Building Resiliency in Healthcare

In the healthcare industry, the reliability of supply chains is not just a matter of business efficiency; it can be a matter of life and death—as we saw during the COVID-19 pandemic. The products managed within these supply chains—ranging from surgical instruments to PPE to life-saving medications—are essential to patient care, and any supply chain disruption can have dire consequences. Unlike other industries, where delays might result in financial loss, in healthcare, a delayed or unavailable product can directly impact patient outcomes.

When SCO Magazine spoke to Marisa Farabaugh, senior vice president and chief supply chain officer at AdventHealth, back in the spring of 2021 at the height of the pandemic, she noted that it’s one thing if you work for a candy manufacturer: you know your production schedules, your raw materials, waste, etc. You can rely on just-in-time (JIT) inventory, mainly because you can cleanly predict seasonally and when you need something on hand. But with healthcare, you can’t ever be without a critical supply.

The complexity of managing these supply chains is further compounded by strict regulatory requirements, the need for impeccable quality control, and the unpredictability of demand. As a result, healthcare systems must operate with an exceptional level of foresight, ensuring that critical supplies are always available when needed.

Diversification is the heart of resiliency

Given these high stakes, supply chain resiliency has emerged as a key focus for healthcare distributors and the systems they serve. At the heart of this resiliency is the strategy of supply chain diversification. For the distributor, supply chain diversification means having a robust and adaptable network that can quickly respond to changes in demand or supply conditions. This is crucial for a supply partner, as hospitals rely on consistent and timely delivery of a vast range of products. By diversifying their supply chain, a distributor not only ensures a steady flow of essential goods but also demonstrates their commitment to maintaining high service levels under all circumstances.

This approach not only mitigates risks associated with supply chain disruptions but also enhances the overall stability and reliability of the supply chain. For healthcare distributors, diversification is not merely a strategic advantage; it is a necessity to ensure that hospitals and clinics can continue to provide uninterrupted care, even in the face of global disruptions. By prioritizing supply chain diversification, distributors can better serve their customers, ultimately safeguarding patient care and maintaining the trust that healthcare providers place in them.

“I think diversification is looking end-to-end across the supply chain for potential points of failure. And then trying to build in redundancy and risk mitigation—whether that’s manufacturing, logistics, warehousing, etc.—so we’re either eliminating or minimizing those potential failure points wherever we see them.”

Josh Wolfe

Senior vice president of inventory management, Medline

What healthcare systems need from their supply chain partners

The goal in healthcare supply chain is being able to supply the product providers need to take care of the patients that they serve. Prior to the pandemic, systems sometimes took it for granted that supplies would always be there—they were accustomed to high fill rates, so supply chain wasn’t top of mind. The “trust but verify” mentality has been tested, as a lot of the trust systems had in their suppliers was lost during the pandemic. The focus now is more around verify, validate and provide the visibility, to avoid any large-scale supply chain disruptions. Data has become key—along with communication—so that systems have both downstream and upstream visibility into inventory and the confidence that they are being taken care of. In addition to the supply risk, they have lived through the labor impact on their clinical and supply chain staff and how this affected their patients. It’s no longer enough for suppliers and distributors to say they’ve got things under control—they want the data on the inventory, as well as insight into the sourcing strategies.

In addition, many systems approached their suppliers asking about more domestic manufacturing in the very beginning of the pandemic. There was the thought that if you moved everything to domestic manufacturing, then everything could be better or even fixed. As time went on, there was greater realization about some of the issues faced with d as raw material shortages, packaging shortages, labor challenges, etc.—leading to a broader conversation of resiliency and redundancy. It wasn’t always a matter of where you manufacture a product, but more about making sure that a partner was planning for resiliency at each point along the supply chain. The discussions expanded beyond domestic manufacturing versus international manufacturing, with a clearer understanding on supply chains and how they can be strained.

“We’ve always been good at understanding resiliency and making sure that we have redundancy and multiple sources. We’ve always thought this way. I think the thing that we have gotten even better at post pandemic is really understanding the full end-to-end of our supply chain impact, especially around raw materials.”

Amanda Laabs

Executive vice president, Medline Brand

For Medline, despite the challenges, the reality is that 50% of their brand product is manufactured in North America. And a year after the pandemic began, Medline showed up as number one in terms of manufacturing sites domestically. But customers are also increasingly understanding that the answer to more resiliency is global diversification.

And beyond manufacturing sites, the attention to creating four deconsolidation cross dock operations across both coasts—allowing for more points of U.S. entry—as well as inland cross dock operations helps to lower costs and avoid risk. Medline’s extensive expertise, resources, and relationships in the global transportation and ocean freight market allows for quick resolution to potential disruptions in product transit to the U.S.

Leveraging data and insights for strategic resiliency

Over the last few years, suppliers and distributors have had to make tremendous progress in terms of the KPIs that are monitored and shared across the organization. When considering upstream supply chain performance, systems want to know if vendors are shipping on time and booking containers on time. This information was not always expected or shared prior to the pandemic. But now, it has become critical to share that information through logistics teams— strengthening that communication all around. Reports, dashboards and analytics insights are now available to the customers for more complete visibility upstream.

In addition, backorder communication to mitigate supply shortage risk, along with workflow management tools, are the types of improvements and investments that are necessary for resiliency—this is all critical to the larger idea of supply chain diversification. And this also requires systems to become more sophisticated in their approach towards more clinically integrated supply chains. They must remain open to clinically equivalent products and automated options such as auto-substitution to clear the way for more supply continuity.

But when you have, like Medline does, the broadest med-surg portfolio in healthcare, there is a much deeper pool of inventory to support customers. And the corresponding scale of distribution business brings unparalleled data to analyze manufacturer performance, identify trends, and help provide solutions proactively.

“I think what differentiates us is the combination of manufacturing expertise, diversified sourcing footprint, and global logistics infrastructure. That global scale and end to end resiliency, paired with our vertical integration across the supply chain, puts us in a unique position to deliver the best outcomes for our customers.”

Josh Wolfe

Senior vice president of inventory management, Medline

Supply chain diversification has emerged as a critical strategy for ensuring the resiliency and reliability of healthcare supply chains. The ability to source products and raw materials from multiple suppliers across manufacturers and regions is essential for mitigating risks and maintaining consistent fill rates—something Medline has always been proud of with industry-leading service levels—especially in the face of supply chain disruptions. Distributors who prioritize and successfully implement these strategies are not only safeguarding their operations but are also playing a pivotal role in supporting the healthcare industry. They are setting new standards for reliability and responsiveness, ultimately benefiting healthcare providers and the patients they serve.

Key takeaway

Looking ahead, the landscape of supply chain management in healthcare is poised for continued evolution, driven by advancements in technology, data analytics, and global trade dynamics. Healthcare distributors must remain at the forefront of these developments, continually innovating and adapting their strategies to anticipate and respond to emerging challenges. As the industry faces new pressures, the importance of supply chain resiliency will only grow, reinforcing its role as a cornerstone of effective healthcare delivery. By staying committed to diversification and innovation, healthcare distributors will continue to protect patient care and empower healthcare providers, ensuring that the system remains robust and reliable in the years to come.