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COVID-19: the catalyst for a more resilient supply chain

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By Kevin Sample, senior consultant, GHX, for Health Tech World.

The COVID-19 crisis has been a huge challenge to the global healthcare industry in many different ways, but it has also been the spark to re-evaluate previously accepted practices and processes and innovate across the sector. Nowhere has this been more evident than in the global supply chain that supports our hospitals and frontline health workers.

Learnings from past pandemics such as SARS should have prepared us for what was about to come, even if we could never be sure when or from where. But as COVID-19 took hold, some of the initial responses to the crisis saw hospitals and healthcare providers competing for scarce supplies of essential products, such as Personal Protective Equipment (PPE).

“The demand for PPE and other supplies was unprecedented and our usual supply channels for goods were severely impacted,” one healthcare provider recently told me. “Prices rocketed and promises of supply became increasingly unreliable.” Perhaps even more alarmingly, dubious and previously unknown sources of supply started to appear, targeting desperate healthcare providers with demands for pre-payment for supplies that were potentially unsafe.

Working with suppliers and providers gives me an insight into the difficulties faced on both sides of the supply chain. Hearing first-hand from providers about the challenges they have encountered, it’s clear that COVID-19 sent seismic shockwaves through the sector. However, through collaboration and innovation there is an opportunity to build a more resilient supply chain to help hospitals prepare for and minimise risk from future crises. With this in mind, I have detailed seven key strategies below that can help healthcare providers plan their responses to future pandemics.

1. Planning with key respondents is critical

A clear lesson from COVID-19 has been that sourcing plans need to be a lot deeper and wider. Many organisations and even countries went into the crisis with generic pandemic plans that were often based on an influenza outbreak, only to find that these plans did not survive first engagement with the reality of the pandemic.

A systemic approach that clearly outlines the decision-making team that will handle the crisis, assigns roles and responsibilities and accounts for contingency plans is critical. For example, we have learned that plans must now account for scenarios such as working with non-traditional sources of supply. It’s also imperative that the planning process involves internal stakeholders as well as those across the supplier and the provider communities.

2. Matching supply chain and resource needs

A key pillar of a well-run organisation is the scenario planning it engages in. Any large organisation – utilities being one example – will try to plan its requirements many years ahead, and within that, consider every eventuality. A healthcare provider has similar needs and variables, with the same responsibility to engage in thorough scenario planning.

Planning for a crisis requires individuals to account for the different ways in which a crisis may impact resources. For instance, the infectious nature of COVID-19 led to a spike in demand for PPE. To build real resilience, it is important to understand that the next pandemic might create pressures in other environments such as operating theatres if surgical intervention is a factor.

Scenario planning should look at the contingencies and how demands may be met in alternative ways, such as turning operating theatres into intensive care units or the retraining and redeployment of staff.

3. Creating evidence-based protocols

The establishment of evidence-based protocols is invaluable for effective planning during crises when clear and informed decision-making is paramount.

A significant body of evidence on the safe and sustainable use of PPE and other critical resources is being generated as a result of the experience with COVID-19. Analysis of this evidence helps to develop a clear understanding of how to address critical questions such as what equipment is needed or how it can be reprocessed and decontaminated.

These evidence-based protocols inform ongoing decision making, support waste reduction, improve the ability to adapt to different products or approaches and build confidence among care providers. Clear understanding also helps to ensure conversations remain focused on outcomes, not cost.

4. Identifying and mitigating risk

Pre-COVID, Just-In-Time (JIT) delivery was determined to be the right approach as it minimised the need to carry expensive stock and avoided storage costs and associated issues. In fact, it was reported that in France, a stockpile of 1.7 billion facemasks was burned ahead of the COVID-19 crisis as part of a money-saving programme to run down stock that had reached a peak in 2011.

There will, of course, be times when JIT is exactly the right approach, but it is important to consider alternative models such as increased stockholding of some goods, supplier/distributor held stock, or reduced liabilities with a consignment. While the supply of facemasks seemed perfect for JIT delivery, the lockdown in China prevented masks from being exported to other countries that needed that supply. Therefore, the approach should be determined based on a risk assessment.

5. Prioritising vendors that minimise upstream risk

The selection of vendors needs to be based on more than quality and price; a key consideration is the risk factors that may affect a particular supplier due to geopolitical events. A good example is the Fukushima earthquake in 2011. As it turned out, nearly all of the world’s supply of metallic paint for the automotive industry came from the affected region, curtailing consumer choice for many months.

The same risks exist in the healthcare supply chain and it’s important that vendors are vetted through a risk assessment. This needs to include assessing the potential logistical risks a supplier may encounter and how it may impact production and delivery. A good approach is to consider adopting a dual or redundant sourcing policy where risks can be mitigated through parallel supply chains.

6. Negotiating resilience

All too often the factors negotiated in a sourcing agreement are limited to price, quality and volume. What is left off the table is the resilience of supply. Providers need to prioritise resilience alongside other factors in negotiations and that may mean exploring contract terms that can support resilience of supply during times of global increase in demand.

COVID-19 clearly demonstrated that the standard approach to contracting, while effective in normal times, showed cracks under stress. Contracting should strive to establish agreements that guarantee this continuity of supply and priority access to goods. It is also important that providers build into their negotiations the what-if scenarios of a product becoming unavailable and how a substitution product could be fast-tracked through qualification.

7. Harnessing the power of information

Every provider has a suite of Enterprise Resource Planning (ERP) or Business Intelligence (BI) and Catalogue Index applications that drive the digital sourcing process. How well these tools are used and their ability to inter-communicate varies widely.

Given the huge value of management information and its importance in sourcing decision making, organisations need to review and optimise their IT systems and how they interoperate. With clear, up-to-date and accurate data, the decision-making process is more effective and efficient.

While many of the aforementioned strategies are not new, it sometimes takes a crisis to improve long-standing approaches and encourage the adoption of new strategies. The post-COVID world will be different in many ways to the one we left behind in the spring. But it may well show us the route to progress and innovation as the healthcare supply chain realigns and builds its resilience.

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