How can vendors and distributors be a source of support to their customers in case of a pandemic or other emergency? One supply chain executive weighs in.
I believe vendors have the opportunity to take an increased leadership position in support of future emergency needs for hospitals. Hospitals depend on all channel partners for their survival in times of emergency. The good news is most come running when asked, but vendors tend to play a savior role in rapid response. Unfortunately, much of the response could have been avoided if advanced planning and communication had already taken place. Times are changing, but the provider side of our industry is still more “cottage” than “corporate” in nature, so the most logical consolidated response initiatives will probably come from vendors. The following are some areas that could provide a value through consolidated vendor-driven leadership.
Vendors can help with the support, adoption and use of uniform standards, specifically GS1 standards of the GTIN and GLN. The lack of clear standards on product identification and care location identifiers hinders our industry’s ability to rapidly respond. I hear a lot of talk, but not enough action, on this initiative. For many, it is a chicken or an egg decision – if providers will require and use standards, vendors will make the necessary investments to retool their operations to support. That is a fair argument. However, vendors have the opportunity to help transform the industry in ways that would allow all channel partners to reduce cost and increase service differentiation for those that adopt. In times of emergency, uniform standards could help providers rapidly identify needed products and their locations. By doing so, non-affiliated healthcare entities could rapidly transfer excess or necessary products to specific care locations. My belief is that there are plenty of products already in the pipeline, but the lack of credible visibility of product, quantity, and location forces overstocking based on fear. I look to the retail sector for guidance in this area. Companies like Wal-Mart have built a highly functional inventory management infrastructure to ensure consumers have what they need in the required quantities even when demand is highly variable. They do so, yet minimize their inventory, because they know everything about the product pipeline. Retailers know what is on the shelf in all locations; they know what is in each distribution center; and they even know what is being produced at the manufacturer. Retailers know the lead times to and from each sourcing location so they have the ability to credibly and professionally manage the supply chain so that the consumer’s demands are met at the lowest possible cost. This may sound harsh, but if we had the same supply chain support passion for patient care as retailers have for the consumer dollar, this could be a very different and much more efficient industry.
Vendors and distributors can play a key role in offering reserve stock options for providers that struggle with maintaining reserve levels in their own organizations. Reserve stock can be official or unofficial in nature, and many vendors could leverage these capabilities to increase their strategic importance to providers. Vendors tend to have more sophisticated inventory management systems, and if vendor systems can sequester and hold certain products and quantities for emergency needs, providers will be better protected in their time of need and may be willing to pay for the increased capabilities or service. As the guaranteed service levels increase above a base expectation, the distributor could charge higher fees to cover the increased stock held on the provider’s behalf.
Regional surge support
Vendors could design and organize regional surge support for products in a given geographical area. By doing so, every provider may not have to load their individual channels with products at the alarming rates that we see today. At Mercy, ROi is providing a system-wide surge balancing program for pandemic supplies. Our belief is that a pandemic will not strike all locations in our four state coverage area at the same time, with the same intensity. If this is true, every location will not need the maximum supply allocation at the same time. By consolidating the storage of supplies in a central location (ROi’s Consolidated Service Center), we were able to cut our anticipated surge stocking needs by 50 percent and still have the capabilities to support our needs by shifting the needed supplies to the impacted regions. The levels are set in coordination with local, regional and federal response expectations to assure that the hospitals’ needs are met for a period of time while national stockpiles are being deployed.
Communication and coordination
Vendors, or specifically distributors, know which products are being purchased by each provider location. They could use this knowledge to coordinate a unified response between providers and government support operations that may be involved in a major pandemic response. It would be important for distributors to work together to coordinate a response so no one distributor has complete knowledge. Most distributors will move to protect their current customer base, but a proactive and integrated plan may be able to increase the status of all channel partners with their customer base and may be able to set firm expectations before the difficult times of an emergency.
Daily inventory visibility
Vendors could help with providing complete pipeline visibility of product and lead times. If provided on a daily or frequent basis, higher levels of trust will be built and overstocking of reserve stock could be reduced or eliminated. This service would also begin to differentiate players in the market as strategic or transactional. My belief is the strategic players will always win in the long-run.
In times of short supply, product allocations are necessary. All customers know this, but don’t like it because we all feel we are special. Vendors could work with their customer base in advance of an emergency to communicate allocation methodologies. This open dialog and pre-engineered operating procedure could help when allocations are necessary. Out of fear, bad behavior will occur by providers, but the more providers know and trust their vendors, the more effective response program.
National stockpile facilitation
When an emergency hits, local, state and federal governments all have support plans in place to assist. These plans often take days or even weeks to completely mobilize. Vendors and distributors can play a key role in the facilitation of national stockpiles to each provider location. Distributors already go to the locations on a frequent basis and they know the key resources of each provider that can get the supplies to the correct care-givers. The issue will be that they do not have the goods. If distributors can act as cross docking agents for government response centers, a rapid response with adequate supplies could become more effective. Many vendors could also assist with product cross mapping capabilities. These services could help with clinical equivalency for products that are not exact matches but may provide a necessary substitute in a time of need.