Can you imagine a situation where a Doctor is performing a critical surgery at the operation theater and technician comes and says that we have run out of materials or a particular size of implants are not available to operate !! Can you think of a situation where a critical drug is not available in the hospital which is important to save the life of the patient? Does this look insane? Can you believe this? Don’t be surprised if this happens. While this may not be a mere case of improper planning alone, but could also be a case of non-availability of the product in the market. This may not only happen in a COVID-19 kind of a situation but can happen otherwise as well. People keep asking me on how important is Supply Chain Management in Healthcare Industry and its imperative to understand that this vertical plays an integral part in the operation theater (OT), Surgical procedures, ICU (Intensive Care Units), Pharmacy, Labs, Wards, etc., the supply chain in healthcare involves procurement of medicines, consumables, lab reagents, and equipment. Due to the inherent business model of healthcare to be run in a real-time environment with no or a minimal waiting time and especially with 3000+ SKUs to be managed on a daily basis, the entire supply chain management needs to be managed by competent professionals coupled with the use of technology to run efficiently. Important aspects of supply chain management in healthcare are:
- Process compliance (Order to Delivery)
- Lead time for delivery
- Availability of materials
- Quality of the product
- Right price
- Inventory holding period and storage space
- Expiry management
- Re-usage tracking
- Preventing leakage just to elaborate the key aspect starts with proper planning, segmenting into A, B, C items and setting reorder levels, key triggers for availability of products, analyzing past trends and average consumption levels, seasonal movements, time taken for delivery, transportation arrangements, manufacturer and vendor credentials, import requirements and statutory compliance.
Quality of the product is extremely important as for instance each and every item in pharmacy is governed by a drug formulary (Pharmacy & Therapeutic Committee). Any new item needs to be signed off by the PTC before it is made available in the pharmacy. At the same time, we need to make sure that it is bought at the right price as well to get the right margins. Inventory holding also becomes the key as a higher holding period blocks the working capital and may in-turn result in non-moving stocks turning expiry. There are items which are re-usable which varies by specialty as well and hence, needs proper tracking to avoid leakage. It is also important to build an SCM landscape and track the various key metrics and compare the same against the market benchmark to identify avenues of improvement. Metrics could be in terms of product mix, Branded Vs Generics, geo-dependency mix, gross margins, vendor dependency, per sq feet cost, bonus structures, etc.
How do we handle supply chain amid COVID-19 environment? Amid a lot of uncertainties, the following may be suggested and implemented to build a future proof organization. These are extraordinary times and every crisis brings a lot of opportunities and this is the time to introspect and go back to the drawing board and organize ourselves better –
1) Go back to Basics (Get your planning and process right).
2) Build a robust drug formulary so that we have inbuilt models for alternate availability of materials at the right time (Brands, Generics, Research Molecules, Branded Generics).
3) Specialty Mix/Item Mix/Vendor Mix/Geography Mix (Get these 4 right).
4) Re-look at your inventory holding period (21-45 days suggested depending on lead time).
5) Invest in technology and build a robust model.
6) Have transparent conversations with manufacturers/vendors to extend the credit period.
To sum up the above, the overall success of supply chain management in health care lies in an extremely high level of diligence, high-level monitoring on a real-time basis and be adaptive to the changing needs.