New Allocation Best Practices Work Toward Harmonizing The Supply Chain

Care providers, distributors, manufacturers, and GPOs contributed to resource recommendations


December 2021 – The Journal of Healthcare Contracting


By Elizabeth Hilla, HIDA SVP

When pandemic-related demand for personal protective equipment exploded in March 2020, medical supply distributors responded by doing what they do best – working alongside their healthcare provider customers as trusted partners. They tapped into their logistics and planning expertise to rely on a tool used in times of short supply – allocation. 

The pandemic underscored the usefulness of allocation. It preserves inventory for customers as long as possible during a shortage, ensure that customers receive some portion of a limited supply at previously agreed upon prices, and prevents hoarding. It also makes it more difficult for opportunistic brokers to buy up limited supplies and resell them to the highest bidder – a familiar scenario at the onset of COVID-19.

Understanding that strong alignment and communication between healthcare trading partners is more important than ever, HIDA last year convened an expert workgroup to develop specific, best practice recommendations for medical supply allocations. The initiative lies at the heart of HIDA’s Healthcare Supply Chain Collaborative, whose mission is to transform the healthcare supply chain through best practices for processes and data.

The workgroup’s result: a white paper with steps specific to distributors, manufacturers, care providers, and group purchasing organizations, along with a set of standard definitions. The new resource, “Allocations: Best Practices For Conserving Medical Supplies During Shortages,” is available to download at no charge from HIDA.org/Distribution/Resources/White-Papers. It addresses transparency, information sharing, calculations and processes, and specific challenges. Among the recommendations:

  • Manufacturers should set allocations to their distributors, and allow their distributors to set customer allocations, to prevent customers from receiving conflicting information.
  • The baseline period for allocation calculations should be the same quarter from the prior year.
  • When communicating allocation amounts to trading partners, the supplier should provide units not just percentages.

Allocation has always been an important tool for conserving supplies during a shortage, but each organization throughout the medical products supply chain seemed to take a different approach. We believe these new recommendations are an important step in aligning the processes.

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Elizabeth Hilla – For more information about the Health Industry Distributors Association, the Healthcare Supply Chain Collaborative and related resources and events, visit HIDA.org.