Managing Global Supply Chain Disruptions

What healthcare supply chain leaders need and how distributors and manufacturers are responding

December 2021 – The Journal of Healthcare Contracting

Disruptions up and down the global supply chain are everywhere in the news today: Manufacturing sites in Asia are shutting down because of COVID-19 Delta Variant outbreaks, container ships piling up in U.S. ports due to lack of workers and equipment to offload them, products sitting in warehouses as the nation faces a growing truck driver labor shortage. 

The impact on healthcare has been devastating. The computer chip shortage has left hospitals waiting months for CT scanners, telemetry monitors, defibrillators and other life sustaining and saving products.1 The rising costs of materials used for medical supplies – 60% price increase in steel for wheelchairs and hospital beds, and 100% for polycarbonate plastics used for oxygen tubing, nebulizers, canisters and oxygen masks – add significant financial pressures to the equation.2 

These problems are not going away anytime soon. Experts say supply chain congestion and elevated costs in the shipping sector are predicted to last into 2023.3

All healthcare supply chain stakeholders – manufacturers, distributors, group purchasing organizations (GPO) and healthcare organizations – are struggling with these ongoing challenges. The Healthcare Industry Distributors Association (HIDA) stresses the need for greater transparency, collaborative information sharing and ongoing communication among these parties.4

During a Health Connect Partners October 2021 virtual roundtable facilitated by McKesson Medical-Surgical, U.S. healthcare supply chain leaders expressed what they need from distributors and manufacturers to successfully navigate the crisis, and McKesson responded with how it is addressing those needs both through its own resources and in conjunction with supply manufacturers.

Moving Products: The Need for Internalized Logistics  

Supply chain leaders want to know how products get from manufacturing sites to their facilities and what distributors and manufacturers are doing to overcome logistical challenges that lead to product shortages. 

“We look at the news and see ports that are backed up weeks in the water with ships sitting still, and then we have daily calls with supply manufacturers to ask when we are getting products,” said  a regional supply chain director servicing communities in the northeast. 

“Transportation bottlenecks are a real issue that goes beyond our industry and likely won’t settle down until late 2022-2023, but there are several things we are doing to mitigate the disruptions as fast as possible,” commented Will Benton, head of manufacturer solutions, McKesson Medical-Surgical. 

McKesson has internalized many global and domestic logistics within its team, rather than outsourcing them to third parties. This includes the processes of product brokerage, customs clearance, ocean partner negotiations and freight vessel booking.

Other steps McKesson is taking to speed up the flow of supplies is routing shipping containers to less congested U.S. ports, then leveraging its ground fleet to transport products to its regional distribution centers and onto healthcare facilities more quickly. 

Sourcing Products: The Need for Greater Visibility

The COVID-19 crisis has taught a valuable lesson on product sourcing – the importance of not only knowing product suppliers, but the suppliers’ suppliers of raw materials that go into the manufacturing of items. 

“When we talk about transparency, I look at other industries and it seems healthcare supply chain has so much catching-up to do around understanding the global supply chain,” said Sean Poellnitz, vice president of supply chain for Mosaic Life Care. “From a raw materials base, can we understand what is happening in that market over the next five years that could impact us?”

For example, the impact of global chip shortages continues to impact industries around the world. How will these shortages affect the healthcare supply chain and what can distributors and suppliers do to adjust and evaluate their product portfolios in response? 

McKesson is taking a much more calculated, categorical view across its product portfolio. The company is tightly monitoring 41,000 products critical to care delivery, considering country-of-origin, the suppliers of raw materials, lead times and availability to determine whether to expand its supplier base in a specific product category. 

Selecting Suppliers: The Need for Diversification and Domestic Production

The move toward sole-source contracts to lower costs backfired when the pandemic hit. Those organizations that had standardized on one supplier for critical items were left scrambling to find alternatives if their sole supply source was disrupted. Health systems were desperate for supplies and some alternate manufacturers took advantage of the situation, pushing low-quality products into the U.S. under the Emergency Use Authorization (EUA). 

Across the board McKesson has been diversifying its supplier base so that it has multiple sources for as many product categories as possible, setting a high bar to ensure that it is providing legitimate, quality medical-grade products to its customers. 

There has been industry-wide support around efforts to source more medical supplies from companies that manufacturer them near shore (e.g., Mexico, Canada, South America) or onshore in the U.S. The challenge is reestablishing a manufacturing base that was long ago pushed overseas by the desire for lower costs, and whether healthcare organizations will pay more for products that are more easily accessible and at less risk for supply chain disruption.  

“We have been asking our GPO and other partners in the marketplace whether they are looking at domestic suppliers as opposed to international ones,” said one supply chain executive, “While we know we will pay a little more at the pump, it may cut out some of red tape and sequestering of inventories from other countries.”

McKesson is closely partnering with manufacturers that are aggressively making investments to expand their manufacturing footprint. This is another strategic push across the company’s product portfolio to help ensure customers have access to suppliers with broad capacity moving forward. 

“We are fully engaged with all the credible manufacturers on discussions to source domestically, but it is a real balancing act where they want us to commit to volume while we are still trying to gauge volume,” said Benton. “We are having conversations with our customers to gauge the importance of having a certain share of our portfolio with domestic suppliers, which will be very doable moving forward, but comes with a price disparity.”

Empowering Health Systems: The Need for Data and Analytics

An executive director of supply chain in California , asked whether McKesson had thoughts on leveraging technology for early signaling that could provide healthcare organizations with leading-edge insight into potential disruptions for proactive decision making. 

McKesson recently implemented technology that allows it to understand how future shortages would impact product availability throughout its network to mitigate the amplitude of those issues as they arise. By applying artificial intelligence (AI) and machine learning (ML) to historic data, McKesson is also performing predictive analytics to gauge future risks. 

“We have been receiving increased requests from customers for new types of data around country-of-origin and geographic sourcing, which we are working to address,” said Greg Colizzi, vice president of health systems marketing, McKesson, who led the roundtable. “This work is helping us be nimbler in how we manage our overall supply chain.”

Most recently, McKesson added a new product concentration by country-of-origin enhancement to its McKesson Business Analytics tool that helps health systems gain a global view of where they are purchasing products by geographic area. 

“We are developing predictive analytics, and risk measurement, around the products customers are purchasing so when shortages happen and they incur cost increases based on country-of-origin, they can direct those higher cost supplies to essential facilities,” said Tracy Crowley, product manager, McKesson Business Analytics. 

When asked what type of metrics were of interest, a senior vice president of supply chain management services in a Texas  based health system, said from a country-of-origin perspective, he is interested in mapping out fill rates, stating: 

“I believe some folks would be willing to pay a little bit higher cost if products were coming domestically because of more predictable fill rates and the ability to carry lower inventory levels due to greater reliability.”

“Internally I am tracking fill rate out to our providers, but I am looking for fill rates out from McKesson or suppliers to us,” commented another supply chain director servicing a non-profit health system in Seattle, Washington. 

Crowley also described other reporting and analytics available to McKesson customers, including GPO compliance, Rx growth, formulary compliance, spend by site (e.g., surgery center, medical practice or post-acute) and efficiency measures, such as frequency of orders, size of orders and frequency of small orders. Healthcare organizations can not only access their own measurements, but also benchmark against others similar in size and scope.  


While nearly every market sector is currently being impacted by global supply chain issues, from retail to construction, the challenges to the healthcare industry present the greatest risks as they impact patient lives. 

Manufacturers, distributors, GPOs and healthcare organizations all play a critical role in delivering supplies to the point of care (POC); therefore, they must all be involved in efforts to address the bottlenecks and delays of the current crisis and prepare for future disruptions as they arise.  

In closing the virtual roundtable, Colizzi stated:

“Healthcare wouldn’t function without the supply chain and the important work the participants of this roundtable do. We truly appreciate what you have been through in the past year and a half. We urge you to continue sharing your perspectives on the situation and what you need from us to better serve your clinicians and patients. In turn, as we leverage technology and manufacturer relationships to better understand the impact of current challenges and gauge future risks to product availability, we will continue sharing this information with you. Together as an industry, we can pave a stronger path forward but it requires all of us to work closely together.”

1 Medical device makers plead for computer chips in global shortage: 6 things to know, Becker’s Hospital Review, October 6, 2021,

2 Supply Disruptions Are Hitting Home-Based Medical Care, InsideSources, October 6, 2021,

3 How supply chain chaos and sky-high costs could last until 2023, FreightWaves, October 4, 2021,

4 Allocations: Best Practices For Conserving Medical Supplies During Shortages, HIDA, October 5, 2021,

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