ESG and Supply Chain Risk Management and Resiliency
Building a resilient healthcare supply chain
Bill Moir joined Henry Ford Health as the senior vice president of supply chain management in January 2021, when the industry was heavily entrenched in the COVID-19 pandemic.
Since then, the Detroit-based system has spent significant time reassessing the supply chain. Every aspect has been examined for improvements, from where supplies are procured to how clinicians are engaged. Henry Ford has also spent a lot of time on understanding how to create a resilient supply chain, with much of the focus on how the system can better manage future needs and risks to ensure patients and staff always have what they need.
“The key for us is swimming far, far upstream to get the information needed (to be able to make) informed decisions,” Moir said.
The work going on at Henry Ford to transform the supply chain is happening across the industry to varying degrees. The major shortages of personal protective equipment experienced during the initial waves of the pandemic—as well as the continued supply challenges today—have served as a wakeup call to many healthcare leaders that the supply chain needs an overhaul. The result is a renewed focus on elevating health system supply chain functions.
“(The supply chain) is front and center and top of mind for a lot of organizations that (previously thought), ‘That’s not that important,’” said Richard Roycroft, managing director at Huron, who consults providers through clinical and operational transformation.
A key strategy that has emerged to improve supply chain resiliency is geographic diversification. Providers are increasingly interested in working with manufacturers that have production in different regions of the world, including in the U.S. Furthermore, providers want to work with suppliers who have geographic diversification for their own products. A sole or dual-source strategy is still appropriate in certain instances so long as the manufacturer is diversified, said David Hargraves, senior vice president of supply chain at Premier, a healthcare improvement company and group purchasing organization (GPO).
As providers consider buying from U.S. suppliers as part of their diversification strategy, cost may present itself as a significant challenge. U.S.-based suppliers are typically more expensive than those based in Asia. However, Hargraves encourages providers to remember that diversifying is not about choosing one supplier over another. Rather, it’s about expanding selection and choosing from many suppliers to build healthier markets and enhance overall resiliency of the supply chain.
“You're not making the choice, ‘Do I want the low-cost one from China or the high-cost one from the U.S.?’ You blend it all together, and that blended cost is an acceptable cost (with) materially better resiliency,” he said.
One of Henry Ford’s diversification strategies is risk-scoring product categories to understand their vulnerabilities to shortages. To facilitate that approach, Henry Ford is working with its GPO Premier to get needed information from suppliers. The questions being asked of vendors include: Are the raw materials and geographic manufacturing of the product diversified? What are the environmental and geopolitical factors to consider in where these products are sourced?
To ensure it can receive consistent information from suppliers, Henry Ford opted to leverage partnerships with Premier and others. “We’re all trying to get the same information, so why not do it together? I think collaboration is critically important to solving this global supply chain challenge permanently,” Moir said.
Another element of supply chain resiliency is seeking more transparency from suppliers. Novant Health is asking its vendors more questions, particularly regarding how they are addressing stockouts and disruptions, said Mark Welch, senior vice president of supply chain for the North Carolina-based system.
“Resiliency is not just for one part of the supply chain to solve,” he said. “My part (as a health system) is to have even more transparency on what I am using, how much and when. I need to identify what is critical and what I can substitute out if needed. For the vendor, they need to assure me that they can meet my needs and will support spikes as events occur.”
Getting this information and assurance from suppliers can be challenging even for leading systems, Roycroft said, but distributors are another group that can serve as a resource for providers. As they are closely monitoring the global supply chain and work with suppliers, they can help providers gain an understanding of important details.
While taking steps to diversify procurement, it’s necessary to bear in mind that supply chain resilience is closely tied to workforce capacity. As is the case for the rest of the healthcare workforce, supply chain teams are exhausted.
AdventHealth, based in Altamonte Springs, Florida, is confronting this reality by training or cross-training staff for key functions, as well as by leveraging internship programs.
“When we think about a resilient workforce, it’s really (about) creating an environment that people want to work and grow in,” said Marisa Farabaugh, AdventHealth’s chief supply chain officer.
The supply chain accounts for the largest percentage of healthcare’s carbon footprint–71%–and therefore, much can be done to improve environmental sustainability. Hospitals and health systems are also becoming more inclined to allocate portions of their supply chain budget to supporting locally owned vendors as well as minority-owned and women-owned businesses. This feature explores the work of leading health systems in these areas.
David Zuckerman, president and founder of Healthcare Anchor Network (HAN), sat down for a conversation with Modern Healthcare Custom Media about how supplier diversification is integral to health systems’ mission of improving health and lives.
The 2021 Practice Greenhealth Benchmark Report spotlights how healthcare organizations are advancing their environmental purchasing strategies, as well as where there are opportunities to deepen commitments.