Speaking of Supply Chain

Reconsidering the Cost of Focusing on Price Alone
John Strong
By John Strong, Co-Founder, Access Strategy Partners
2020-Aug-11

Introduction

It is no secret that another pandemic was predicted years ago. So why did the U. S. healthcare supply chain find itself in so much hurt when COVID-19 came ashore earlier this year? Despite some health system CEO’s throwing their supply chain programs under the bus, I’ve said from the beginning that there isn’t a single sourcing executive in the country who should be blamed—this time—for what happened, especially with the supply of Personal Protective Equipment. A second instance will be largely unforgivable, though.

This blog is not intended to examine all the instances that led up to the shortages of PPE in America but cover a few of the prominent ones.

The risks of foreign sourcing

There was nothing wrong with sourcing from foreign manufacturers—until there was. Even in the best of times, foreign sourcing of medical products—even simple ones - can be very challenging. Distance, language barriers and differences in products all play a role. Supply chains are long, complicating delivery. Government regulations are different, and government meddling to ensure enough domestic supply during an event like a global pandemic can make even the best supply chains crack.

The overlooked value of domestic sourcing

Our laser-focus on price alone led us to source product from some supply chains that have proven to be too lengthy, and too easily disrupted during a global crisis. As supply chain leaders look back, the solution needs to be partially here at home, and there needs to be a willingness to work collaboratively, as other industries do to ensure product availability on America’s own shore that will be high quality, available without foreign government interference and supply chain disruption and not break the bank.

Have we gone too far taking cost out of the U. S. healthcare supply chain?

Guilty. I spent my whole career trying to reduce cost from the healthcare supply chain, both at a national and a local level. I eagerly embraced PAR stocking, Just-in-Time inventory and a whole host of techniques to reduce overhead.

Product standardization? Yep, for sure. Reduction of suppliers to reduce processing costs. Sure. All these steps that have worked so well in industry in the U. S. came back to the healthcare supply chain, and in some cases backfired on us, as we tried to provision providers quickly and efficiently.

Conclusion

Today most supply chain executives are still rightly focused in three key areas: Ensuring a continuing supply of PPE, ensuring a supply of products that will be needed for vaccine administration, and availability of products required as elective procedures scale back up in some parts of the country.

Overall, though, it will soon be time to take a hard look at the sum of the whole supply chain and ask ourselves what we can do to ensure quality, availability and prices that we can live with.

As always, we welcome your comments and suggestions.

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