Significant risks and opportunities are driving businesses to shed the inefficiencies of the past or go the way of the dinosaur. This is especially true in Healthcare. Given the personal and professional impact of timely, cost efficient and most importantly effective treatments, today’s global healthcare industry faces enormous challenges and opportunities. Effectively trying to manage both ends of that spectrum is forcing executives out of the boardroom and into the supply chain. Here’s a look at the health care challenges of today.
Change is constant in the supply chain
Major evolutions in distribution and manufacturing in the 21st century have changed the dynamics of doing business in North America and across the globe. Growth in imports has soared in the last few years fuelled by the Asian domination of the manufacturing sector. This is especially true in North America where manufacturers have become importers and distributors with a new focus on efficiency and improved customer service.
Furthermore, with the shift in power due to margin compression, regulatory pressures and competing demand for capital in healthcare, many provider networks have taken their supply chains into their own hands while manufacturers have opted to focus on their core competencies; research and development, sales/marketing and customer services, delegating supply chain operations to outsourced experts. These movements in the landscape are at the heart of the changing economy and more so in healthcare where the management of a secure supply of healthcare products is vital for the well being of patients.
The supply chain – a network of resources
The supply chain is no longer a controlled entity within the four walls of a warehouse. Today, it is a network of resources, scattered across facilities and entities in different cities and countries. To be effectively managed, supply chain resources need to be linked. Suppliers, partners and customers; each performing a role in the supply chain, and each user and/or automated process are small “hubs” contributing to the movement of goods, funds as well as information in the supply chain.
The need for visibility
To support today’s business model in this high-velocity, complex and distributed logistics environment, real-time visibility has become a key strategic imperative. Visibility to suppliers’ production rates and shipment lead times, in-house inventory, historical data, and customer sales projections can drive benefits in efficiency, lower inventories and improve fulfillment rates. Overall, visibility is driven by companies’ need to:
Become more proactive and systematic in their supply chain operations Track and trace products throughout the supply chain, from cradle to grave Proactively alert customers of product availability and status of shipments Improve on-time delivery, reduce lead time and lead time variability Reduce and/or redirect working capital, as well as fixed and variable costs These are fundamental capabilities for the supply chain today, and given the risk and regulatory oversight, clear visibility is vital in Healthcare!
A look at the healthcare industry
With over $4.5 trillion in expenditure, the global medical industry is one of the world's largest and fastest growing industries, comprising various sectors: medical equipment and supplies, pharmaceutical, healthcare services, biotechnology, and alternative medicine sectors. Undoubtedly, the management and delivery of these vital goods throughout the healthcare supply chain are proportionally as complex and important as its size and velocity.
Overall, the process of manufacturing and distributing pharmaceutical products is similar to that of other industries. Companies purchase raw materials for bulk synthesis of active and inactive ingredients. Dosages are formulated and packaged. Products flow (from cradle to grave) through manufacturers’ warehouses, wholesale distributors/3rd Part logistics providers, retail pharmacies, medical institutions, and finally to the patient. Some products make their way back to their manufacturers due to recalls and returns.
Characteristics of the healthcare supply chains
Globalization, competition and margin compression Increased regulatory oversight The rise in IT budgets at healthcare institutions Growth in usage of medication Increased cost of drug development, production and distribution Major retailers driving packaging and labelling requirements Manufacturers’ desire to control the customer and margin away from wholesalers New outsourcing models in the “patent to patient” supply chain process To meet these while improving cost, reducing inventory and maintaining high fill rates is a significant challenge to any supply chain. It is an even greater challenge in pharmaceuticals because of the compliance and regulatory requirements.