shocks and still give good patient care even with money or supply problems. This needs more than just emergency savings; it needs cost optimization built-in.
US healthcare groups need to keep adapting because supply chains still face inflation, political issues, and climate events. Getting ready for future problems means staying focused on cutting costs, seeing supplies clearly, using different suppliers, and adding technology.
Using AI and automation to manage many SKUs helps buy supplies better, keeps patient care steady, and controls spending.
Working better with GPOs and suppliers increases supply visibility and lets groups manage stock before problems start.
By using these ways, people who run healthcare systems in the US can build supply chains that save money and stay strong for future challenges. This focus on money health and supply dependability is needed to keep good care in a world that is not always steady.
Health systems were unprepared for the magnitude of supply shocks, leading to rapid depletion of critical supplies like PPE. Many bypassed standard procurement practices, resulting in overstocking, receiving substandard supplies, or failing to obtain products altogether.
Health systems can extend visibility into supply chains, explore product-specific strategies, develop relevant protocols and governance, and optimize costs to create more resilient and efficient supply chains.
They can improve internal visibility by consolidating inventory data and using tools like RFID or barcoding. Externally, they should engage purchasing organizations and suppliers for SKU-level visibility to anticipate supply disruptions.
Critical items should be assessed based on whether their absence is life-threatening, the availability of substitutes, frequency of use, and potential revenue impact in case of shortages.
Mitigation actions include implementing demand management protocols to reduce unnecessary use, establishing guidelines for product alternatives, and considering stockpiling high-risk items to prevent shortages.
Strong protocols and governance enable rapid decision-making during supply chain disruptions, helping health systems respond effectively and maintain care quality even in crisis situations.
A dedicated resilience team can enable proactive preparedness, streamline the decision-making process during crises, and reduce response times for critical supply decisions across the organization.
Scenario planning helps health systems develop and pressure-test response plans against various crisis scenarios, ensuring preparedness and identifying ways to enhance risk response coordination.
GPOs provide health systems with data and insights into supply chains based on the collective buying power of their members, allowing for earlier detection of potential shortages.
By ensuring a healthy cost base and optimizing expenditures before a crisis, health systems can create a financial cushion to withstand economic downturns and supply chain disruptions.
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