Supply Chain challenges to Pharma industry and hospitals

  An Article on Supply Chain challenges to Pharma industry and hospitals

Healthcare sector is one of the largest and fastest growing sectors in the world. For this phenomenal growth, the prominent key drivers and the rising challenges  are-

- Globalization and the advancement of information and communication technologies

- Patient safety and security  

- Complexities in the supply chain due to rising demands from hospitals for pharmaceutical industries.

Supply chain management techniques which have successfully been employed almost throughout the segments of Industry are employed in health care sector also to face the above challenges. Like other segments, here also these techniques have successfully been employed to match supply and demand so as to supply the material in the right quantity, at the right place t right price, right product and most important at the right time.  

Why Supply Chain approach to Pharma industry and Hospitals?

A popular notion is that supply chain concepts can be applied largely to manufacturing operations and are not applicable to service operations. But this is not true.Like every Enterprise, hospitals and health systems are equally under pressure to control their rising costs of supplies primarily locked up in inventories consisting of pharmacy, surgery, medicines and drugs and yet maintain their ultimate obligation in providing timely, efficient and effective treatments to their customers (patients). The supply chain costs represent today the second largest expenditure category of hospital’s operating expenses next to costly manpower. These costs are increasing exponentially due to –

·         Growth in usage of medication  and very expensive and very clinically sensitive devices and implants

·         Service lines such as interventional cardiology and total joint replacement surgery using high value supplies such as supplants and drug coated stunts.

·         The rise in IT budgets at healthcare institutions

·         Increased cost of drug development, production and distribution

·         Cost of  packaging and labeling requirements of Drugs

It is as such important to have a close look on supply chain management system of hospitals with an Endeavor to make it efficient, integrated and synchronized. The subject popularly known as HSCM (Hospital supply chain management system) due to its potential in saving heavy costs and in satisfying patients has gained its prime importance in healthcare industry.  Senior financial executives as such these days need to recalculate the strategic significance of the supply chain and plan accordingly

Inefficiencies in supply chain unlike in other domains of industry may result in extreme cases even into death of patients. As such apart from cost reductions, an effective supply chain is very vital to human life and its longevity. Ultimate objective of this subject is to manage materials/equipments and manpower   like doctors, nurses and other supporting staff and treat patients and transform them into a healthy person at a reasonable and optimum cost in minimum time so as to satisfy their expectations through quality treatment. Innumerable flows between suppliers and customers, both upstream and downstream, have to be considered to strike a balance.

Supply Chain of Hospitals

Supply Chain ( also can be characterized as value Chain) of hospitals integrates suppliers, transport and warehouses and hospital services (including outpatient, emergency, in-patient, laboratory, radiology, stores and purchase, food, laundry and medicines /equipments) so as to serve the patients by optimum utilization of resources. The resources in terms of materials/medicines used in the hospital can be classified majorly based on their applications such as diagnostic, Surgical, Therapeutic, Bedside, Service, Engineering, Housekeeping and ICT.To substantially reduce supply-related costs, a hospital must develop a fully integrated enterprise wide supply chain in which all processes as mentioned above  are coordinated and supported by state-of-the-art technology. A pertinent question which should be asked to hospitals is whether your organization delivers  the right product to the right place at the right time and for the right price? If not then situation demands for a thorough check up of your processes and give your hospitals a treatment of ‘Supply Chain Management’.

How Improvements in supply chain in healthcare sector can be affected?

Basically the process improvement opportunities exist in five key areas: (1) contingency plans (2) supply chain integrity; (3) Demand pull model (4) Cutting down on too many intermediate partners (5) value visibility.
Contingency plans
As the supply chain involves factories producing medicines and diagnostic equipments, temperature controlled warehouses and distribution facilities to keep the material flow in order, what happens if a factory producing life saving medicine gets destroyed or the distribution facilities disruptions hamper the product flow endangering human life?   The most effective action is to develop systematic contingency plans, including factors like alternative production sites, manufacturing flexibility, factory-direct shipping capabilities, offsite backup distribution center capacity, and critical safety stocks.
Supply chain integrity

Quality assurance, such as lot integrity and tracking, is a crucial healthcare supply chain function. It ensures that patients receive safe therapies, and that problems are contained and minimized. New technologies, such as radio frequency identification (RFID), offer the prospect of ensuring supply chain integrity. Through automatic identification, traceability and visibility tools, healthcare companies are given the opportunity to make the Healthcare supply chain more efficient and accurate, and thus safer by:

·         Reducing medication errors

·         Making counterfeiting more difficult

·         Enabling efficient and effective traceability

·         Decreasing the production and supply chain cost

It is important here to mention here that revolutionary technology of  RFID  can greatly contribute to the healthcare and pharmaceutical  industry with Wi-Fi and voice over IP (VoIP), creating a single information system providing visibility throughout the supply chain. It track patients and hospital assets, improve patient safety, play a role in running clinical trials of drugs, manage critical care assets and hospital equipment, reduce counterfeiting of pharmaceutical products, reduce medical errors, and cut costs, thereby improving efficiency.

As a futuristic technology I would like to mention  that in future unmanned flying vehicles as drones through aerial route  would provide speedy delivery of crtical items like blood, medicines appliances to the hospitals enabled by the pharmaceutical firms. This would improve to fulfill the critical demands posed by hospitals on pharma industry towards patient life safety enabling doctors in performing critical operations in the operation theater. 

Demand Pull Model
Healthcare supply chains need to move toward an integrated "demand-pull" model, so that manufacturers have much earlier visibility into actual consumption. In many other industries, this integrated supply chain system has enabled the participants to align production and distribution much more closely with actual demand. All the channel participants can see and understand what they need to do individually and together in order to successfully lower costs and increase service levels. Healthcare supply chains would free up tremendous amounts of valuable resources by adopting this channel model; important elements, such as ICT and process control systems to provide real-time information at point of patient infusion/injection, are now being put in place.
Cut down too many intermediate partners
 The prospect of disintermediation, moving product directly from manufacturers to providers, is growing stronger in healthcare supply chains. This process offers important economic benefits. But it is only appropriate in certain situations, and it requires that manufacturers and providers develop new expertise and trust. To give a successful example from other segment of industry, Wal-Mart and Proctor and Gamble built a strong and sustainable relationship between them and the rewards were in terms of win-win situation for both of them to become world leaders in their respective areas.
Value Creation by individual partners
At present health care supply chains are fragmented and the current pricing structures and channel policies reinforce the inefficiency of this fragmented sector. Distributors negotiate volume discounts from manufacturers, and offer discounts to providers. What is important is to have trust in each partner and work towards common goal of value creation, which is the precondition for major improvements in supply chain efficiency. In well-functioning supply chains, each participant has an important role in creating unique, visible value as product flows from source to consumption. Instead of competing within the value chain, one supply chain of the hospital should compete with another value chain of the hospitals for sustainability, survival and competitive advantage..
Conclusion
Supply Chain Management in other industries has got its due recognition and this subject now is considered to be a  board level topic to solve intricate and new challenges rising in this critical segment. Now conditions are right for another round of major healthcare supply chain improvements due to  pressure on management to reduce costs and increase efficiency and have a customer responsive approach. This has happened especially after hospital chains of multinationals have arrived in India. Healthcare budgets are very tight, supply chains have critical vulnerabilities, and providers have significant opportunities for much-needed process improvements. The supply chain as such should be part of the enterprise strategic plan, incorporated across all components and service lines of hospitals. A hospital's or health system's strategic plan should include supply chain management as a key strategy for maintaining fiscal goals, improving quality and satisfaction levels, and addressing industry trends and developments. There is a tremendous scope of applying IT, telecommunication techniques and Automation in hospitals. The mantra is to concentrate on improving efficiency, quality, and responsiveness to patients and apply innovative methods of supply chain coupled with technology to achieve the end goals.

Written by Professor Akhil Chandra