Since I was preparing for a meeting related to healthcare supply chains, I dug deep into the topic and thought it would be valuable to share the findings. In reviewing baby Tylenol /Motrin to adult diapers to medtech and pharmaceticals, supply chain disruptions have eased in some areas but continue in many others. As is typical in supply chains, the disruptions and issues move, but they have not disappeared.
Healthcare Supply Chain Examples
Several key points emerged from a review of of the the healthcare supply chain.
- Baby Tylenol & Motrin shortages: It has been blamed on a spike in fevers: however, uneven demand (for when illness will occur) is quite normal and will not ease. Inventory was simply not available in the “right” place at the “right” time, stemming from supply chains reliant on China which were negatively impacted with Zero-COVID policies with insufficient inventory and/or capabilities to compensate for these disruptions.
- Doctor’s offices & hospital systems: Although shortages have eased, sporadic shortages of critical items remain. From crutches to surgical supplies, items are not available in the “right” place at the “right” time. Again, manufacturing and inventory policies should be reviewed.
- Labor shortages abound: No matter which area of healthcare, everyone mentioned labor shortages. There simply aren’t the appropriate skills and resources in the “right” place at the “right” time to keep healthcare systems running smoothly. I have experienced this frustration as well!
- Taking control of manufacturing: It came up in medtech, but also in several other sectors. There is interest in reshoring, nearshoring, friendly shoring, expanding capacity, and sourcing new suppliers. In essence, there is a mantra of producing in “Asia for Asia”, “America for America”, etc. The bottom line: Reduce the risk in supplying customers.
- Regional/ local supply chain: In the same vein of taking control, companies are also focused on sourcing closer to supply hubs. For example, in a healthcare manufacturer, they have found a local supplier to fabricate and procure most parts needed for upgrades to machines. That has made a significant difference in mitigating long lead times and successfully serving customers.
- Pharmaceutical: There are definite concerns about the active pharmaceutical ingredients (APIs) risks concentrated in China and India. Beyond that issue, there are significant price increases in certain raw materials such as chemicals. Also, even though there is a high cost and long lead time to qualify new suppliers, companies are biting the bullet and pursuing alternatives. Additionally, to manage risk, supply chain professionals are looking further into their supply chain to mitigate risk. Otherwise, disruptions will continue.
- Reliability remains key: No matter the sector, there are concerns with reliability. Reliability is trumping cost. If air is more reliable than ocean containers, companies are sticking to air. If trucking is more reliable than rail, they will stick to trucking. If reliability cannot be attained, the source of supply is being evaluated.
- Capital equipment sector: is loosening up a bit.
Disruptions continue. Unfortunately, they simply continue to move. It seems a bit like that Whac-A-Mole game. What are the successful doing to resolve this issue?
Common Theme Emerges: Taking Control
The common theme is that those executives and companies taking control with proactive strategies are overcoming most of these challenges and are thriving in comparison with the competition. There isn’t just one way to take control. You could source additional suppliers, add capabilities, insource production, supplement internal resources, and there are many more options to pursue. Of course, the successful are not just taking control. They continue to prioritize service, manage margins and profitability (ie. pursuing cost reduction programs especially those that can achieve a win-win, adjusting pricing, etc.), and right-size inventory to manage cash flow. The “trick” is to achieve all three simultaneously.
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