Healthcare Year in Review: Supply chain reshaped
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2020: The Year in Review
December 12, 2020 01:00 AM

Year in Review: Healthcare supply chain reshaped

Alex Kacik
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    Operations

    The healthcare supply chain cannot solely rely on the lowest-cost goods from foreign manufacturers, providers said, some of whom plan to incorporate a more diverse, resilient mix of suppliers come 2021.

    Shortages are not new. There have often been supply disruptions for pharmaceuticals and personal protective equipment, but the COVID-19 pandemic drove an acute shortage that is expected to permanently reshape the supply chain.

    Many providers are devising or building on existing supply chains closer to their operations, opting to pay a premium for a more reliable source rather than be subject to the inconsistency of international suppliers. They are also rethinking “just-in-time” inventory strategies that limited overhead but increased risk exposure.

    “Supply chain leaders are saying that we may save pennies on the dollar overseas, but it isn’t worth it. We can’t afford to do that,” said Jamie Kowalski, a healthcare supply chain consultant who has tracked the increasing popularity of centralized, standardized “self-distribution” supply chains via his annual survey. “We are held hostage and just have to get in line and wait.”

    Bon Secours Mercy Health, for instance, helped transform an Ohio cheerleader uniform factory idled by COVID-19 into an isolation gown manufacturer. It is asking regional systems to buy in to support a sustainable, domestic PPE source.

    “I had not spoken with an executive prior to this who was thinking about second- or third-tier suppliers. This just turned everything on its head,” said Scott Eber, a director at consultancy Guidehouse. “They are thinking about how to mitigate risk much more than they did previously.”

    It remains to be seen if providers will revert to traditional supply chain strategies and the lowest-cost options. But at minimum, organizations will have contingency plans that feature geographically diverse suppliers going forward, experts said.

    “The days of cheap PPE and commodities are over,” said Daniel DeLay, senior vice president of supply and services resource management at CommonSpirit Health. “We can always work on cost and savings, but there has been a restructuring. The whole idea of prioritization of value for healthcare systems and suppliers is important because we are spending a lot of money on things that don’t necessarily involve care at the bedside.”

    PREMIER
    From cheerleading sweaters to isolation gowns: Onshoring in Ohio

    Bon Secours Mercy Health helped transform an Ohio cheerleader uniform factory into an isolation gown manufacturer.

    The push to onshore more personal protective equipment production is a national movement. Many providers have been burned by nontraditional suppliers as they grapple with supply constraints stemming from Chinese and other international manufacturers.

    After securing a fabric supplier in South Carolina to round out its own supply chain, Bon Secours Mercy is now talking with other regional health systems to gauge their interest in a sustainable domestic source of PPE.

    3 Big Events

    Jan. 16: A recall by Cardinal Health of more than 9 million surgical gowns spurred shortages throughout the country, which would be the first of many throughout 2020.

    March 4: Indian officials preemptively restricted the exports of a range of pharmaceuticals and their ingredients, some of which are part of widely used antibiotics, to protect its domestic supply as COVID-19 throttled production.

    May 14/19: The Trump administration tasked a drug manufacturer with increasing U.S. production of essential COVID-19 drugs’ active ingredients. Officials also increased the National Stockpile reserve of drugs and supplies.

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