Purchasing products from secondary sources wasn’t something that popped up overnight in the U.S. healthcare supply chain. Prior to the COVID-19 pandemic, many of the largest IDNs, as well as distributors, sourced from primary and secondary sources. Shortages and recalls have plagued our medical supply chain for several years. A Statistica study showed recalls grew by 71% in 2018 and 2019 pulling nearly 400 million units from the market. The recent gown shortage and IV shortages in 2018 created serious shortages that de-stabilized global supply. Those shortages made supply chain departments understandably nervous. COVID-19 has likely changed the way healthcare sources product forever.
We now have a situation where close to three-fourths of hospitals and health systems have dealt with a source other than one they had authorized or worked with in the past. In fact, many supply chain leaders realize that limiting the risk of future supply chain disruption must include proactively expanding the sources of supply.
Moving forward, de-risking the supply chain will be critical. It’s in an IDN’s best interests to have options, but they have to be safe options. The following are three 3 questions Supply Chain Leaders need to ask themselves about what they are sourcing.
No. 1: Is the vendor credentialed?
Before COVID, Supply Chain Leaders rarely ever bought anything from a company they didn’t know or already have a relationship with. That’s obviously changed, but IDNs still need the validity provided by supplier vendor credentialing. There are a lot of entities reporting to be in this business that actually aren’t. They may not inventory or maintain appropriate standards for managing and handling product. They may not have the appropriate paperwork for products coming from outside of the country. Many aren’t experienced. In other cases, you have people who are experienced, but not in healthcare. For these reasons and more, vendor credentialing is key.
You need to be able to verify who you’re dealing with, that you’re connected to the source point and understand their specific role in the supply chain. Do they buy and hold product? If so, what is their warehousing and process to manage inventory? How long have they been in the medical products business and do they have strong reference base? Medical products are regulated and required to be registered and meet FDA standards, so it is important to audit the paperwork trail.
No. 2: How many touchpoints?
The nature of the global chain is product may pass through several hands. Having a chain of custody back to the original manufacturer allows you to ensure the authenticity of the products. Additionally, the more touch points you have in the chain of custody, the more opportunities there are for something to go wrong.
How does the product flow from point A to point B to point C? If you’ve got 7-8 steps in the chain, you might want to be a little bit more careful. Whereas if you only have 2-3 steps in the process, you can have a lot more confidence that the product is what you’re looking for and it’s going to be valid. Think of it like a CarFax for a used car. You want to be able to trace the chain of custody.
No. 3: Domestic, or overseas?
The third component is the importance of knowing how the product traveled, whether domestic vs. overseas, and where the product sits. Particularly with PPE, 80-90% of all the products manufactured come from out of the country. Understanding how the inventories are managed and transported is important. At what point is the product sourced domestically? Is it stocked in the United States? Very well intended sourcing companies represent that product is on the water or in country, but oftentimes that information is inaccurate. Currently, there is a global transportation crisis. This consists of both a shortage of carrier capacity as well as a shortage of freight containers. Delays, cancelations, and excessive lead-times are likely on products sourced from overseas. Additionally, be careful of the “Made in the USA” marketing. Many products claim they are “Made in the USA”, but their components are largely sourced outside U.S., with only final assembly of the product in the U.S. If the raw goods come primarily from outside the U.S., the supply chain challenges remain.