Healthcare Supply Chain

Healthcare Supply Chain

Healthcare Supply Chain



Healthcare Supply Chain


Healthcare supply chain constitutes the resources required to deliver health services to clients, in this case, patients. In healthcare, the patients are the consumers, and the product they expect from this market is improved health at an affordable rate. In general healthcare supply chain include the resources required to deliver quality care to clients.

In healthcare, supply chain management is very complex as well as a fragmented process. It involves obtaining capitals, managing supplies and distributing goods and services to providers who in turn deliver to the clients. In order for the healthcare supply chain to complete, information about medical products and services go through several independent stakeholders who include manufacturers, providers, hospitals, insurance companies, regulatory agencies, and group purchasing organizations. The healthcare supply chain begins at the manufacturer where the products are produced and sent to a distributor. Depending on the product, hospitals can directly contact the manufacturer to order inventory or a distributor or can rely on a group purchasing organization which enters into a contract with the medical product manufacturer on behalf of the health institution. The products are then sent to the hospital, where they are kept as inventory for providers and patients. The duty of the healthcare organization is to ensure that there is enough inventory and patients have access to possibly life-saving apparatuses.

The participation of regulatory agencies is another aspect of the health care supply chain. These agencies include the Federal Drug Administration, Medicaid, Medicare, private and other health payers (insurance providers). The role of these agencies is to ensure that every commodity is fit for the patient and whether hospitals will be reimbursed for it on covered patients.

Supply chain management

Supply chain management is the management of vertical (up and down) relationships with suppliers and customers to ensure superior customer care value is achieved at the least cost possible to the entire supply chain. The uniqueness of healthcare supply chain management is because every involved party has specific interest to protect. Different stages in the process may concentrate on their own interests. For instance, healthcare providers may prefer a certain product because they were trained with it, while the hospital administration may favor one that is cheaper. The objectives of the supply chain are not usually aligned within an organization, which means the management of the process is most times inadequate and fragmented (Kwon, Kim, & Martin, 2016). The management has to consider various requests and views before settling on product budgets.

Because the supply chain management is aimed at maximizing customer value, their input is equally as important in the management process. The conscious effort that is applied by every part of the supply chain in effective and efficient ways considers the needs of the customer. Providers may consistently order the same glove sizes, but the preferences of the patients vary with some requiring custom products, such as options that do not include latex depending on their health status.

In general, management of the supply chain entails a combined effort of organizations to ensure that medical products reach the patient who is the end-user in the case of healthcare supply chain management. Since the end product includes the welfare of the patient, all items, including the tools used by providers, are considered for patients. Supply chain management involves physical flows which are the manufacture, transportation, and storage of medical products and constitute the physical part of the supply chain. The other aspect is the information flows which, as the phrase suggests, is the coordination of physical flows through the sharing of information.


Leadership in the supply chain entail gathering intelligence to inform decisions and creating relationships with various stakeholders and suppliers. In small hospitals, the supply chain leader often doubles in a different role. In large health organizations, entire departments are dedicated to the supply chain and work the logistics systems beginning from research and information analysis, distribution, market analysis, legal considerations and strategy. The supply chain leader is the person in charge of these departments. The supply chain leader may be a specialist in supply chain or another high-level manager in some cases, the chief executive officer.

Leaders manage people and relationships, and its effective execution is of great importance in that it ensures that patients do not lack services by hospitals missing tools or inventory. They are expected to lead a team to build an effective and efficient healthcare supply chain aimed at minimizing cost through collaborating departments within institutions and external stakeholders. The difference between healthcare supply chain leaders and those of other industries is that they are focused more on providing quality services to the customer and generating revenue only holds a secondary position.


Healthcare supply chain planning is the process of planning medical products from the point where it was a mere resource to the patient. Overall supply chain planning includes production planning, distribution planning, demand planning, and sales and operation planning. Planning outlines the best way to meet the needs that arise from the demand plan. Healthcare supply chain planning regulates processes to ensure that supply and demand are balanced in a manner that achieves the best cost. Demand planning ensures that the demand is anticipated to make sure that patients can find medicine whenever they are prescribed. By effectively planning the demand, the supply chain is able to anticipate peaks where a certain product would be highly on demand such as flu season.

Best leadership and management principles

The core of a healthcare supply chain management is to ensure that the patient gets the best service at the lowest prices by coordinating the actions of various departments and influencing various stages during the distribution process. The leadership and management principle from a collaboration perspective ensure a smooth collaboration between every fact involved in the supply chain network that responsible for achieving the goals of the supply chain at the most basic level. The best supply chain leaders are those that have actual experience with every part of the supply chain, which allows them to have a deep knowledge of what every stage of the cycle is about and what it involves.

The other principle is the team approach. It is unrealistic for a supply chain leader to assume that it is their sole responsibility to make the supply chain work by handling each task required to coordinate the supply chain management process. The team approach allows the leader to facilitate the orchestration of logistics by selecting people with matching skills, delegating the work and upholding performance standards. Effective supply chain processes encourage initiative from partners, providers and stakeholders throughout the supply chain. Ideally, collaboration creates an environment where every partner involved benefits. This is reflective of the clear goal of supply chain management which is to effectively tie together various aspects of hospital functions, information systems, human resources, market analysis, as well as research and development. The best principle in this scenario thus is to create a behavior of collaboration, motivation and the motivation to innovate.

The other principle, which is futuristic, and entails an innovative spirit. Healthcare supply chains should be lead today with people that make intelligent use of information tools such as industry metrics and market data to guide decisions and ensure innovation. Innovation is central to efficient supply chain management. Good leaders stay up to date with market trends, are aware of logistics technologies and systems, and are always on the lookout for ways to provide improved services for patients.

Strategic Sourcing

Strategic sourcing is very crucial as it has a practical impact on every aspect of business and a great deal on the supply chain. Strategic sourcing is a collaborative practice that gives an organization the opportunity to align its purchasing capabilities with its general value proposition. An organization improves efficiency and quality by creating a strong and reliable supply base. There are various benefits of strategic sourcing, one of which is the reduction in costs. Every institution spends a good amount of its revenue on purchases, and about 70% of procurements savings can be attained through strategic sourcing (Kulkarni, 2018). Strategic sourcing simplifies procurements processes, controls costs, and maximizes value for every amount spent.

Strategic sourcing aides the management of risks beyond compliance checks. It helps with the broader inherent risks, especially when dealing with the point of care Technology devices, which are very expensive. For care technology, strategic sourcing allows hospital administrations to prioritize performance metrics and objectives, guaranteeing continuous risk management across crucial procurement activities. With technology, hospitals will consider elements beyond cost, especially innovation, flexibility and the supplier’s sustainability. Building relationships may mean faster lead-times, reliable fulfilment, greater quality and flexibility for negotiation. If properly done, strategic sourcing creates an economic advantage by aligning the goals of the vendor with that of the buyer.

Demand Forecasting

Demand forecasting is very important in the health care supply chain. As mentioned earlier, there are patients that want custom medical products due to several reasons, particularly those that can be considered premium based on their ability to pay. There are various techniques that supply chain management can use for demand forecasting. One is the survey method, which covers the future purchase plans of patients and their goals. Considering the collaborative approach to supply chain management discussed earlier, surveys allow for the inclusion of consumers in the healthcare supply chain. Surveys collect information on the kind of services the consumers anticipate in the future. Surveys include expert opinions about a certain product, the Delphi method and Market experiment. Supply chain management must pay special attention to expert opinion on a product considering the nature of products in the healthcare industry. The Delphi method, on the other hand, involves decision-making by a group of experts who provide an opinion on the demand for certain products in the future (Côté & Smith, 2018). A new product may be introduced that providers may consider more potent in dealing with a certain health condition which means they will influence an increase in demand.

Importance of Transaction Files

Transaction files contain transaction information such order record which suggest which items have been consumed and by what rate. By checking the history of preference in the transaction file, the supply chain process ensures that clinicians have the tools required for them to ensure quality. Purchasing decisions are very impactful and the guidance of transaction files is essential because the same pattern created in recent history is likely to be repeated and a hospital administration would like to ensure they have the right tools and medical products in response to demand.


The one size fits all supply chain approach initially adopted by various pharmaceutical and medical device companies is not applicable in practice. Health care supply chain require intelligent segmenting guided by the product characteristics, clinician preferences and customer requirements. Products with varied features should not be forced down the same supply chain process because the result is multiple inefficiencies such as unbalanced inventory. By segmenting on the basis mentioned, organizations can develop forecasting, distribution strategies, production for each category.


By utilizing data and harnessing prices, health care organizations can be able to manage inventory better and build more informed purchasing contracts with suppliers and manufacturers. An effective healthcare supply chain process incorporates the input of every interested party. Having all department on board is particularly a crucial strategy in optimizing the supply chain. For this reason, a leadership technique that supports collaboration is essential. Building strong relationships through strategic sourcing save on costs, ensures that a health organization is dealing with a sustainable supplier and minimizes risks beyond cost. Demanding forecasting enables health organizations to define the items that are required and ensure that inventory is balanced.


Côté, M. J., & Smith, M. A. (2018). Forecasting the demand for radiology services. Health Systems, 7(2), 79-88.

Kulkarni, P. (2018). Optimizing strategic sourcing in the healthcare supply chain with consideration of physician preference and vendor scorecards.

Kwon, I. W. G., Kim, S. H., & Martin, D. G. (2016). Healthcare supply chain management; strategic areas for quality and financial improvement. Technological Forecasting and Social Change, 113, 422-428.