Industry workgroups look for solutions to back order and shortage issues

By David Forbes

Shortages and back orders – every supply chain leader’s worst enemy – are becoming increasingly common in the healthcare supply chain. We may not be able to eliminate these issues – we can’t prevent hurricanes that cause plant closures for instance – but we can work on ways to better manage them.

In my role as Director of the Healthcare Supply Chain Collaborative, I manage a number of workgroups focused on supply-and-demand issues. These groups are in the very early stages of developing best practices for improving demand planning, ensuring emergency readiness, and better managing shortages. But even at this stage, some important themes are emerging – most importantly, the importance of better information-sharing between trading partners.

Here are a few ideas raised by workgroup members from across the supply chain:

  • More automated communications are needed. Providers and suppliers are spending way too much time calling each other to find out when a product is needed or when it will arrive. Greater use of tools like EDI 856 (Advance Ship Notice) could save precious hours of staff time.
  • Partners need real-time rather than just point-in-time information. Supplier web portals that allow their distributors and customers to self-serve inventory and delivery information are highly valued.
  • Managers need information that’s as realistic as possible. Overly optimistic projections of product arrival dates lead to last-minute scrambles, but overly conservative projections can cause problems too.

“If we’ve brought in a substitute product for a hospital to help them through a back order that’s projected to last 6 weeks, and the product arrives 2 weeks earlier than expected, we end up overstocked on the sub,” noted workgroup member Dana Frank, Director of Resources and Development, Concordance Healthcare Solutions.

Certain organizations are already making moves to improve information-sharing with their trading partners. Michael Darling, Vice President Supply Chain with St. Luke’s Health System of Kansas City, provides daily floor-level consumption data to the system’s distributor via a modified EDI 850 (Purchase Order). The distributor, which serves as an extension of his own organization, then feeds the relevant data further upstream to key manufacturers. This daily feed has allowed St. Luke’s upstream trading partners to quickly hedge against the large impact even the smallest change in demand can have and has resulted in a dramatic fill rate improvement. Darling participates on the Supply Chain Visibility Steering Committee and hopes to help make practices like these more common across the industry.

Provider participation on these industry workgroups is needed. Contact me at Forbes@hida.org if you’re interested in joining one of the groups focused on:

  • Supply Chain Visibility
  • Demand Planning
  • Shortages and Back Orders
  • Supply Chain Disruption

About the Healthcare Supply Chain Collaborative

The Collaborative’s mission is transforming the healthcare supply chain through best practices for processes and data. The initiative is managed by the Health Industry Distributors Association and led by volunteers from across the end-to-end supply chain. To find out how to get involved, contact me at forbes@hida.org.