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Rx for Healthcare Supply Chain part 2

In my last blog entry, we addressed core SCM concerns like special transportation needs, inventory management and reverse logistics and how these are instrumental for an efficient healthcare function. Breakdown at any point in this function has life or death implications. Taking this discussion further, let us touch on the need in this sector to collaborate better to leverage on the supply chain efficiencies of the intermediaries involved.

The Association for Healthcare Resource & Materials Management (AHRMM) and Centre for innovation in Health Care Logistics (CIHL), at University of Arkansas conducted a survey of Healthcare professionals to assess the state of health care supply chains. One of results that stands out is that, more than half of respondents indicated working in an immature supply chain with fewer than one in twenty respondents indicating the existence of an extended supply chain. In this context, let's touch on a few aspects particularly on the importance of player inter-relationships.

4. Procurement and relationships 

Relationships with trading partners hold the key! Most efficiency is derived by strong relationships between suppliers, wholesalers, and healthcare pharmacies. Typically it has been observed that wholesalers dominate the relationship with the buying and selling organization. The contracts are managed in such a way that the pharmacy is eligible for volume discounts as well as system related support for the much needed enablement of automatic order capturing and processing. This would pave way for processing larger amounts and volumes.
From a manufacturer's perspective it is of foremost importance to get in to the demand driven mode and eventually develop strong relationships with its customers. The pharmaceutical giant Abbot in the year 2006 carried out this exercise to think outside in and injected the feedback to its supply chain management philosophy. This gave the company to reach out to its diverse customer base, track the service they provided on agreed KPI s and develop methods to co create value

5. Logistical and behavioral aspects

A lot depends on who manages the show. Anybody would agree that to deal with uncertainty, keeping the buffer stock near the consumption point, i.e. postponing the push-pull boundary in the supply chain to the maximum extent. In a ground breaking joint study conducted by MIT and World Bank, named the "Zambia pilot", it was revealed that in pharmaceutical supply chains, a cross-dock level postponement was a better alternative than point of consumption.The reason cited for this "counter intuitive" result was the behavior of the staff at pharmacies that had become "complacent" that the inventory was not far away. This added to the laxity in the ordering process which negated the advantage of local inventory positioning.Getting a pulse of stakeholders, partners including pharmacists and physicians is found to be of a great benefit to improve efficiencies. There is a need for bidirectional knowledge transfer between partners on operational methodologies, guidelines and strategies to be followed.These processes (for example, inventory replenishment) can be streamlined to a great extent by technology-enabled SCM interventions.

6. Standards Adoption and transaction improvement

Last but not the least, there is a need to adopt global standards to improve day-to-day transactions. Pioneering this initiative is GS1, a not-for-profit organization globally responsible for making information exchange and traceability of goods seamless. This is particularly significant in this complicated value chain inundated with intermediaries. For decades Hospitals and suppliers have been playing the cat-and-mouse game over price, volume and scheduling discrepancies resulting in manpower loss. 
The aim of this initiative is standardizing the electronic vocabulary and to take this sector to similar milestone where retail industry is pertaining to bar code scanning. The use of Global Location number and Global Trade Item Number would give the much needed fillip to the collaborative nature of the business. The Success story shared at the GS1 site, shows that adoption of GS1 standards is a positive step in "eliminating costly EDI errors in pursuit of the perfect order. This example is a much needed encouragement and motivation for stakeholders and decision makers to champion the need for greater collaboration in their organizations.

Analyzing all these points I would be glad to know from readers if they think this sector is unique when we talk about supply chain initiatives? What do you feel about Supply Chain as a management philosophy specific to this sector?
Should there be a public private partnership model needed in this sector which could save millions of lives in developing and underdeveloped world? Would be a pleasure to know your thoughts.

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