Opinion: Why the Healthcare Supply Chain Buckled Under COVID-19

June 1, 2020

Despite heroic efforts by hospitals across the country, the healthcare supply chain has struggled in the fight against COVID-19.

Despite heroic efforts by hospitals across the country, the healthcare supply chain has struggled in the fight against COVID-19. Current shortages include PPEs, ventilators, and drugs-and patients, physicians, and nurses are suffering grave consequences. While no hospital could have anticipated a supply chain disruption of this magnitude, they were unprepared.  

The healthcare supply chain has long operated decades behind other industries. Once considered a leader in innovation-hospitals were among the first companies to utilize enterprise resource planning (ERP) systems and materials management information systems (MMIS)-they have not kept pace. Resource limitations and competing priorities, including mounting pressure by public and private payers to reduce costs while improving quality, have placed supply chain optimization on the back burner. 

Many hospitals have yet to fully transition to automated supply chain management technologies and processes, and while they do use several tools to support supply chain management, these tools are not unified under one platform and are not fully integrated with EHRs and ERPs. As a result, hospitals can’t quickly track and analyze their data in order to use their limited resources most wisely. They also aren’t using supply demand forecasting technologies, which could have helped them better prepare for a disruption of this magnitude.   

Hospital leaders recognize healthcare supply chain shortfalls-and they did so even before COVID-19 hit the United States. In February, healthcare consultancy Sage Growth Partners surveyed 100 hospital and supply chain leaders. Only 11% of survey respondents said supply chain management in healthcare is on par with or ahead of other industries, and nearly half (46%) acknowledged that they manage the supply chain only moderately well, slightly well, or not well at all. 

Hospitals must ensure that when the next supply chain disruption arrives-whether that be a second surge of COVID-19, another infectious or viral outbreak, or an event such as a strike or natural disaster-they are ready. That means moving quickly to automate supply chain management, implement AI-based analytics that account for disruption scenarios, and incorporate demand forecasting technologies. 

They must also update and revise their supply chain management disruption contingency plans, as the models they had in place prior to COVID-19 were no match for an event of this scale and duration. Finally, they must create plans for secondary and tertiary resources, and begin developing coalitions with other hospitals to pool resources when necessary. 

The great news is that hospital leaders are already signaling a commitment to optimize the supply chain. In early April, as we approached the peak of the curve, Sage Growth Partners issued another survey to 138 hospital leaders. When asked to identify the technology solutions that have grown in importance over the past four weeks, supply chain analytics ranked second on the list-just behind virtual care technologies. Respondents also indicated that supply chain is now the second most important of their competing priorities, outranked only by patient safety. 

Of course, there are limits to what hospitals can control when it comes to the supply chain. This pandemic shows just how dependent the U.S. is on foreign supply, device, and drug manufacturers-something we must examine after this crisis subsides. In addition, the federal government has failed to adequately support the healthcare supply chain with additional resources. As of early April, the Strategic National Stockpile of emergency supplies was nearly depleted. According to reports, it contained only about 9,000 ventilatorsin early April, when New York state alone required an additional 37,000.  

Still, there are some elements of the healthcare supply chain that hospitals can control, and they must move quickly now to ensure they are more prepared for the next serious supply chain disruption. The speed at which they need to move cannot be overstated. Healthcare supply chains are likely to be tested again in a few months, and patients’ lives may hang in the balance. 

Todd Plesko is CEO of Syft, a leading provider of AI-enhanced inventory control and end-to-end supply chain management software and services for hospitals and health systems. He previously founded and led several healthcare technology companies.