Planning for 2024 projected supply chain cost increases, market disruptions
With constant market changes and unanticipated disruptions occurring daily within the healthcare supply chain, it's important for providers to stay on top of the game, and Vizient's spend management teams can help.
Using data, insights and action, and in partnership with the category managers and delivery teams, Vizient's Assurance team helps support providers, suppliers and distributors strengthen price and supply assurance and ensure critical supplies and essential medications are available when needed.
"Our primary goal is to develop solutions and resources to ensure providers get the right amount of the right product at the right price at the right time," said Kevin Johns, senior director, core tenet programs.
Recently published by Vizient Price and Supply Assurance, the Budget Impact Projections Report forecasts a 2.9% estimated supply chain rate increase for January to December 2024, and sheds light on a few of those market disruptions leading to these supply chain challenges. Three of the primary factors driving this forecasted change include ongoing economic and geopolitical market changes, a 'new normal' on supply chain cost pressures and supply chain disruptions.
Market changes
The U.S. has been in a state of flux since the pandemic, and until March 2022, the Federal Reserve had kept interest rates low to spur economic growth. But, as inflation soared post-pandemic, The Fed began steadily escalating interest rates to slow the economy to rein in inflation. That impact, coupled with an actively realigning global supply chain, are integral factors playing a role in overall supply chain costs.
A new normal
The cost of raw materials, freight and labor are not expected to return to pre-pandemic levels and will continue placing pressure on supplier's manufacturing costs.
Consider the price of cotton, as an example. Historically, the average cost of cotton was 70-80 cents per pound. By May 2022, following the pandemic, the average cost of cotton had risen to $1.64 per pound. But cotton's average cost has leveled off since October 2022, averaging around 90 cents per pound for most of 2023. Despite solid cotton supply levels and weak demand, pricing remains above pre-pandemic levels.
"We're at a point where costs won't necessarily return to what they were before the pandemic, but we are seeing costs decrease from what they were in 2021 and 2022, and we can expect to see that logic continue to play out in 2024," said Jeff King, research and intelligence director.
The Budget Impact Projections Report forecasts a 2.9% estimated supply chain rate for January to December 2024.
Three of the primary factors driving this forecasted change include ongoing economic and geopolitical market changes. 'new normal' on supply chaln cost pressures and supply chain disruptions.
The cost of raw materials, freight and labor are not expected to return to pre- pandemic levels and will continue placing pressure on supplier's manufacturing costs.
Text or email this article to key stakeholders and share on social media.
Explore the Budget Impact Projections Report, to gain a deeper understanding of the factors driving the 2024 supply chain market.
Supply chain disruptions
In 2023 alone, the healthcare supply chain has seen numerous unpredictable and unanticipated disasters and disruptions — tornado damaging a Pfizer warehouse; possibility of UPS, port and railroad strikes; and Yellow Freight shut down, to name a few — and accounting for those can be challenging. However, Vizient Supply Assurance has been working to help providers make their supply chain more resilient and gain a deeper understanding of how the value chain is affected by the supply ecosystem. One way they've done this is through the assurance score, a net-new supply assurance performance insight that provides greater visibility into the market and helps providers and suppliers better plan and strategize around their sourcing decisions.
"The supply assurance score helps providers gain insight into and identify their developing or current supply risks, allowing them to adjust accordingly, better prepare for a supply disruption and lessen its overall impact on care delivery," Johns said. "Beyond our proactive support and advancements in preparedness, we also help providers mitigate the challenge during and after an unanticipated disaster occurs through our market disruption briefs and other response measures."
"It's important for Vizient providers to know they're not alone in this," Johns said. "Vizient is continuing to deploy resources and efforts to help equip and empower providers to make the best cost-effective decisions in their supply chain."