STRATEGIC SOURCING & LOGISTICS STRATEGIC SOURCING & LOGISTICS
Having had enough of the pandemic, hospitals simply want just enough supplies
by Rick Dana Barlow Photo credit: FrankBoston |
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ack in the go-go 1980s, low-unit- of-measure (LUM) distribution concepts such as just-in-time (JIT) and stockless were emerging as quite the rage among forward-thinking, progressive materials management leaders. For many, these “new” – at least in health- care – methods were seen as perhaps the greatest process improvement since sliced bread. These days with supply chains strafed by pandemic-induced backlogs and shortages, more seem to view sliced bread as an expensive novelty and likely prefer sticky buns. During his keynote address at the Association of Healthcare Resource and Materials Management (AHRMM) conference last August in Nashville, award-winning professor and consultant Randy Bradley, Ph.D., CPHIMS, FHIMSS, Associate Professor of Supply Chain Management and Information Systems, University of Tennessee Knoxville, Haslam College of Business, Department of Supply Chain Management, highlighted three distinct Achilles heels that threaten faith in – and perhaps viability of – JIT distribution. Those three elements? They form an equation. 1. When you have a supply shock. 2. When you have a demand shock. 3. When you have a price shock from the supply and demand shock.
“We got all three – not just one,” Bradley
said. “And when demand outpaces supply we try to overcorrect.” The resulting focus on stockpiling he billed as “JIC” for “just- in-case” as one end of a seesawing trend back-and-forth. “We will see more of this,” he predicted. “When things get good, you’ll swing back.”
What the industry needs is a new phi- losophy, according to Bradley, called “JE” for “Just Enough.” This “requires you to
do demand planning, demand sensing and demand shaking,” he added.
Where do we go now? Supply Chain experts believe the healthcare industry still has miles to travel before that becomes standard operating procedure but remain mixed on JIT’s future demand. “No organization wants a repeat from
the pandemic, so returning to the same practices from two years ago would be short-sighted,” said Sandhya Dhir, Head of Healthcare Strategy and Development, Amazon Business. “Now is the time to embrace new technologies and new sup- ply chain models to build more resiliency. While some of the shortcomings of the JIT model were exposed during the pandemic, managing backorders and stockouts has always been a concern for healthcare pro- viders, to the point that industry almost turned their back on recognizing this is a problem that can have better solutions. A way to create a balance and still be able to rely on a JIT model is to ensure an organi- zation is already set up to access multiple sources of supply as soon as uctuations, especially when not predictable, occur. In addition, leveraging newer e-commerce technologies including ERP API integra- tions, approval work ows, auto-reorder tools, and real time analytics builds effi cien- cies during times of supply uncertainty.” What’s clearly recognized is that the pan-
demic shook healthcare supply chain’s faith in and reliability on JIT to the core. “Over the years, the healthcare industry became overly reliant on a just-in-time (JIT) delivery model and other approaches, like ‘stockless,’ that helped cash-strapped healthcare systems trim costs,” noted Michael DeLuca, Executive Vice President, Operations, Prodigo Solutions Inc. “The
16 January 2022 • HEALTHCARE PURCHASING NEWS •
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method had its benefi ts It kept operating costs low, while still allowing hospitals to operate effi ciently and order medical supplies when needed, and it placed a priority on driving down inventory-related expenses. This approach was applied across health systems for all medical sup- plies and mirrored best-in-class inventory and fulfi llment practices of Fortune 100 manufacturers. “In 2020, many hospitals had to re-
evaluate this model in real time as they adjusted purchasing models,” DeLuca continued. “The grim reality of the pan- demic proved that the healthcare industry no longer has any choice but to apply the painful lessons we have learned and pivot to a more thoughtful and strategic approach to supply chain management and demand planning. As our nation emerges from the COVID-19 crisis, it is critical for the industry to step back and re-evaluate past practices so that the industry is better prepared for the future.” Everyone’s going to have to work together on this, according to DeLuca. “Maintaining a more strategic level of preparedness will require a long-term com- mitment from healthcare systems, medical supply distributors, manufacturers, and the federal government. And most importantly, health systems need to work together and support one another in creative solutions – this collaborative spirit is what will unite the industry for whatever is in our future,” he added.
It’s a control thing What the COVID-19 pandemic cast in doubt really is who had – and has – control over product.
“Hospitals want and need to control sup- plies for patient care. But with just in time
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