The healthcare supply chain works differently from many other industries because the need for supplies comes from medical needs, not from usual market changes. Patients cannot delay using medical devices and supplies. This makes predicting how much will be needed very hard. For example, the demand for syringes, catheters, or surgical tools can change a lot depending on how many patients come in, sudden health events, or seasonal issues like flu outbreaks.
Owens & Minor, a well-known US medical supply company, shows these challenges. By using Electronic Data Interchange (EDI), a form of digitization, the company got better at predicting demand. EDI helps quickly and accurately share orders, inventory levels, and delivery status between suppliers and healthcare providers. This improves communication and lowers mistakes compared to paper-based methods.
Thanks to EDI, Owens & Minor created just-in-time (JIT) delivery systems. These systems provide supplies as hospitals need them in real time. This reduces too much inventory, waste from expired products, and costly overstocking. Hospitals then get supplies more smoothly without having to spend a lot on storage.
In 2015, Amazon Business started a large digital marketplace for healthcare supplies. It features 45,000 sellers and over 5 million products, including medical devices and consumables. Amazon’s model offers fast shipping and competitive prices, especially for items like catheters and syringes that sell in large amounts but do not bring high profits. This put pressure on traditional suppliers like Owens & Minor to change their strategies.
Owens & Minor saw a 5.2% drop in revenue and profits in the first quarter of 2017 because of these changes. The company responded with a four-part plan: focus on the best market routes, expand along different care stages, become a main partner for manufacturers, and use data and analytics to improve services.
The “Amazon effect” also means patients expect to get medical supplies sent directly to their homes or long-term care places using online marketplaces. Suppliers now need better digital services and delivery options to meet these new demands.
Medical practice administrators and IT managers must update supplier contracts. Suppliers who offer clear pricing, detailed demand data, and integrated online ordering will be better partners for healthcare organizations.
Predicting demand in healthcare is very hard because of changing patient numbers and sudden emergencies. Regular forecasting methods used in retail often don’t work well here. Digitization offers tools like cloud data analysis, which looks at past usage, patient types, and seasonal trends to guess demand more accurately.
Machine learning (ML) and deep learning (DL) models can analyze large amounts of data. These AI tools find patterns that people might miss. This helps suppliers keep the right amount of stock, plan deliveries better, and lower waste.
A study by Ahmed M. Khedr and Sheeja Rani S in December 2024 found that using deep learning with supply chain management helps pick the best suppliers, control inventory, and plan transportation. For medical device suppliers, this means ordering more accurately to match hospital needs. Important devices are ready when needed without having extra stock.
Owens & Minor used activity-based costing (ABC) to see which products need special care, storage, or delivery schedules. This helps stop sensitive devices from going bad and makes better use of resources. With advanced data tools, the company gives hospitals advice on managing their inventories to control costs.
Practice owners and administrators should choose suppliers who share detailed reports and data. This can improve budgets and reduce supply problems.
Using artificial intelligence (AI) and workflow automation is changing medical device supply chains. AI can handle large data sets in real time, spot trends, and automate normal tasks.
In supply chain management, AI helps with:
Workflow automation makes processes faster that used to need manual work. Automatic inventory tracking and order processing reduce human mistakes and speed up getting supplies.
For healthcare providers in the US, using AI-based supply systems can lower delays, improve device availability, and help patients by having the needed equipment ready on time.
Medical practices and hospitals want to work more efficiently. Understanding how digitization helps the supply chain is important. Working with digitized suppliers like Owens & Minor or newer platforms like Amazon Business means thinking carefully about:
Now, the healthcare supply market includes both traditional suppliers and digital marketplaces like Amazon Business. Traditional suppliers focus on long-term partnerships and special items. Digital marketplaces focus on fast delivery of standard items.
Owens & Minor’s approach is to let digital marketplaces handle low-profit, high-volume items and focus on higher-profit, specialized products themselves. This gives a good balance.
Healthcare administrators must think about price, delivery speed, product specialty, and supply chain openness when choosing suppliers. This balance gives access to needed devices at good prices without losing quality or reliability.
The US healthcare supply chain is changing fast because of digitization, AI, and market shifts. Medical device suppliers that use digital tools can forecast demand better, manage costs, and respond faster to customer needs.
Medical practice administrators, owners, and IT managers need to keep up with these changes. It helps keep operations smooth, control costs, and make sure patient care is not hurt by supply problems.
Digitization is now a necessary change in the medical supply chain. Technology helps make the supply chain more efficient and competitive.
Healthcare supply chain dynamics are complicated due to unpredictable demand forecasts. Patient behavior differs from typical consumer behavior, as healthcare consumption is often not voluntary.
Digitization through Electronic Data Interchange (EDI) allowed Owens & Minor to improve demand forecasting and reduce exposure to supply/demand mismatches, enhancing competitiveness in a consolidating market.
Owens & Minor faces competitive pressure from fully-digitized supply chain marketplaces like Amazon Business, which offer advantages such as quick shipping and lower prices for low-margin items.
Owens & Minor’s short-term response involves joining the marketplace by selling low-margin, high-volume items while considering outsourcing distribution to Amazon for such products.
In the future, Owens & Minor might continue to outsource low-margin deliveries to Amazon while focusing on higher-margin items that require specialized storage and delivery.
The ‘Amazon effect’ refers to the disruption created by Amazon’s entry into healthcare supply chains, leading suppliers to rethink their strategies and pricing models to remain competitive.
Owens & Minor should build its own EDIs to strengthen contracts with hospital networks, aiding their cost containment efforts and reducing reliance on external distributors.
Owens & Minor might consider offering appealing revenue-sharing agreements to manufacturers of low-volume, high-margin items to maintain supply through the healthcare chain.
With the ‘Amazon effect’, there is a growing trend of consumerism where patients may demand direct-to-consumer medical deliveries, influencing supply chain dynamics.
Owens & Minor’s move to activity-based pricing allows them to offer valuable insights into managing the supply chain effectively, thus reducing waste and improving efficiency.
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