When identifying the complexities of healthcare supply chain management, the issue of backorders stands as a pivotal challenge that significantly affects both operational efficiencies and patient care. A recent Power Supply Advisory Group meeting unveiled critical insights into the pervasive challenge of backorders and the impact they continue to have on supply chain operations. This discussion not only highlighted the complexities inherent in the healthcare supply chain but also underscored the collective drive towards more resilient practices. Through the lens of this discussion, the urgency of addressing backorders in a manner that ensures operational efficiency and maintains the quality of patient care was palpable.
The Persistent Struggle with Backorders
The discourse around backorders in healthcare supply chains revealed a consensus on the urgency and complexity of this issue. "It is definitely still relevant," affirmed Suzi Collins, reflecting the sentiments of many professionals contending with backorder challenges. This acknowledgment underscored the necessity for strategic planning and adaptation, emphasizing the importance of resilience in the face of such challenges. Moreover, Matt Putman's observation, "We need to be able to trust the manufacturers, trust the distributors," highlights the foundational role of trust in navigating the complexities of backorders. This trust is crucial for establishing resilient supply chains capable of adapting to and overcoming these persistent hurdles.
Balancing Efficiency and Supply Diversity through SKU Management
A critical point of discussion was the strategy of SKU consolidation by manufacturers, aimed at streamlining operations but inadvertently complicating supply chain resilience. Deric Gallagher pointed out, "The reason that they're doing it is because they want less backorders," highlighting the intended benefits and unintended consequences of SKU consolidation strategies.
Gallagher further elaborated on the downstream effects of SKU consolidation, stating, "Not only are they costly to the healthcare provider, suggested alternatives may not work for all clinical departments, and finding an alternate manufacturer that isn't experiencing backorders can be difficult.” To mitigate the impact on providers, Gallagher proposed several suggestions for manufacturers, including early and constant communication, sharing demand data with competitors, and allowing a longer runway for the entire product lifecycle.
Onshoring vs. Offshoring: Quality, Cost, and Resilience
The group continued their conversation on onshoring versus offshoring (see last month’s blog post), exploring the trade-offs between manufacturing costs, quality control, and the agility of the supply chain. The group recognized the benefits of geographical diversification in manufacturing to bolster supply chain robustness. “And a lot of that is linked to offshoring,” suggested Deric Gallagher. He continued by saying “The quality piece is really the true root cause for many of these backorders," prompting a reflection on how quality concerns associated with offshoring could impact backorder prevalence and supply chain resilience. This nuanced approach to the onshoring versus offshoring debate emphasized the need for a strategy that accounts for cost, quality, and resilience in equal measure.
The Imperative for Transparent Communication
A recurring theme was the call for enhanced transparency and proactive communication from suppliers. Suzi Collins highlighted the significance of transparency, noting, "The lack of transparency I think is the other significant problem." This call for open communication underlines the pivotal role that clear, timely information plays in managing backorders effectively. The group concurred that fostering a culture of transparency is essential for enabling healthcare providers to plan and respond strategically to supply chain challenges.
Strategic Sourcing and the Quest for Autonomy
The meeting also dived into the realm of strategic sourcing and the degree of control healthcare systems have over their supply chains. "Who should drive this?" Justin Poulin queried, sparking a conversation on the dynamics between healthcare providers, Group Purchasing Organizations (GPOs), and suppliers. Jody Eastland emphasized the need for GPOs to take a more active role in advocating for their members stating, “We have had a focus on challenging our GPO more on scenarios with manufacturers that have not communicated well. I would like to see them not be so diplomatic in these situations where there are mass product backorders and be more of an advocate for their members.” This discussion also pointed towards a desire for greater autonomy in supply chain decisions, suggesting a potential reevaluation of traditional sourcing strategies to empower healthcare providers. It underscored the need for healthcare systems to assert more influence over their supply chain decisions, potentially redefining their relationships with GPOs and distributors.
Conclusion: Charting a Course for Supply Chain Resilience
The Power Supply Advisory Group's exploration of backorders in the healthcare supply chain served as a catalyst for a deeper understanding of the challenges and potential pathways to resilience. As the industry grapples with these issues, the insights gleaned from this meeting highlight the importance of strategic collaboration, innovative thinking, and a commitment to adaptability. Moving forward, the collective wisdom of the group illuminates a path toward a more resilient and responsive healthcare supply chain, ultimately ensuring the continuity and quality of patient care in an ever-changing landscape.
If you're interested in joining our Power Supply Advisory Group, we'd love to hear from you! Please send your inquiries and a copy of your resume to Justin Poulin at justin@powersupplymedia.com.