Without directional change, supply chain linked to inefficient future, white paper forecasts

In his just-released white paper, “Blueprint for an Efficient healthcare Supply Chain”, consultant, writer and former healthcare materials manager Lynn James Everad, CPM, APP, maintains that patient care is at risk unless healthcare systems find new ways to reduce their costs. Improving supply chain efficiency would be a giant step in that direction, Everad noted. Medial Distribution Solutions Inc. (Norcross, GA) published the white paper.

The fundamental problem? “Each link in the chain operates solely in its own best interest with little or no concern for the overall efficiency of the chain”, Everard said.

In fact, suppliers aren’t only culprits. Providers’ inefficiencies reverberate through the entire supply chain, too, he added. “Inefficient internal processes in procurement, inventory management, and physical distribution within provider organizations all create scenarios that require suppliers to meet urgent demands rather than plan to support continuity of supply for the customer,” he said.

Unfortunately, that strategy and tactic hasn’t gotten them very far, he continued, because lower prices have failed to improve providers’ financial status. Instead, they have “shifted focus away from more valuable process redesign, and taken away funds from manufacturers that otherwise could have been spent on product development, he said.

Evard also leveled criticism at group purchasing organizations (GPOs) and the new e-commerce marketplaces. He noted that GPOs “exacerbate the situation by offering lower aprices while ignoring larger cost-savings opportunities.” He charged that their contracts with authorized distributors actually “disrupt valuable, long-standing relationships” between providers and distributors.

But suppliers must share the blame as well, he added. “Selling is often about push, that is, pushing products to customers regardless of the value they offer or the cost they can reduce,” Even said. What’s more, by failing to separate the price of products from the price of their services, distributors have failed to establish their value in the chain.

“On its journey from raw materials to utilization, a product will make only a few stops, far fewer than  in the past”, he predicted. Product prices will be a function of the product’s value to the customer, not simply a function of what the market will bear. And “the ultimate value produced by the healthcare supply chain as a whole (will be) the cost-effective positive patient outcome”.  

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