By Kimberly Anders and Chaun Powell
It’s been nearly two years since the onset of the COVID-19 pandemic and disruptions continue to rock the global healthcare supply chain. There have been shortages of raw materials, labor and manufacturing; issues surrounding shipping, transportation, warehousing and distribution; and now rising inflation hitting the entire healthcare continuum, from manufacturers to distributors to hospitals and everyone in between.
Adding to the rocky landscape are the historic number of supplier mergers and acquisitions in 2021 (activity has been more robust than anticipated with over 3,000 total transactions expected by year-end, an increase of more than 25 percent as compared to 2020) and the “great resignation”, a.k.a. “the big quit”, where the U.S. Bureau of Labor Statistics reports an overall turnover rate of more than 57 percent for the year.
It’s a long list of disruptors and given the fact that the fight against COVID-19 is far from over, chances are the list will continue to grow. Finding ways to build a stronger, healthier, more resilient supply chain that can withstand disruptions brought on by the virus and other economic factors is vital – to ensure we emerge from this pandemic better prepared for the future.
Where is the healthcare supply chain headed in 2022? What follows are the five main trends that we believe will define the industry and some insights on how suppliers can set themselves up for success.
No. 1: Putting eggs in different baskets
One of the things that COVID-19 highlighted was an over-dependency on the production of products from Southeast Asia, specifically China. This included everything from personal protective equipment (PPE) like face coverings, gowns and exam gloves needed to care for patients, to products like cotton swabs needed for COVID-19 testing and hypodermic needles needed to dispense vaccines.
In 2022, there will be a laser focus on developing more resilient strategies that include domestic and diverse manufacturing and sourcing of those vital products and, to some degree, more near shoring of production. Domestic and diverse manufacturing will not only help build resiliency – but also help create jobs.
This isn’t going to come easy. It’s going to take a massive effort on behalf of the U.S. manufacturing industry and the federal government to create an appropriate amount of support to ensure, from a public policy standpoint, we make it possible for organizations and companies to stand up domestic and diverse options.
What does this mean for healthcare suppliers? We see three major implications:
- More participation in demand- or commitment-driven models that help suppliers to bolster supply, invest in redundancies, enter or re-enter markets and explore new therapeutic categories for innovation. Premier has led the charge with recent collaborations with manufacturers where millions of domestically made PPE – N95 respirators and masks, nitrile exam gloves and surgical gowns – in addition to pharmaceutical products, are now produced in the U.S. This is a direct result of committed purchasing that makes it clear the buyer base is there to stay.
- Investments in automation to produce goods and compete with low-cost countries in an environment where labor is hard to come by. Automating the manufacturing process will help to create a smarter supply chain, driving greater efficiency by either increasing production capacity or reducing costs and allowing domestic companies to compete more effectively on a global scale.
- A push for tax breaks and low-interest/no-interest loans as well as reasonable environmental and other regulations to help companies invest in and drive future-forward strategies. Government action in the form of domestic manufacturing tax incentives and affordable financing options are necessary for U.S. manufacturing to compete against countries with much lower labor costs and to improve supply chain resiliency.
Ramping up domestic and near shore manufacturing, creating competitive alternatives and changing the way we source vital healthcare products is the way forward in eliminating overreliance on overseas manufacturing – sustaining the U.S. in strong economic times as well as through times of crisis.
No. 2: Diversity is the spice of supply chain
The challenges facing the healthcare supply chain since March 2020 have been both unprecedented and unpredictable, and solving them will require bold new approaches. Although he wasn’t navigating his way through a global pandemic at the time of his famous quote, Sir Tim Berners-Lee, inventor of the World Wide Web in 1989, sums it up best: “We need diversity of thought in the world to face the new challenges.”
Fast forward to 2022: “We need diversity of thought in the healthcare supply chain to face the new challenges.” We think Berners-Lee would whole-heartedly agree with our adaptation. And here’s another: “If variety is the spice of life, diversity is the spice of supply chain.”
As a result of the pandemic, supplier diversity has taken on a whole new meaning. Traditional supplier diversity programs within the supply chain are giving way to more strategic, collaborative approaches between healthcare providers and local small businesses. Supplier diversity supports both business and clinical progress. It’s a fundamental component to improve inclusiveness and equality in healthcare, build trust between patients and providers, and improve health outcomes.
While supplier diversity once meant including minority- (MBEs) and women-owned (WBEs) businesses, it now also includes:
- Lesbian-, gay-, bisexual- and transgender-owned (LGBT)
- Service-disabled veteran-owned (SDVO)
- Small business owner (SBE) as defined by the Small Business Administration
- Veteran-owned (VBE)
These diverse suppliers are adding their unique experiences and points of view to address some of the most significant issues in healthcare:
- The COVID-19 pandemic
- The increasing demand for telehealth services
- The opioid crisis
- The increasing prevalence of chronic diseases like diabetes, obesity and hypertension
- Improving patient education and community health awareness
- Innovative strategies to combat rising healthcare costs
More and more companies, including healthcare providers, are starting to set goals of diversity purchasing, with one study indicating that 30 percent of organizations are setting formal diversity spending goals. The same study indicates that spending across different diversity groups will increase, pointing to Black-owned businesses (an increase of 77 percent), women-owned (an increase of 65 percent) and service-disabled veteran-owned (an increase of 63 percent) to name a few.
In this environment, suppliers should consider:
- Making a commitment to diversity. Suppliers can further advance their diversity, equity and inclusion (DEI) efforts by making it an integral part of their organization’s supply chain management strategy. This includes a team dedicated to the program, enterprise-wide strategy and commitment, and ongoing goal setting and metrics evaluation.
- Diversifying both their supplier base and employee base. For DEI efforts to be successful, it’s vital to identify community resources and work closely with local partners to seek input as well as pinpoint and engage certified, diverse-owned vendors with which to do business. Equally important is building a diverse workforce that’s inclusive, brings unique perspectives and viewpoints, encourages innovation and fosters better decision-making. And when you successfully diversify your supplier base or your employee footprint, share your story with us so we can help share the great work you are doing with Premier’s membership.
- Procuring appropriate certification types and accreditations. Most companies with supplier diversity programs will only contract with certified suppliers. Several supplier diversity certifications are available from various agencies, including:
- National Minority Supplier Development Council (NMSDC)
- Women’s Business Enterprise National Council (WBENC)
- National Gay & Lesbian Chamber of Commerce (NGLCC)
- United States Hispanic Chamber of Commerce (USHCC)
- Asian Pacific American Chamber of Commerce (APAAC)
- Vets First Certification Program (for veteran-owned small businesses)
- U.S. Business Leadership Network (for disabled-owned small businesses)
Ultimately, supplier organizations blazing the trail of DEI activation can see more success in positively impacting communities economically, promoting innovative solutions and driving competitive pricing and terms – among other benefits.
No. 3: Automation domination
It’s no secret that many aspects of healthcare are crying out for technology-enablement, many of which were amplified as a result of the pandemic. One area in dire need is today’s inefficient manual invoicing and payment processes that are bogging down the healthcare supply chain. Many suppliers and the health systems they serve have accepted manual processes as a part of doing business. What they fail to see is how much these paper-driven processes negatively impact their bottom line.
PINC AI™ data shows that as many as 70 percent of all invoices are paper-based, and nearly 85 percent of purchasing is still done manually with paper checks. These processes can almost double transaction and processing fees and can take up to four times longer to process.
Automation in the form of an e-invoicing and e-payables platform can solve the costly accounts payable (AP) and accounts receivable (AR) problems created by outdated, manual, paper-based purchasing and payment processes. Starting with the contracting and ordering process, moving all the way through invoicing and payment, a seamless, paperless experience for suppliers and their health system customers is possible – and where the healthcare supply chain is headed in 2022.
Imagine an automated workflow between your organization and health systems that:
- Improves your order-to-cash (O2C) process by 11 days on average and reduces match exceptions to as low as 1 percent.
- Shortens your organization’s days sales outstanding (DSO), enabling you to unlock cash flows, increase your margins and credit rating, and bolster your stock value.
- Allows you to track invoices and payments on-demand 24/7 as well as extract payment details for on-the-spot AR reconciliation.
And it all comes with the assurance that your sensitive data is secured with the highest encryption disciplines employed in healthcare, to safeguard against cybercrime and other types of check and invoice fraud and theft.
With an automated e-invoicing and e-payables solution, supply chain staff are freed up to focus on what matters most – building stronger relationships to enable the delivery of high-quality patient care, which is on trend to evolve as sites of care will continue to shift as we move into 2022.
Research shows that by 2040, most care will be delivered at home, in outpatient settings or virtually. Adapting to this new way of care, in terms of supplies and delivery methods, will require new automation capabilities and other technologies as well as relationships with different types of suppliers, retailers, contract employees and technology providers.
For 2022, it will be important for suppliers to begin reimagining supply chains equipped to deliver non-hospital-based care in a safe, cost-effective and high-quality way at scale. Automating manual processes and tech-enabling the supply chain from the inside out will be imperative for these new models of care to succeed.
No. 4: The elusive 360° view
We can orchestrate so much of our lives with a simple click. Think Amazon. Tap the app and you have instant visibility to where your package is – one, five, 10 houses away. Think healthcare supply chain and it’s much like trying to see through a dense fog. Manufacturing has become a complex labyrinth where visibility is deficient, and in a lot of cases, we have no idea where products and goods are in the manufacturing process or transit.
We all paid a price for this lack of transparency during the pandemic.
COVID-19 highlighted the absence of upstream and downstream supply chain visibility and reinforced the urgent need to better understand product availability and risk. Providers struggled to access vital healthcare products and medications while government agencies struggled to know what supplies were available or how long it would take to replenish stockpiles.
How did this happen?
The healthcare supply chain is lacking a technology-enabled infrastructure that provides visibility to:
- See demand and predict surge for supplies.
- Understand what products are in stockpiles, distribution and hospital inventories so that we can dynamically move supplies to those in greatest need.
- Understand the risks associated with geographic concentration of suppliers.
- Rapidly respond with new facilities to manufacture critical PPE and generic drugs.
The pandemic taught us that having a clear, 360° view without blind spots is critically important to drive greater transparency, risk mitigation and business continuity in the healthcare supply chain.
Rather than standing up another inadequate and duplicative process, moving into 2022, emphasis must be on building a system that can comprehensively track critical product availability – from the raw materials, to manufacturer, to distribution, to state and national stockpiles, to hospital inventory.
This will enable accurate inventory management, dynamic allocation – the delivery of existing products to areas in greatest need – and a data-driven approach to ramping up supply via mechanisms such as the Defense Production Act. Not only will this help providers anticipate demand for key products, but it will also allow the nation to better manage supplies during a crisis.
Looking ahead, suppliers can expect that buyers are going to force them to provide more disclosures and transparency into potential vulnerabilities, informing contracting decisions and ensuring continuity in the supply chain. This means suppliers will need to get more sophisticated and automated about reporting, tapping technologies such as artificial intelligence (AI) and natural language processing (NLP) for faster access to the data.
Supply chain professionals within a health system must have transparency into the totality of the supply chain in order to be effective. Alongside an understanding of any potential risks with their suppliers, supply chain professionals can then apply real-time data demand signals to accurately identify the intersection of their demand and sustainable supply.
The icing on the cake is real-time access to usage, inventory and location information – rounding out the necessary improvements to transform the healthcare supply to the same level of sophistication that we see in the automotive, electronics and food sectors.
No. 5: Offers they can’t refuse
One of the most recognizable movie lines of all times comes from Mario Puzo’s The Godfather: “I’m gonna make him an offer he can’t refuse.” And while we’re not fans of mobsters, suppliers should approach employee retention in 2022 in the spirit of the Godfather’s famous line – make your employees an offer they can’t refuse.
No matter the industry or size of the company or business, the pandemic has had huge implications on the relationships between employers and their employees. A change in environment, going from working in the office to working at home, was the biggest challenge. Zoom fatigue became a real thing as did working with significant others, children and pets in the background. Priorities shifted, work/life balance gained new meaning and moving forward, employees will continue to reassess what they value across their personal and professional lives.
To increase your employee retention and satisfaction, think like the Godfather and consider what you can offer to your employees that they will have no choice but to accept. Here are some ideas:
- A diverse and inclusive culture. Integrating diversity and inclusion into the fabric of corporate life is essential for long-term, sustainable growth. A diverse and inclusive culture is one that’s comfortable and accessible to all. Employees who feel comfortable at work are more likely to be loyal to their employers. Furthermore, there is strong evidence that diverse teams and inclusive cultures drive better outcomes, more effective problem-solving and greater engagement.
- Flexibility to work remotely. Now more than ever, employees want more choice over where and when they work. This control over work location and schedule can be invaluable when it comes to striking the right work/life balance. Large organizations are using their scale to invest in IT tools and programs that give employees greater flexibility in their work environment.
- Physical and mental health support. Over the course of the pandemic, personal well-being has taken center stage. Anyone can be experiencing heightened levels of stress and anxiety, and in need of support. Organizations need to keep a pulse on disengagement and staff burnout, continually looking for ways to make jobs more sustainable and expanding access to employee assistance programs and mental health services.
- Safety protocols. The issue of employee safety was amplified by COVID-19 as organizations redesigned care delivery spaces and protocols almost overnight to protect healthcare workers and patients. Employees working onsite likely have worries about being infected by those they come in contact with such as co-workers or customers. Organizations should encourage and support these employees, communicate with them regularly about the safety precautions being put in place for their protection.
Talented, engaged employees are one of the most essential factors to your organization’s successful operation. Being responsive to the wants of employees will go a long way in retaining them into 2022 and well after the pandemic’s end.
The future of healthcare supply chain
After a challenging 2021, there are many roads to supply chain success in 2022 – including innovative manufacturing and sourcing strategies, diverse and inclusive workplaces, automated purchasing processes and technology-driven infrastructure solutions that provide complete supply chain visibility and drive stable supply.
Premier remains focused on building a more resilient healthcare supply chain. Together with our members, suppliers and other partners, this collective strength and commitment is reaffirmed and continues in 2022 and beyond.
Premier’s Kimberly Anders, GVP, Strategic Supplier Engagement and Chaun Powell, GVP, Procure to Pay