Transforming Healthcare Supply Chain Management with Emerging Technologies

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Supply Chain Management (SCM) refers to arranging goods produced by various organizations, from raw ingredients to the final products. Manufacturing and transportation are the most visible areas of a healthcare supply chain.

Integration of new disruptive technologies like AI, Blockchain, data analytics and IoT into the supply chain management systems offered dramatic growth for SCM globally in the healthcare sector. According to marketsandmarkets, the global healthcare SCM market is anticipated to reach $3.3 billion by 2025 from $2.2 billion in 2020. The critical factors for driving this growth include the emergence of cloud-based solutions, reduced operational costs, improvement in efficiency, and overall profitability. SCM’s growing popularity in every sector, especially in the healthcare industry, proves highly beneficial for human lives.

The article covers the following points that state what healthcare supply chain management is and how technologies are transforming it:

  1. What is healthcare supply chain management?
  2. Who are the stakeholders in the healthcare supply chain?
  3. What are the challenges in healthcare SCM?
  4. A five-step plan to strengthen the healthcare supply chain
  5. How can emerging technologies transform healthcare SCM?

What is the healthcare supply chain management?

The Healthcare supply chain can be defined as the procurement and distribution of products and services to serve patients. Management of relationships with suppliers and customers to offer superior customer satisfaction cost-effectively is the purpose of a supply chain. Supply chain management is a fragmented process; it includes obtaining resources, managing supplies, and delivering goods and services to patients and healthcare providers.

A supply chain usually begins with a manufacturer that produces the medical products and sends them to a distribution center. Healthcare organizations or hospitals can directly buy the products from the distributor or manufacturer. Further, the products are transferred to the organization and stocked into an inventory.

The healthcare industry involves various types of supply chains. The two most significant supply chains are:

  1. Pharmacy Supply Chain
    Supply chain management has a vital role for hospitals to ensure timely availability of medicines at the lowest possible price. Supply chains involve varied supplier vendor agreements, rounds of negotiation, floating tenders and freezing on product delivery process. The stakeholders cannot predict market demands for any medicine independently; therefore, capturing the exact need to consume drugs to get its current market trend is necessary. It is a general phenomenon where demands are higher than supply or reverse, as low demand and high availability. To eliminate such a situation, market research and study of the drug flow supply chain are essential.
  2. Medical Devices Supply Chain
    Medical devices and equipment are a crucial part of the healthcare industry. Devices like X-ray, MRI and mammogram machines are generally susceptible and require specialist handling. It is essential to work with the manufacturers and logistics providers who have an in-depth understanding and experience handling and delivering such sensitive products in the proper condition to their destination.

Who are the Stakeholders in the Healthcare Supply Chain Management?

Based on supply chain functionalities, stakeholders are categorized into four groups:

  1. Manufacturers
  2. Purchasers
  3. Distributors
  4. Providers

These are the four main stakeholders participating in almost every supply chain. The manufacturer’s role in the healthcare supply chain is to produce the required medical products and forward them to distributors. Anyone who buys the medical supplies (generally wholesalers or retailers) from the manufacturer and holds the responsibility to disseminate them to the people can play the purchaser /distributor’s role. Hospitals, pharmacies or clinics are the healthcare providers who intend to provide the best possible healthcare services to their patients.

Moreover, for handling operations like distribution, transportation, inventory management, warehouse management, etc., logistics are involved in the supply chain. Logistics are responsible for two main functions: first, managing resources, i.e., capacity management (ambulance, wheelchair, etc.), warehouse management (drugs, medical devices and equipment, etc.); and second, workflow management, i.e., shipping, routing, etc.

What are the challenges in the healthcare Supply Chain Management?

  • Inaccurate inventory data
    Poor visibility into the hospital’s inventory is the biggest problem for managing supplies. Hospitals relying on legacy software for managing their inventory, procurement, logistics and other operations usually face the problem of doing their job efficiently. For instance, a case was reported during the peak days of Covid-19 that a reputed medical institution suffered severe performance issues due to falling short on disk storage space. The system falling short on storage space could no longer store the inventory data.
    Many hospitals didn’t know how many ventilators and other resources they had and how many they would need. The next challenge was sharing the information with the distributor or state authority. Managing and sharing updated inventory data had to be performed regularly to optimize the medical resources’ relocation across various medical institutions. Consequently, the influx of inaccurate data led to derailing the planning effort for many states.
    Solution: The use of modern technologies like the Cloud-based paradigm for managing assets, Blockchain’s security, tracking and traceability capabilities can bring a massive difference in the performance of a medical organization.
  • Weak supply chain
    A close observance into a medical supply chain reveals that hospitals are overly dependent on third-party logistics. It leads to an atrophied procurement process and diminishes the actual capability to adapt to a crisis quickly. Lack of visibility and accountability are the main reasons for a weak supply chain.
    Solution: The best practice to overcome an inefficient supply chain is to follow the supply chain and make sure to eliminate unnecessary manual operations and streamline data flow all along. Using technologies like AI and Blockchain could bring transparency and visibility into the system. Medical service providers should focus on integrating the inventory and procurement solutions.
  • Delayed supplies
    Supplies are generally delayed when either the products are damaged or get stuck somewhere in the supply chain. Consider the supply chain of medical devices (like MRI machines, etc.); the most significant issue these devices’ shipment faces is in-transit damage due to mishandling. Rough handling is not the only reason; exposure to high temperature and humidity are just other factors.
    For example, exposure to excessive-high temperatures could cause electronic devices to reduce battery life. High moisture or condensation can lead to short circuits and there may be many other cases of damages. These damaged products are returned to the manufacturer and hospitals may have to wait for the next round of delivery.
    Solution: Technologies like data analytics, IoT and Blockchain can resolve complex real-world problems when integrated into a system. These modern technologies provide accurate data modeling. Such projections allow making more informed decisions. IoT-enabled modern fleet management and cargo tracking capabilities enable distributors to offer real-time data on supplies relocation to various medical institutions and authorities. The in-sync data between distributors, hospitals and other stakeholders allow for accurate planning on a very granular level and prioritize delivery of critical supplies, thus acting faster and saving more lives.
  • Shady ordering and bidding processes
    During the pandemic, multiple incidents related to insufficient medical supplies occurred and undercover bidding and shady ordering came into existence. Since the supply chains cannot trace back the provenance, lack of transparency and visibility led to the emergence of foul plays in the supply chain.
    Solution: To preclude such foul plays, clients can rely on Blockchain-enabled end-to-end delivery tracking systems. The entire supply chain’s visibility should be an essential requirement for every stakeholder to ensure a robust and efficient workflow.
  • Lack of innovation
    The old supply chains rely heavily on out-dated systems, which lacks innovation and becomes the root cause of all the supply chain mishappenings. These systems lack storage spaces, do not provide transparency, depend on out-dated working models and technologies.
    Solution: No one can be prepared enough for every unknown crisis, but an agile and resilient system can help to bounce back after getting a blow quickly. Practicing high maintenance strategies, strong connections with other parties in the business ecosystem and most importantly, leveraging modern innovative technologies can help in challenging situations. Technologies help to reach a global level and allow building prosperity, necessary skills and expertise. Innovation is the ultimate tool for survival in crisis and peace.

A five-step plan to strengthen the healthcare supply chain

One of the researches has identified five specific capabilities that could dramatically improve the healthcare supply chain’s performance. Its bottom lines:

  • better segmentation of products, customers and markets
  • enhanced agility to minimize costs and greater flexibility
  • alignment with global standards
  • measurement and benchmarking
  • collaboration across the healthcare value chain

It has become a general phenomenon today that a typical laptop manufacturer in Asia can accept an order on Monday and deliver a pallet of freshly assembled customized systems to the customer sitting in Europe within a week. In comparison, a typical pharmaceutical manufacturer would take around 75 days to perform his duty. This gap is the point of concern and must be closed soon. Of the five comprehensive transformations identified, three can be accomplished internally, while the two others- alignment and collaboration, need to be worked together with customers, suppliers and even competitors.

Internal Factors:

    1. Segmentation
      Several pharmaceutical and medical device companies run one size fits all supply chains. However, there can be significant differences in demands, the importance of drug or device to the patients, profitability, the value per unit of weight, customer’s cost to serve and service expectations. A single set of a supply chain is never efficient for every product with varied characteristics. It may create many inefficiencies like high inventories for some products while others are in short supply, a need to reschedule production campaigns to meet urgent delivery requirements or use of expensive air cargo when slower surface modes would do. The intelligent way to tackle these problems is the segmentation of supply chains according to the characteristics of products and the consumers’ demands.
    2. Agility
      Agility here doesn’t only mean being fast; it means building an operating model that responds better to demand shifts and customer needs simultaneously and at reduced costs. Companies must focus on aligning the production cycle with the demands and increasing the manufacturing processes’ low frequency. An agile supply chain model requires stability in production, replenishment and visibility. The improvements in supply chains are made by making the cross-functional process more disciplined, incorporating a better understanding of demand and supply scenarios, effective communication and transparency on potential supply issues and bottlenecks.
    3. Measurement
      Healthcare companies need to improve the structural driver: manufacturing frequency, responsiveness, reliability of supply, and stability are the factors that are mostly not systematically managed or measured across the network. It is crucial to follow the metrics such as the manufacturing frequency index to measure SKUs’ share (Stock Keeping Units) produced with high frequency. Companies must also standardize metrics across plants and countries. Commercially available benchmarking tools and approaches could provide rough guidance for high-level opportunities in inventories, costs and services.

External Factors:

  1. Alignment
    Fast-moving consumer goods manufacturers use point of sale information gathered from retail customers to build production plans. For example, the grocery industry has generated billions of dollars in value by adopting standard barcodes. The healthcare sector should follow a single set of standards that support efficient data interchange to build a cost-effective supply chain. This approach would increase patients’ data safety by eliminating counterfeit operations risks, reducing medication errors and improving recall processes.
  2. Collaboration
    Supply chain partners must find ways to collaborate more effectively for increased benefits. The following six essential steps can prove to be useful in a productive collaboration:
    • companies should step forward to collaborate in areas where they have solid footing
    • select sophisticated benefit-sharing models
    • choose partners for the potential value of collaboration
    • jointly manage performance and measure impact
    • dedicate resources to collaboration and include senior leadership in it
    • start with a long-term perspective

How can emerging technologies transform healthcare SCM?

  • IoT and RFID tracking
    A simple task of locating an asset could cost hours of productivity of the staff. Adoption of IoT-enabled devices with RFID tracking systems could prove to be cost and time-effective. A real-time location system (RLTS) allows locating, tracking and monitoring the assets. Automated inventory tracking not only streamlines the healthcare supply chain but also provides complete visibility of the system.
  • Drone technology
    Drone technology can provide a competitive edge in delivering medicines, vaccines, medical kits and other equipment fastly and effectively. Drones can act as versatile courier devices to assist complicated deliveries. It can also be used to supply blood/ blood samples to the intended receiver at the provided location whenever needed. Moreover, small indoor drones can be installed in hospital premises to deliver medicines to patients at the bedside.
  • AI and predictive analysis
    AI has completely transformed the way to manage, analyze and leverage data in every industry. AI has made organizations shift from basic descriptive analytics to predictive analytics. Predictive analytics help to monitor patterns and determine the likelihood of future events. With predictive analysis, healthcare organizations can leverage statistical data to manage the supply chain by variation reduction and gain more insights into demand patterns and supply utilization. Data-driven accurate forecasting helps in making more informed decisions and optimizes inventory.
  • Robotic Process Automation (RPA)
    Adopting an RPA system eliminates the labor-intensive, manual and repetitive tasks in a healthcare supply chain. It typically reduces the cost and time invested in a supply chain and eliminates the possibility of human errors prevailing in the system. Automated routine tasks enhance efficiency and reduce overhead. Warehouse modernization with RPA deployed machines maximizes profitability and increases efficiency.
  • Blockchain
    Blockchain-based novel approaches are the most efficient to track the complete lifecycle of drugs down to a single dose. Various companies are already developing numerous Blockchain-based innovative solutions to provide a means to securely and reliably track products throughout their entire lifecycle. Blockchain plays a vital role in supply chain transformation by reducing fraud and providing better-managed quality in the manufacturing and distribution of pharmaceuticals. Health companies like Pfizer and Roche are already working actively on such solutions. Production and distribution of counterfeit medicines is the most prevalent problem as the global black market keeps manufacturing and providing such drugs without getting under the radar. Consumption of fake medicines risks human lives and can be life-threatening. A Blockchain-based supply chain works in different phases:
    1. Any drug or pharmaceutical product’s manufacturing process starts with an order of raw ingredients placed by the manufacturer to the supplier. There’s a digital agreement between the manufacturer and supplier stating the points like cost of components, timescale to supply the items, penalty and bonus clauses, invoice settlement, etc. This digital agreement is known as Smart Contract. Blockchain stores all the information added by the manufacturer and supplier in the ledger. For every piece of information added to the ledger, a hash value is generated associated with the data. The hash is unique and can never be altered; hence Blockchain ensures integrity and security of data.
    2. Supplier responds by providing required items to the manufacturer. The packages are attached with RFID codes that allow real-time traceability of the items to all the stakeholders. All the information records are updated in real-time as the drugs are transferred from one entity to another in the supply chain.
    3. Once the drugs’ manufacturing is complete, the drugs are packed with a QR code and forwarded to other processes’ logistics. The agreement between manufacturer and logistics service provider is recorded in the Smart Contract.
    4. The IoT-enabled logistics delivers the order to the distributor. The IoT sensors embedded in the drugs and vaccines storage pallets share real-time storage data like temperature, humidity and light to verify the products. The distributor updates the information about the quality of the checked products on the ledger.
    5. The distributor finally forwards the shipment to the concerned HCOs and other health institutions.

Transformation of the healthcare supply chain can do more than just improving the bottom line. Pharmaceutical and medical device companies can move towards delivering safer and affordable access to products that could enhance and even help save many people’s lives worldwide.

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Author’s Bio

Akash Takyar
Akash Takyar
CEO LeewayHertz
Akash Takyar is the founder and CEO at LeewayHertz. With the experience of building over 100+ platforms for startups and enterprise allows Akash to rapidly architect and design solutions that are scalable and beautiful.
Akash's ability to build enterprise-grade technology solutions has attracted over 30 Fortune 500 companies, including Siemens, 3M, P&G and Hershey’s. Akash is an early adopter of new technology, a passionate technology enthusiast, and an investor in AI and IoT startups.
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