How Supply Chain in the Healthcare Industry has Evolved, and Where It’s Going From Here

Healthcare supply chain management has come a long way. Just a decade ago the supply chain in hospitals included mainly manual processes for obtaining resources, managing supplies, and delivering goods and services to providers and patients.

Now, most hospitals no longer rely on manual processes to keep track of their supplies. While there are still a dizzying number of products and services that go through a hospital’s supply chain, along with an array of stakeholders, technology is helping to close the data gap in hospitals. Pen and paper have mainly been replaced as technology in supply chain management has evolved, and the industry is continuing to see considerable changes.

Where is healthcare supply chain management today?

Providers use a myriad of items, from medical devices to prescription drugs, personal protective equipment, office supplies, and computers. Employees involved in healthcare supply chain management are responsible for keeping stock levels that meet providers’ needs and making sure that inventory is properly maintained and recorded. However, managing the supply chain is not as simple as making sure providers have enough gloves.

The healthcare supply chain starts at the medical product manufacturer where items are produced and sent to a distribution center. Depending on the type of product, hospitals can either purchase inventory directly through the manufacturer or distributor, or the transaction can be conducted through a group buying organization, which establishes a purchasing contract with the manufacturer on behalf of the hospital.

Medical products are then sent to the healthcare organization, where the goods are stocked in inventory for providers and patients. The organization ensures that providers are not left without essential medical products and patients have access to potentially life-saving tools.

All of these steps in the supply chain rely on some degree of manual work complemented by some automating technologies such as barcodes or supply chain management software. However, because of the number of vendors and other stakeholders involved, the quality of the data in the supply chain isn’t ideal. This leaves hospitals lacking the data they need to drive a lot of the waste out of their organization and prevents them from negotiating the best deals with their vendors.

Where is healthcare supply chain management going from here?

The primary technology used as hospitals migrated away from pen and paper processes was barcode technology. Barcodes had exploded in retail industries over the last 30 years and became a mainstay in hospital supply chain management over the last 15 years or so.

Many healthcare organizations have found the data provided by automatic data capture technologies such as barcodes to be invaluable. By harnessing pricing and usage data, healthcare organizations can track and manage inventory more efficiently and construct more informed purchasing contracts with manufacturers. These insights through accurate data have saved hospitals untold sums of money.

Now, many hospitals and healthcare providers are looking to take the next step in their supply chain technology evolution. While barcodes were a huge step forward from pen and paper-based processes, they still left a lot of data on the table. Barcode technology requires user compliance to physically scan the barcodes on each box, which isn’t always a guarantee in healthcare. In fact, about 15-25% of all data goes unrecorded due to users not scanning barcodes. Barcodes also require laborious reconciliations to make sure that stock levels are accurate, again because users aren’t habitually scanning barcodes.

Hospital supply chain departments are now looking to smart, RFID-based supply tracking systems that can track real-time inventories without reconciliations and keep an accurate, real-time record of inventory usage. With this data, these systems offer up valuable insights that help to continuously improve PAR levels through data driven analysis. Hospitals typically suffer from overstocking or hoarding as a reaction to running out of stock when it is most needed. By having great data and planning properly, inventory levels can be minimized while ensuring stockouts no longer happen.

Advanced supply tracking systems such as iRISupply from Mobile Aspects can also reduce the amount of manual work needed to manage and re-order supplies. The biggest time savers are 1) the elimination of reconciling inventory to produce an exact on-hand inventory count and 2) moving from eyeballing of inventory to figure out what to order to having inventory management software tell you exactly what’s needed each day. Additionally, setting up an interface with the materials management system will automatically re-order inventory and reduce the time employees spend managing inventory. As the pandemic rages on, today’s healthcare environment is calling for hospitals and health systems to rein in their costs. More than ever now is the time for academic hospitals to invest in an Enterprise-Wide Supply Tracking System.

Hospitals need to have the data to react quickly to a dynamic healthcare environment. Therefore, a supply chain should be constantly on the lookout for new technologies that will help them to meet their mission. As barcodes make way for RFID technology, the industry will be looking for the next great technology breakthrough.