Hospital Supply Chain Best Practices
Supply chain management is nowadays a red-hot buzzword in the health sector, and its importance grows tremendously every few months. In addition, most health facilities struggle with tight budgets, forcing them to pay more attention to cost efficiency strategies throughout their organizations.
This is the very reason why the supply chain has come under increasing scrutiny. As a result, the department is ripe for substantial savings in various areas and cuts costs for many health facilities.
But for most hospitals, supply chain management does not only entail tracking inventory acquisition and where each item goes after purchase. In fact, it’s among the top expenses for healthcare providers.
But while only a handful of organizations can acknowledge having a very effective supply chain management process, most industry stakeholders agree that it can cut costs, grow revenue, and enhance the quality of care.
But it’s not as cut and dry.
A Challenging Supply Chain Landscape
Despite their willingness, various roadblocks limit healthcare providers from achieving their optimal supply chain efficiency. Common challenges include:
- Lack of resilience – The pandemic situation has exposed a greater need for resilient hospital supply chains. Healthcare organizations now must enhance their adaptability to shifting COVID-19 conditions while bracing for the post-epidemic “next-normal,” but this hasn’t been an easy feat for most companies.
- Inadequate visibility – Poor visibility is always the root cause of lack of visibility in hospitals, specifically limited access to real-time, consumable, centralized data from siloed systems and various data sources. This makes it harder to understand what you need, what’s available, and future demand expectations.
- Cost management – At the peak of the pandemic’s first wave, costs of medical supplies and personal protective equipment sored, and supply costs are anticipated to be the most significant expense for health providers. In addition, the lack of visibility facilitates unnecessary inventory decisions, leading to delayed processes, waste, and high carrying and inventory costs.
- Integration and interoperability – Technology, process, and organizational integration hurdles hinder visibility and increase costs. For example, most hospitals can’t integrate data across disparate ERP (Enterprise Resource Planning), external sources, and legacy supply chain systems or ensure interoperability across tools like RFID barcode readers.
These are only a few key challenges encountered within most hospitals’ supply chains. But despite the complexities, paying attention to several hospital supply chain best practices can ease your management and help you meet your overall objectives.
Effective Hospital Supply Chain Best Practices
The following best practices will help you avoid mistakes and make the right moves as you seek to achieve a well-managed hospital supply chain:
Develop A Strategic Sourcing Approach
You’ll find enormous value by creating and implementing a well-thought-out approach to strategic sourcing. Begin with defining purchasing responsibilities in your purchasing department.
Initially, this department only handled capital and consumables, but the scope has broadened in the past few years. Currently, this department is responsible for purchased services, IT management, and service contracts.
So outline your GPO’s (group purchasing organization) responsibilities and acknowledge any existing local agreements. Next, review your GPO compliance flexibility level. Again, a third party can offer valuable insights whenever you’re stuck.
Ensure Accurate Inventory Repositories and Product Data
A healthcare provider must prepare to purchase the right product, while a supplier should deliver the right product. So always do the following:
- Ensure accurate product identifiers and product data sources
- Ensure transparency in inventory items
- Offer tracking data on the items used and required
- Constantly enhance your current data’s shred repository
Review Your Purchasing Controls
It would help if you also heightened your automation and purchasing controls. Begin with examining your purchasing policies and procedures, including order authorization. You’ll then deploy a reliable ERP system for electronic purchase orders to improve inventory management precision.
Plan to acquire an EDI system if you don’t have one. Electronic data capturing will enable a more accurate inventory master file. Technology that can enhance your hospital’s purchasing process may include automated supply dispensing, barcoding, and electronic payments and invoicing.
Enhance Turnover Time and Order Accuracy
Mistakes during ordering sometimes cause clinical errors. Erroneous orders could leave your hospital without some tools for specific procedures. Furthermore, patients might get the wrong medicines, hence poor outcomes, potential malpractice lawsuits, and the risk of revenue loss. So always pay attention to accurate ordering and timely supplies delivery.
When your orders are fulfilled accurately, you’ll avoid wasting time with reordering. That’s why you need order controls to enhance your hospital supply chain efficiency. For instance, a computerized provider order entry system cuts ordering turnaround times and eliminates transcribing and ordering mistakes.
Create Visible Demand Signals and Forecasting
Most suppliers have limited visibility into products out in the field despite the need to have a projected plan to map the direction of the money. Proper company supply chain management requires accurate production forecasts, logistics, and procurement.
That’s why it’s essential to deploy a shared infrastructure that connects the healthcare community for enhanced visibility. You should also enable aggregated data sources to enhance demand planning and forecasting.
Consider evaluating what you would have lost with an inaccurate forecast versus what you would have saved or gained through improved forecasts.
Accurate Demand and Supply Forecasts
To resolve acute shortages, you must identify the deficit’s root cause and focus on expanding the available supply. From the scarcity of medical supplies and COVID-19 personal protection gear amid skyrocketing patient flows, it’s clear how crucial it is to protect health workers. Increasing ICU beds won’t help if you don’t have the personnel to serve patients.
Staying on top of supply shortages requires excellent knowledge of the entire supply chain inventory. Review your suppliers’ capacity while observing consumption rates and demand patterns to forecast your hospital’s future inventory requirements. Predicting shortages on time can improve your chances of addressing them before a crisis.
Create Visible Demand Signals
Most suppliers have limited visibility into products out in the field despite the need to have a projected plan to map the direction of the money. Proper company supply chain management requires accurate production forecasts, logistics, and procurement.
That’s why it’s essential to deploy a shared infrastructure that connects the healthcare community for enhanced visibility. You should also enable aggregated data sources to enhance demand planning and forecasting.
You can achieve this by evaluating what you would have lost with an inaccurate forecast versus what you would have saved or gained through improved forecasts.
Consider Careful Contract Management
It’s common for hospitals to let GPOs handle contract management, leveraging contracts based on your negotiation power. This substantially cuts product and services costs. However, it’s also crucial that you understand the contract pricing.
Typically, service pricing is highly dependent on competitor rates and health plan contract payments. Therefore, your hospital’s pricing structure must address the market forces.
But if you don’t review your market forces and contracts, you may end up paying too much. Furthermore, you must evaluate your contracts meticulously for any “strict confidentiality clauses” on the negotiated prices.
Implement an Effective Pricing System
Understanding costs can help our management deploy an effective pricing strategy. A cost accounting system can help you process comprehensive data regarding a service’s actual and incremental costs. You can also support your pricing using Medicare cost allocation and the charge to cost ratio.
A strategy will help you create a pricing system, and it’s in your best interest to know the cost-to-charge relationship. Furthermore, you must also save, manage, and monitor data on expenses like labor and supplies while keeping an eye on your competitors’ pricing.
Publically and commercially available databases will help you with this. You can also leverage tools that provide insights into cost reduction opportunities, pricing, and value creation. What’s more, you can leverage a comprehensive cost-saving solution.
Involve Every Department When Making Supply Chain Changes
As supply chains minimize costs along the way, managers might recommend changes that don’t impress clinicians. But you can avoid this by involving all employees in decision making, which entails creating value analysis and product teams.
All stakeholders must be available to discuss effective strategies and establish great communication channels, and medical staff must understand the hospital’s supply chain strategies and goals.
Supplies and equipment affect virtually every department, and vital tasks require senior leadership support and participation of different teams.
Gather Information and Automate Functions
Gathering as much information as possible enables effective supply chain management. In addition, a wealth of information can help you understand various departments’ trends and note opportunities for improvement.
You can partner with a third party delivering business intelligence on the different ways of saving on consumables, purchased service engagements, and capital. In addition, continuous savings monitoring and broadcasting help your hospital’s leadership and teams understand progress.
Leverage dashboards for level pricing to avoid paying different prices for a service or product. Furthermore, you must centralize purchases and savings tracking and invest in robust analytics and automation solutions. These ensure a less daunting supply chain management and make the process a strategic asset for your organization.
Final Thoughts
Healthcare providers have a unique supply chain compared to other industries. Yes, it involves continuous product acquisition monitoring and their route from source to destination. However, most of these supplies are a matter of life and death. What’s more, comprehensive supply chain management can be an additional expense.
Fortunately, the above hospital supply chain best practices can help you push through the numerous hurdles and complexities. Furthermore, a cost savings solution will help make your work easier, where VIE healthcare Advantage comes in.
Being the only comprehensive solution available, the solution can help you eliminate unnecessary costs, optimize cost information analytics, benchmark your costs, accelerate cost reduction, and measure your contracts’ effectiveness and performance.
Speak with our margin improvement experts today about your hospital supply chain.