Since 2020, healthcare supply chain leaders have been operating in crisis mode due to COVID-19, talent management challenges and more.
To learn about what 2022 has in store, Becker's Hospital Review recently spoke with Joe Walsh, founder of Supply Chain Sherpas. Walsh has been working with Cardinal Health on a variety of initiatives as a trusted supply chain expert. He shared his predictions for the year ahead and how health system leaders can best respond.
Note: Responses have been edited for length and clarity.
Question: What supply chain challenges from 2021 should we expect to carry over into 2022?
Joe Walsh: I believe three challenges from 2021 will carry forward into 2022. The first is assurance of supply. PPE shortages have become the norm and I don't think we're out of the woods yet. Primary shortages like these occur whenever demand surges for products that are directly related to supply chain disruptions. Secondary shortages occur when products are tied indirectly to a disruption. For example, a raw material plant might shut down due to COVID-19 and that affects production of finished goods used in the OR or the cath lab. We don't currently have enough visibility into secondary shortages until they occur. We've just started to scratch the surface to understand how pandemic, geopolitical, transportation, cybersecurity, labor, financial, or natural disaster events dynamically affect our supply chains.
The second issue is the talent crisis. This megatrend applies to providers, suppliers and distributors. Organizations are struggling to recruit, develop and retain supply chain employees. One of the biggest contributors is that virtually all supply chains worldwide broke during the pandemic. Now, every industry is competing for the same pool of supply chain talent. Over the past couple of years, crisis management has been the name of the game for healthcare supply chain professionals and there's no end in sight. For team members that crave stability, other industries suddenly look attractive. Sectors outside of healthcare have found creative ways to recruit supply chain employees and they're making supply chain a destination career. Compensation is also a major issue. Supply chain salaries in healthcare lag other sectors.
The reactive nature of the healthcare supply chain ecosystem is the third challenge. Stories abound about the heroic actions that people have taken to save the healthcare supply chain. While the praise is well-deserved, this culture potentially prevents us from taking a more proactive approach to risk prevention. This is one of those situations where we may have valuable insight to gain from our colleagues in other sectors. We get the outcomes we reward, and today we are over-calibrated to acknowledge, reward, and fund rescue and recovery missions.
Q: How can health systems combat these supply chain issues and what breakthroughs have you seen?
JW: Supply Chain Sherpas sits at the intersection of suppliers and providers. Over the last couple of years, we've spoken with more than 400 supply chain leaders throughout healthcare. We've observed breakthrough work in three areas.
The first is improving the alignment of the supply chain function. In healthcare, supply chain has traditionally served as a support function to the clinical agenda or financial agenda. It’s important for healthcare supply chain leaders to sit next to the CFO, CMO, COO and CHRO, not underneath them.
The second area is introducing new measures of success. Historically, supply chain’s primary measure of success is nonlabor cost reduction (or reducing the cost of purchased goods and services). When organizations take that KPI to the extreme, it’s understandable that the byproduct is a fragile supply chain. We must step back and identify a balanced set of metrics that lead to a healthy supply chain. We believe that supply chain ROI is the right metric where a supply chain contributes many forms of value in exchange for corresponding investment in people and infrastructure.
The third area is deploying new and improved strategies to enable a more resilient supply chain. One example is dynamic sourcing which considers when an organization sole sources, multi-sources, brings manufacturing back onshore or even uses local sourcing. Providers are implementing operational infrastructure to prioritize critical supplies, to enable demand sensing and demand planning, and to catalyze more visibility. Inventory strategies, with costly and space consuming ‘just in case’ models replacing the JIT models of yesterday.
Cardinal Health’s Strategic Stock Solution is an innovative way for providers to stockpile and sequester their critical supplies from multiple manufacturers, in a cost effective and space saving manner.
Q: What advancements in data and technology do you anticipate in the supply chain industry during 2022?
JW: Too many technology companies fail to recognize that in healthcare, no one simply buys technologies. They buy solutions to acknowledged problems. We must ensure that technology and data-related solutions target problems that healthcare customers willingly acknowledge today.
Supply chain resilience is an issue that most providers, distributors and manufacturers acknowledge. Promising technology innovations include solutions that identify the products that become critical in various disruption scenarios and then cross-reference clinically equivalent products across a broad network of manufacturers without competitive bias. Other important solutions are advanced analytics, and event monitoring solutions to help sense primary and secondar shortages. Demand sensing, demand planning and tools connecting trading partners are also showing early promise.
There are some revolutionary technology platforms to keep our eyes on as well. Blockchain has the potential to fundamentally transform the way our industry approaches a universal item master, price synchronization, contract management, product chain of custody, and transaction management. Robotic process automation is also making inroads in the procure-to-pay space as the talent crisis demands we dramatically improve productivity.
Q: What advice do you have for health system supply chain leaders for 2022?
JW: I have four recommendations. The first is capitalize on the spotlight. This isn't the time to play small or hope for a return to normalcy. You need the courage, conviction, and risk tolerance to carry the strategic agenda for supply chain into the board room and don’t take “no” for an answer.
Second, lean on partners. We can innovate and cocreate our way to a more resilient future. Supply chain resilience is needed at the ecosystem level. Don’t be afraid to redefine what you want from GPOs, distributors, and manufacturers. Your partners will build new models to support your needs if the requirements are actionable, specific, clear and consistent. I see distributors like Cardinal Health really stepping up and acting as a strategic partner to help health systems advance their goals – whether it’s driving savings, standardizing their supply chain across the continuum of care, increasing supplier diversity, or becoming more sustainable.
Third, invest in talent management, including creative recruitment, skills development, leadership development, and team engagement. Supply chain teams were underinvested in and unprepared for COVID-19, and now they are fatigued and overwhelmed. Organizational expectations for the supply chain function continue to increase exponentially. This will be a recipe for disaster, unless we make investments to close these gaps.
Finally, build a tech-enabled supply chain. To counterbalance the growing talent crisis, we need a data-driven approach and we must leverage technology. Technologies like RPA and blockchain are truly revolutionary and they can help us rethink business as usual.