The goal of supply chain management is pretty straightforward: to get people and organizations the products they need, at the right time, in the right quantities—and at the best possible cost.
The process, however, is much more complicated, especially when it comes to the high-stakes realm of healthcare.
In the healthcare space, effective supply chain management can literally be the difference between life and death. Supply chain disruptions mean that healthcare providers won't have the medical equipment or medicine they need to heal, help and save their patients.
Here's a closer look at how supply chain management works in the healthcare industry, a breakdown of the overall importance of supply chain management in healthcare and an explanation of why it should be a top priority.
Why is healthcare supply chain management so complex?
You may think of the healthcare supply chain as fairly simple. A healthcare provider delivers supplies, medication and care to a patient. As a patient, that's the only part of the chain you participate in.
But in reality, the healthcare supply chain is much longer than that—and has a number of integral links.
What exactly is a healthcare supply chain?
A health care supply chain refers to the network of systems, companies and individuals involved in the healthcare industry and health services, according to the Emergency Care Research Institute (ECRI).1 And it goes beyond just hospitals and healthcare facilities.
From the sourcing of raw materials for medical equipment and prescription drugs, to distributing these medical supplies to healthcare providers, to managing healthcare organizations' inventories, to ultimately delivering medications to patients, there are a ton of steps and parties involved—and many of them extend around the globe.
Because of all of these interconnected processes, the healthcare industry can't function unless the chain is intact. Let's take a look at some of the most important links.
What are the different links along the healthcare supply chain?
All supply chain operations involve the production, procurement, distribution and consumption of goods and services, and the healthcare industry is no exception. These are some of the key goods and services moved along the healthcare supply chain.2
Medical supplies
Medical supplies are needed for nearly every aspect of healthcare delivery.
Think of…
- Medical devices
- Diagnostic tools
- Surgical equipment
- Bandages
- Personal protection equipment (PPE) like gloves, gowns and masks
- Sanitizing materials
- …and so much more
Even in less technological or advanced medical settings, the basics are still essential. When these supplies aren't moved along the chain to get where they need to, the quality and safety of care is affected.2
Pharmaceuticals
Many of us have experienced prescription drug shortages. Often, these stem from a supply chain management issue. But aside from not being able to pick up the products you need at the pharmacy, what happens when an emergency room runs out of penicillin, or lidocaine?
Getting the right quantities of pharmaceutical drugs to the appropriate places, and doing it on the right schedule, is essential.
Information
The healthcare supply chain doesn't just run on delivering equipment and drugs. It also distributes data. Information flows from suppliers to customers (and vice versa) and includes things like price quotes, purchase orders, delivery statuses, payment invoices and more.2
Inventory statuses, quantities needed and even information about customer feedback are all examples of the vital information that's sent back and forth along the supply chain, and keeps things running smoothly.
It's not just the suppliers and customers that engage in these information flows, and when combined with the movement of medical supplies, equipment and pharmaceuticals, all of this translates to an intricate network of interactions between the following parties.1
Manufacturers
Healthcare manufacturers produce the wide range of medical products used in a variety of healthcare settings. Not only do they need to manufacture the quantities needed of all of these supplies, they also need to produce them to the designated performance, health and safety standards.
This requires following rigorous processes and staying meticulously up to date on the latest industry, hospital and healthcare regulations.
Distributors
Healthcare distributors are a key link between manufacturers and healthcare facilities. They make sure medication, equipment and other important shipments make it to their destinations, monitoring deliveries and keeping things on track according to each facility's needs.
Third-party logistics providers
Third-party logistics providers are a type of distributor, though they tend to be smaller, more local and more specialized. They're typically more knowledgeable about a certain area of healthcare, and their products may be more cost-effective than from larger distributors. They may also have increased inventory in their areas of specialty, allowing them to deliver more products at lower costs.1
Providers
You've probably noticed that people use the term provider in reference to individual physicians, but also to greater healthcare institutions. That's because providers refer to any organization that provides some type of healthcare service. Providers include hospitals, pharmacies, assisted living facilities and so much more.1
In the context of the supply chain, providers are the organizations that receive healthcare shipments from distributors. They use these supplies and equipment on patients in their facilities, as well as disperse medications to patients by refilling prescriptions.
Patients
The final link. Patients not only tend to be the final recipient of—or at least a final beneficiary of—many of the supplies passed along the healthcare chain, but they're also a highly influential piece in the whole process. Patients set the demand for goods and services, impacting what types of products get sold and the quantities of the goods that subsequently move along the supply chain.1
9 Priorities in efficient supply chain management for healthcare
Now that you know what the healthcare supply chain consists of and how it works, let's lay out some of the main reasons why strong management across this chain is so important—and some of the biggest implications it can have.
Here are some of the top priorities for healthcare supply chains.
1. Get the right medications to patients
Without a well-managed supply chain, the right medications can't always get to the right providers and patients in need. As you could probably guess, this is one of the biggest implications of healthcare supply chain management and is a large part of what makes it so high stakes.
2. Deliver in a timely matter
Ensuring a healthcare facility receives the supplies it needs is important, but it's equally important that they're delivered on time. Effective supply chain management means that the delivery process is efficient and timely. In certain types of medical facilities and situations, a late shipment can have the same effect as no shipment as all.
Strong supply chain management can help healthcare organizations streamline processes and maximize operational efficiency so that things keep running smoothly when it matters most.
3. Reduce medical errors
In addition to providing facilities with the right products at the right times, effective management as well as other checks and balances along the supply chain can help ensure that there are no product issues. Ultimately, this can reduce medical errors.
Think about things like incorrect shipments, expired medications or damaged equipment. Constant communication and thorough checks at every step can minimize these mistakes and make sure patients aren't the ones who pay the price.
4. Improve patient outcomes
On the flip side, optimal supply chain management can actually help improve patient outcomes. Making sure that all supplies are functioning properly, safe to use and available in the necessary quantities is essential to a well-run facility. It can make a positive difference in the quality of patient care—ultimately leading to better health results.
5. Keep a pulse on inventory levels
A strong supply chain will be able to identify shortages or product availability issues before they become a problem. This leads to less risk for providers and patients and plays a role in those increased outcomes described above.
6. Minimize waste
Optimizing inventory levels doesn't just allow a facility to always have the number of supplies they need on-hand, it also means they don't have an excess of supplies. Too much inventory can not only drain money but lead to unnecessary waste when items end up expiring and being thrown away.
7. Increase access to resources
Just because one facility has more than enough of a certain supply doesn't mean that another one won't be in need of more. A balanced supply chain that distributes the correct inventory to different facilities will minimize waste, as well as increase access to supplies and medications for everyone.
When everything is flowing at the right quantities, every facility—and therefore every patient—should be able to receive the supplies they need without needing to travel or overpay.
8. Improve healthcare costs
We've all seen it: when inventory is too low in a certain area, prices can skyrocket. Improving the distribution of medical supplies can directly improve healthcare costs, and this is something that patients everywhere can benefit from.
9. Increase supply chain resiliency
A well-managed supply chain is a more resilient supply chain. This means that in the cases of pandemics or disasters, the chain can adapt rather than break or fall apart.
The better we're able to improve healthcare supply chain management, the more likely it is that in the face of the unexpected—or even the unprecedented—healthcare systems will be able to maintain the availability of critical resources and deliver patient care as usual.
In a world of constant unpredictability, what could be more important?
Play a role in successful healthcare supply chains
From the individuals on the manufacturing floor to the surgeons in the operating room to the supply chain managers themselves, every single link in the supply chain is of equal importance—and none can work without the others.
If the complexity of healthcare supply chain management interests you, you can play a part in it. Learn more about the industry by reading our article, "11 Things I Wish I Knew Before Starting a Supply Chain Management Career."
1ECRI, The Role of Supply Chain in Healthcare, [Accessed November 2024] https://home.ecri.org/blogs/ecri-blog/the-role-of-supply-chain-in-healthcare
2Medline, The crucial role of healthcare supply chain management, [Accessed November 2024] https://www.medline.com/strategies/supply-chain/healthcare-supply-chain-management-critical-role/#:~:text=Enhanced%20patient%20safety%3A%20A%20well,essential%20for%20positive%20patient%20outcomes.
