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Rx for Healthcare Supply Chain

Healthcare has been a market defined by its own challenges. It also has customers (its patients), and being in business of saving lives, the emphasis on value creation, customer service and profit motive is in no way insignificant to other sectors. Even so, it remains strikingly similar to the conventional market place.  In the context of our discussion, this blog entry in two parts looks at healthcare supply chain which comes with its share of complexities.

Having a huge number of intermediaries, high value of products and service levels needed to accommodate highest levels of emergency etc., underlines the battle which supply chain personnel wage on an hourly basis. The sheer nature of this industry makes supply chain inefficiencies a matter of life or death.

Supply Chain Management (SCM) both enabled by critical process and systems, continuously creates value for customers. It conforms to economists' view of value created, in terms of the utilities which are of "form", "possession", "time" and "place".
SCM in Health care is quite often considered by practitioners to be more complex and an interesting management concern. This is more so because it deals with a "bouquet" of products and services that make up the philosophy of "Patient Care". It starts with necessary dietary/food supply chain for a hospital, drugs, medicines and goes on to encompass the gamut of medical devices and equipments needed to service the patient. This bouquet is extended further with the portfolio of services including procurement and transportation, taking into consideration the constraints signature to the industry.
Supply Chain segmentation is a methodology which helps us answer how many supply chains do we run in an organization and what kind of distinct interventions are needed across the product/service portfolio. By SCM segmentation we mean categorization of your products and services with the customer and his/her requirements in mind. It should also encompass the different channels that are leveraged to serve different customers (for example retail /institutional customers).

We shall delve into few of these distinct SCM interventions which can make a difference to healthcare and the way constraints are dealt with, with the help of these interventions.

1. Inventory Management and Rationalization

Surgical equipments, drugs, patient support equipments and devices need to be subjected to inventory management techniques on a routine basis. The problems faced by traditional pharmacies include the lack of a standardized process for stock taking, visual inspection of on-hand quantities and reconciliation of received goods against the bills.
A rationalization can be carried using the velocity - value analysis more commonly known as ABC analysis. Here, the categorization can be carried out based on the velocity and value and different stocking benchmarks can be set for each of these categories. On a different note some experts look at this as just a mathematical model and argue that in healthcare every drug is important, but this method approaches the issue scientifically.
The unique challenge here to have an efficient process to analyze, monitor and manage the lead times of SKUs needed. A classification for SKUs can be carried in terms of the supply lead times taking into consideration the critical, non-critical and scheduled pre-operative cases the healthcare organization is going to deal with.
Applying the classic concepts like EOQ for inventory benchmarks can make up for lost time in emergencies.

2. Temperature controlled needs

The American Pharmaceutical Review points to the fact that roughly more than half of the total pharmaceuticals sold in the world have temperature sensitive transportation and handling needs. Regulatory enforcements from bodies like IATA, United States Pharmacopeia have enforced special rules for handling, storage and transportation of temperature sensitive products. In a report by WHO, 25 % of all vaccine products reach their destination in a degenerated state. This further emphasizes the need for system-enabled cold chain data management, monitoring and transportation services to ensure perfect order fulfillment in the desired state.

3. Reverse Logistics for waste management

Often neglected yet the environmentally responsible side of  healthcare supply chain is the reverse flow of waste including  disposal, recycling and picking up from the point of usage. Here the intervention is in the form of a well defined reverse logistics policy post-classification of the waste, for example - radioactive, hazardous, bio degradable or infectious. Each of these categories could have differentiated handling policies including mode of transport.

We shall discuss few more interventions along with observations from the industry in the next blog entry.


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