Efficiency vs. Resilience: Can We Achieve Both?

Supply chain advances show progress in reaching both goals.

BY Elizabeth Hilla, Sr. Vice President, HIDA

October 2023- The Journal of Healthcare Contracting

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.

Many industry organizations are now making those investments.

In our panel discussion, Peter Saviola described collaboration between customers and suppliers in areas like automatic product substitution, pro-active backorder reporting, improved data capture for product usage, and connectivity across the supply chain. “We’ve seen big improvements in fill rates, with first truck/first delivery, from auto-sub processes,” he said. “The proactive backorder report allows us to look upstream so we know what’s coming and can help providers plan for any predicted shortages.”

Cody Fisher described his organization’s partnership with pioneering technology firm Palantir to build a healthcare supply chain platform that fully connects providers, distributors and manufacturers by bringing unprecedented visibility to supply and demand information. The system provides manufacturers and distributors with visibility to provider orders, on-hand inventories and utilization so they can better meet demand. Providers, in turn, receive visibility to the upstream supply chain to better manage their supply chains and proactively prepare for supply constraints. “This means that inventory management becomes more efficient and more resilient,” he said. “The platform allows for organizational strategies to be collaborative and operational across the supply chain resulting in an intentional balance of efficiency and resiliency in areas such as inventory management.”

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