Improve Efficiency and Cut Costs for a LEAN Healthcare Supply Chain

Healthcare, Supply Chain, Warehousing & Distribution Management
February 23, 2015

Healthcare Supply ChainTo see how challenging healthcare and medical device supply chain logistics are becoming, just watch consumer-targeted television ads for new medicine and medical equipment. The plethora of direct-to-consumer advertising for products from the latest prescription drugs and supplements to medical devices, highlights growth in products entering the marketplace.

For manufacturers and the logistical teams bringing products to markets and consumers, the challenge is expected to grow. Across the healthcare sector, profit margins are thinning as insurers and Medicare reduce reimbursements and buyers seek greater discounts.

Meanwhile, expenses are anticipated to increase with the implementation of various regulations, including elements of the Affordable Care Act.

Medical device and general healthcare organization supply chain demands are growing more complex with each passing year. This includes healthcare providers who must keep costs in check while needing to deliver an ever-increasing number of products. One analysis by McKinsey found that over the previous five years, the number of SKUs per packaging line in the healthcare marketplace has increased by 50% (“Building New Strengths in Healthcare Supply Chain,” 2013).

Faced with these issues, improved supply chain management can reduce cost-related issues facing the healthcare industry. Alternative logistics solutions can include technology, just-in-time delivery and warehousing, as well as novel and flexible logistics solutions and partnerships with logistics vendors dedicated to helping customers seek out best-in-class solutions. Together, these can help companies across the healthcare spectrum heighten performance, reduce costs, and ensure elevated levels of customer service and patient care.

Supply chain performance improvement allows medical device makers to address current issues and implement longer-term, strategic benefits, McKinsey reported. Such efforts reduce costs by reducing manufacturing lead times, cutting inventory levels, and even eliminating some product obsolescence, the company wrote. Supply chain optimization also can improve access and reduce drug shortages, increase product safety by thwarting intrusion of counterfeit products into the system, and even reduce medication errors, the company noted.

“Our analysis suggests that the healthcare sector can improve its margins by tens of billions of dollars and improve patient safety by making supply chain improvements,” the report stated.

Where can other improvements be achieved across the supply chain?

Start by reducing waste and duplication in the supply chain, including warehousing. This can be achieved through consolidation of shipments where possible, reduction of waypoints or touch points from origin to destination, contracting multi-tenant warehousing opportunities to share related costs and reduce unnecessary and inefficient space utilization, and introduction of just-in-time inventory management to further reduce storage costs.

Additionally, outsourcing where possible and turning to experts and third-party logistics providers where necessary can introduce innovative thinking to the organization and maximize opportunities previously not considered.

Ultimately, the goal of any logistics customer, provider and/or partner organization should be to infuse the practice and culture of operational improvement across the organization.

Today’s medical device and general healthcare supply chain will face continued and increasingly complex demands for delivering products to market, while keeping costs in check. Use of the latest solutions and the realization that a cultural, even creative shift may be necessary can help healthcare companies realize improved efficiency and reduced costs in healthcare supply chain logistics.

To learn more, download our white paper “Eliminating Waste in Healthcare Supply Chains” and learn how implementing LEAN can help you improve your healthcare and medical supply chain.

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Written by Keli Parker, Global Director of Product Development and Strategy for Ryder System Inc. With 25 years of experience in the supply chain arena, Keli serves customers in the healthcare, electronics, technology and appliance manufacturing industries.

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