January 2022 – The Journal of Healthcare Contracting
In early November, the White House released key performance indicators measuring progress in clearing bottlenecks throughout the U.S. supply chain. The metrics showed an “abnormally high” number of container ships awaiting berth at the ports of Los Angeles and Long Beach, which together handle 40% of containerized imports entering the country.1
Congestion at major ports of discharge translates to product backorders and delays further down the supply chain across industries. Increased freight, transportation and materials costs — along with labor shortages — also factor into this.
However, if we narrow the focus to the healthcare supply chain, the short-term outlook materializes as a steady state through the end of 2021, with relief just over the horizon. “We hope to see improvement in 2022 as we all learn how to better navigate the landscape,” says Jack Slagle, vice president of category management at McKesson Medical- Surgical.
“It’s just a slow and murky supply chain right now, and it will take time to dig out of transportation challenges,” adds Slagle. “The good news is that manufacturing lines are up and running, and overall production is healthy.”
Amid current supply chain uncertainty, McKesson monitors more than 41,000 critical care products and communicates areas of concern to customers. Proactive oversight reveals that most suppliers’ production levels are at full capacity for goods needed by primary care providers, according to Slagle. For instance, after periods of widespread shortages, personal protective equipment and infection-prevention items (for example, gowns, N95 masks and gloves) are readily available.
“This is largely attributable to McKesson’s due diligence to diversify and expand our domestic and global supplier base to ensure that we are providing our customers with quality products from socially responsible manufacturers,” Slagle explains.
At-risk categories include durable medical equipment, exam tables and other exam room items that have extended lead times. Other challenges vary by manufacturer. “Suppliers that produce full truckload shipments of large, bulky products are typically in a tougher situation than a supplier that produces sutures,” Slagle points out.
Moving forward, enhanced healthcare supply chain management is going to require transparency, collaboration and frequent communication between distributors and suppliers. Organizations across the medical supply chain must work together to help improve production and smooth out problem areas in order to achieve a “new normal.”
McKesson’s recent action items include running backhauls to suppliers, expanding ordering lead times and providing more accurate forecasting to customers. Additionally, some suppliers have agreed to cut back production in low-demand categories to help increase and expedite production in high-demand categories.
Assistance and advice for providers
Just as suppliers and distributors need to collaborate, healthcare providers should maintain an open dialogue with distribution teams regarding supply chain requirements. According to Scott McDade, company relentlessly strives to improve customer service levels and can help in the following areas:
- Working with manufacturers to ship products directly to customers
- Utilizing technology and data analytics to view current inventory levels and cross-reference for alternative products
- Requesting formulary adjustments and/or identifying conservation strategies for critical and high-demand categories
- Expanding customers’ networks to include neighboring systems, local manufacturers and suppliers
Further, as the cold/flu season approaches its peak, primary care practices must make sure that they have enough vital supplies. “Plan, prepare and perform,” advises John Harris, vice president of strategic accounts, laboratory at McKesson. “Proactively work with your distributor to assess market conditions and stay up to date with your product needs and availability. This includes monitoring disease prevalence in your area and understanding trending patient care needs and acuity levels. [And] have flexible protocols in place to accept alternative options and methods if you can.”
Expect to see more physician offices and retail pharmacy chains setting up clinical services, including rapid COVID tests and other lab offerings. Harris noted that McKesson plans on being ready with respiratory testing solutions it can administer to patients at the point of care.
Managing day-to-day inventory concerns
It takes a resourceful collaborator to work through the unique medical and pharmaceutical supply chain issues that have cropped up at health systems and provider practices across the country. McKesson Medical-Surgical’s experience includes these recent examples:
- When a customer needed 100 wheelchairs to support a vaccine center, only 40 were available at the time. McKesson searched for alternatives through its SupplyManagerSM online ordering tool, which enables product comparisons, and located 60 transport chairs as acceptable substitutes.
- Another customer requested a specific type of hand sanitizer for wall-mounted dispensers at their facility. Although the exact sanitizer was not available, McKesson worked with three different manufacturers to ship alternative options from their existing inventories of ready-to-sell products.
- When a health system needed a large order of traditional crutches, which were unavailable, McKesson supplied forearm crutches as a viable alternative.
- Nurses at another health system needed an out-of-stock size of surgical masks. McKesson located a supply of children’s masks that successfully completed the order and fit the nurses who needed them.
Staying ahead of the curve
As we look toward the first half of 2022, healthcare supply chain stakeholders — public and private — are going to prioritize medical supply movement through the U.S. transportation system. Consequently, flexibility, teamwork and planning are going to prove key components of effective supply chain management in the months ahead.
Customers should keep in mind that distributors and their representatives can “do the heavy lifting for you,” comments Slagle. “McKesson specializes in the non-acute, alternative-site distribution business and can provide the solutions and strategies that support getting customers through some of the recent challenges.” Nonetheless, he recommends, “If you have significant product needs or are working on an expansion project that will require new equipment, large supply or pharmaceutical orders, let your distributor(s) know as soon as possible. The more time you allow for order planning, the better the outcome will be for you and your patients.”
Concurrently, healthcare providers can do their part to help avoid potential supply chain concerns. “Stay in close contact with your distributor to understand the measures they are taking and categories that may present challenges in the near future,” suggests McDade. “Take action now to build alternative product formularies so you can make decisions before an issue arises.” Finally, “Make sure your teams exercise conservation efforts in at-risk categories,” he adds.
In an environment of across-the-board collaboration, organizations of all types are committing resources to help improve the medical supply chain. McKesson plans on continuing to advocate for providers in nonacute, alternate care site facilities “to make sure we have the appropriate processes in place to get products to physician offices, surgery centers and even patients’ homes,” observes McDade.
“With time and patience, we are confident that things will continue to improve, and we are working hard to make this a better supply chain overall,” Slagle concludes.