October 31, 2023- Prior to the pandemic, supply chain leaders’ priorities were efficiency and cost control. COVID-19 changed that. Suddenly the top concern was reliable access to products – even if that meant carrying more inventory and spending more money.
As a result, resilience and efficiency are often viewed as trade-offs. More of one means less of the other.
That’s a problem. COVID proved that resilience is critical. Providers can’t care for patients without products. But healthcare facilities are also facing tremendous financial challenges, so cost control and efficiency are critical as well.
Can we challenge the underlying assumption? Can we build a supply chain that’s efficiency and resilient?
We posed that question in a recent education session at the AHRMM annual conference. At the front of the room were myself, Peter Saviola from Medline, and Cody Fisher from Concordance Healthcare Solutions.
We introduced the perceived trade-off between efficiency and resilience – essentially, the assumption that more inventory equals fewer stockouts. Then we did a quick a show of hands: how many folks in the room had excess inventory? Most hands went up. How many had experienced shortages or stockouts? Again, many hands in the air. So inventory wasn’t a silver bullet – organizations often had large stockpiles of certain items, but shortages in other product categories.
The notion of a “false tension” between efficiency resilience came from research by The Advisory Board Company. They observed that during the pandemic, many organizations were focused on external risks such as supplier shortages. The primary response to the risk of shortages was stockpiling. Advisory Board researchers recommended a shift in emphasis toward investments in analytics platforms to enable supply chain transparency and improve demand forecasting.
Read more in the latest issue of The Journal of Healthcare Contracting.