2 McKinsey partners dish future of supply chain resiliency

To find out what resilience means and what strategies supply chain hospital leaders should take, Becker's spoke with William Weinstein, a McKinsey partner who's one of the leaders who serves healthcare providers with external spend, and Drew Ungerman, a McKinsey senior partner who advises healthcare clients on strategy. 

Editor's note: Responses were lightly edited for clarity and length.

Question: For the medical supply chain, what trends or hiccups are you expecting in the next few weeks or few months? 

William Weinstein: The topic of resiliency was definitely something that was top of mind coming out of the pandemic. Between inflation, macroeconomic uncertainty and the war in Ukraine, 90 to 95 percent of executives think they need to focus more on resiliency. When I just talked to my healthcare provider clients, maybe from about a year ago, until the past couple of months, I didn't hear it as much in conversations; I would say over the past two to three months, I'm hearing it again and again. What's different now versus during the heart of the pandemic is the pandemic caught a lot of people off guard and it was very focused on PPE supplies. Now, it's a mixed bag of the types of products that are being shortened. At the end of the day, I hear more and more providers saying, "Wow, this is not going to go away anytime soon." This is something to think about more holistically and rigorously.

Drew Ungerman: The pandemic put supply chain and supply chain resiliency on the CEO agenda in a way that it had never been before. It's always been important to different parts of the healthcare ecosystem, but the pandemic clearly raised that criticality to a whole other level. As the pandemic becomes endemic in many geographies, that focus or intensity on the part of the CEO into his or her management team is not abating because depending on where you are in the ecosystem, the headwinds have become more systemic. They were thought in the initial ways to be ephemeral. Either new ones have cropped up like inflation or the unanticipated war [in Ukraine] and the impending recession in this country have created the need to extract even more value from the supply chain, because workforce levers, frankly, are getting harder and harder to pull given the challenges in the workforce. More and more institutions are focusing on non-labor because of the confluence of all of those events. 

The second macro trend is folks are finally pushing the clinical engagement lever of the supply chain harder than they ever had. There has been inconsistency in how coordinated the supply chain parts of the organization need to be with the clinical arm of the organization. Now, those barriers are being broken down at a greater level than they've ever been because of the need to.

Q: Which resiliency solutions are more fruitful than others? 

WW: One opportunity is to better partner with folks in the value chain, like your distributors, your group purchasing organizations or manufacturers to provide upstream visibility. At the end of the day, providers are just a small piece of the ecosystem, but distributors and GPOs have a much bigger scale and therefore may have broader insight into what's coming down the pike in terms of expected shortages or shocks in the market. The second component beyond visibility is product-specific strategies and thinking through what's the criticality of supplies and if the criticality can be measured in a variety of ways. It's the notion of what is impactful to the patient, what do you actually really have to have for patient care? The third component of criticality is alternative suppliers because many systems were forced to go outside of their traditional channels to find critical supplies. The fourth component of product strategies is alignment with clinical and other stakeholders on utilization protocols. So, what you saw during kind of the heart of the pandemic, when you had a shortage of, for instance, N95s, was systems went from using one N95 per patient contact point to extending the use of that N95 until it was soiled or damaged. The problem that some systems encountered is they're having to basically come up with protocols on the fly. The third part of the framework beyond visibility and product strategy has to do with governance, and this is something that probably is underestimated. There's only so much of the unpredictable you can predict. At the end of the day, nobody knows what six months will bring — there could be external shocks we couldn't even have imagined. If "X" shock happens in our system or this product is unexpectedly in shortage, how can we quickly work with our stakeholders within our hospital system to enact a strategy? The way to do that is to have a governance structure set up where you'd have the supply chain integrated with the clinical side or with infection prevention.

Q: Do you think supply chain resiliency has a lot of crossover with environmental sustainable efforts, whether it's reusing gowns or reusing N95 masks? Where do you see that relationship going?

WW: I think the idea of you know, sustainability is something that is very top of mind and increasingly so for healthcare providers. If you think about the link between that and supply chain resiliency, it does lend itself in certain cases. If we go back to the pandemic, there were extended use cases for N95s, there are ways to reprocess items instead of actually buying new items. It does lend itself, at least to some degree, in ways both for environmental benefit and resiliency benefit. I would underscore, again, all of this has to be done in conjunction with your clinical leadership. At the end of the day, [supply chain leaders] need to be a facilitator for the process working hand in hand with the clinical stakeholders to enact change.

Q: What's the future of supply chain resilience? 

DU: I think we are entering into a phase of the broader macro environment where healthcare leaders are realizing some of the trends that were accelerated by the pandemic are less ephemeral and transitory than perhaps any of us would have predicted at the outset of the pandemic. Some of the workforce challenges are more systemic, the supply chain challenges are more systemic. The crises are leading, as crises often do, levels of innovation that ultimately will benefit the patient, benefit enhanced collaboration across different parts of the healthcare ecosystem where we will get more personalized medicine in the form of getting the right supply to the right person at the right time. We'll hopefully reduce the cost overall of the supply chain through better predictive analytics, better collaboration across the value chain and, frankly, more strategic partnerships between big parts of the value chain.

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