Long-term Supply Assurance Solutions Require Transparency, Collaboration

As the largest GPO in the healthcare industry, it seems only fitting that we reflect on the last couple of years on behalf of all our members. It’s no secret that the pandemic was the perfect storm that caused incredible stress across our industry. From 2019 to 2020, we saw sharp increases in demand that included 300% for N95 respirators, almost 175% in procedure masks, almost 60% for isolation gowns and 175% in nasal swabs. Not surprising for anyone who was tasked with keeping these items flowing within their facilities.

We saw competing uses for raw materials, production capacity limits, labor challenges and global competition for products.

Why was this so impactful? Pre-COVID, many healthcare providers were challenged with finding cost savings where they could. Many standardized to one supplier, used a low unit of measure approach to inventory and few had more than 30 days of inventory on hand.

This probably wasn’t a big “aha” moment for many, but some would suggest that providers simply return to warehousing more inventory, using multiple suppliers for redundancy and purchasing domestically where they can.

Asking healthcare providers to expand their inventory on hand is expensive and difficult to manage.  Finding the warehouse space, rotating stock appropriately and frankly knowing what to inventory is a challenge. In addition, we all know that many of the critical items in high demand have traditionally been manufactured overseas. While it is beneficial for several reasons to move it to North America, that generally takes 18 to 24 months to stand up and, in many cases, the actual raw materials and machinery still comes from overseas. Not to mention the obvious increase in cost without significant automation.

So, what can we do that would have a long-term impact?

• First, the lack of transparency in the healthcare market must be addressed. This industry must have a line of sight around the source and location of raw materials, including active pharmaceutical ingredients, finished goods, inventory levels and locations.
• Secondly, we encourage the FDA and the Strategic National Stockpile to work with healthcare stakeholders. It’s important to know what products are acceptable and widely used, identify what is in fact critical, how to rotate inventory, accessibility, and how to avoid inadvertently negatively impacting healthcare providers by pulling millions of items out of distribution. This includes how to share information more effectively on permanent discontinuances and interruptions in manufacturing that may lead to a material disruption in supply.
• Lastly and understandably, healthcare has become a highly customizable industry. Many providers would like to see a more universal approach to commonly used items, insuring they aren’t tied to a specific manufacturer’s equipment. For example, pump syringes. This would alleviate the stress when a supplier experiences disruption. At a time when healthcare providers are experiencing over 1,000 backorders a month, this could be crucial in a solid redundancy plan.

While our providers are short staffed, tired and struggling with the impact of all the financial, product and logistical challenges, they continue to look ahead at how they can isolate themselves from this in the future. Vizient believes that supply assurance begins with solving for issues more upstream in the supply chain to ensure transparency, data and redundancy make that last mile delivery smooth and reliable. As such, we continue to invest in short-term and long-term solutions for our members. However, we can’t do it alone. This must be a group effort that makes certain the last two years mark a pivotal point in the healthcare industry.

Learn more about Vizient's efforts in building supply chain assurance.