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.”