Reducing Costs in the Healthcare Supply Chain
Healthcare is one of the most challenging environments for a supply chain to operate in. There is a culture of wanting to minimize costs as much as possible, but without letting patient care suffer. Moreover, heavy scrutiny is placed on operations not only by hospitals or GP offices themselves, but also interest groups, stakeholders, government bodies and even patients.
The result is an environment where the desire for a well-controlled accurate service is balanced with limited budgets, the need to find cost reductions and ways to reduce overall waste.
The most challenging environments often require the most innovative solutions and despite the issues, there are technologies that can now offer both an accurate, and cost effective service. However, to best understand how to save cost, it is important to examine what the issues are, and what makes the healthcare supply chain so complicated.
What are the challenges in the healthcare supply chain?
The healthcare supply chain is unique in its complexity for three main reasons. Firstly, there are an abundance of items that are needed to treat patients. These range from simple “everyday” items like gloves, pens, paper, and bandages to more specific items. Complex hospital machinery like MRI scanners or x-ray machines for example have a lot of variable parts and consumables that need to be topped up regularly. These items need to be kept in stock to provide patient care and often it falls on staff to ensure this happens. 78% of hospital staff still have to manually raise orders for anything they need. This often results in extremes of over ordering or stock shortages.
Secondly, the number of items is further muddled by the interest groups involved, all with slightly different goals. Hospital executives might favor a specific item for its cost while doctors prefer a different item for its quality. With more complex hospital equipment, different suppliers also become a factor as parts and consumables are rarely universal. Supply chain goals are not always aligned, so the outcome is a fragmented stock room with numerous different types of seemingly similar items.
Finally, there is the issue of the last mile. Once an item arrives at a hospital, it is extremely difficult to ensure it goes where it needs to. Hospitals are large buildings with numerous entrances, receptions and staff touch points. Some, but not all, will have dedicated goods in areas, but there are no guarantees drivers will go there first. The potential for items or parts to go missing is high and with cost being such a big factor, reordering stock is unacceptable.
This issue is frustrating for low cost consumables, but can become very damaging when items lost are replacement parts for hospital machinery. These parts are needed for repairs and if they can’t be found when the engineer arrives, not only is time wasted, but also the machinery is out of service for an extended period. The cost of this is high, but also patient care greatly suffers.
How can costs be kept low in such a challenging environment?
The issues above create a great deal of complexity. Much of this is intrinsic to the healthcare environment, but isn’t unassailable. Supply chains in other sectors have been able to manage complexity using technology, and while the factors that affect healthcare are unique, there is no reason to believe technology doesn’t hold the answer.
Having an inventory management system to keep track of, and reorder stock is a good starting point. Consumables, require regular reordering and with waste reduction being so important, it is inefficient for staff to be ordering their own items. A much better solution is to have a system which automatically reorders items when they fall below a certain threshold. With detailed stock management information, it also becomes much easier to root out overconsumption and waste. This is useful for reducing the number of multiples of similar items.
Finding a solution for the last mile
While tracking can manage the stock already onsite, overcoming the problems with last mile delivery requires a different solution. Arguably, a lot of the issues that arise in the last mile for medical deliveries occur because of hospital staff. This is understandable with patient care being a priority for hospital staff; asking them to take delivery of, and be responsible for, expensive equipment is not an effective use of their time.
Solutions to the last mile problem are looking to reduce the need for hospital staff involvement or remove it entirely. One such solution, the placing of Bluetooth enabled locker banks onsite to accept deliveries, is something we have pioneered at ByBox. Our lockers are accessed with an app that both engineers and delivery drivers can download. Delivery drivers deliver items into the locker and engineers get a notification when they have arrived. The process can be entirely automated and valuable parts won’t be left with hospital staff.
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