Healthcare Supply Chain Management in a Post-COVID World

For decades now, the just in time (JIT) inventory management method has been the dominant business model in healthcare supply chain management. In the past, companies, no matter what their industry, loathed to order inventory before they needed it, relying instead on a steady stream of deliveries to keep their shelves stocked, and in the case of the healthcare industry, to keep their patients safe.

Just in time (JIT) supply, chain management model seemed to work just fine – until it didn’t. In the blink of an eye, the trucks stopped rolling, the deliveries ceased, and hospitals and medical clinics were left scrambling to provide doctors, nurses, and patients with the personal protective equipment (PPE) they needed to stay safe in a suddenly more dangerous world.

A Perfect Storm of Danger

The fact that the virus at the heart of the new pandemic was airborne, deadly, and easily transmissible did not help, and almost overnight the world began to question the wisdom of ordering critical supplies like surgical gowns, N95 masks, and face shields using the just in time (JIT) inventory model.

It did not take long for the long-dormant deficiencies of the just in time (JIT) supply chain management paradigm to become apparent, but in hindsight, the problems were all too obvious. Even when the JIT supply chain was working well, factory managers often complained of shortages, long lead times, and unpredictable assembly lines.

Acceptable and Unacceptable Health Supply Chain Management Risks

The idea of factory floors staying quiet and assembly lines remaining idle was certainly bad from a business standpoint, but the deficiencies of this tried and true supply chain management model was far more serious when it came to lifesaving supplies like personal protective equipment (PPE) needed to safeguard patients from the threat of COVID-19. In the wake of the rapid breakdown in ordering and supply chains, hospitals, medical clinics, and government agencies were left on their own.

Almost overnight bidding wars were breaking out among entities that should have been working together, government officials were caught flat-footed and members of the general public were put at risk. Given the new realities, ordinary citizens often resorted to extreme methods, responding to these sudden shortages by hoarding protective supplies and stocking up just in case.

Addressing the Human Element

The fact that people would respond in these ways should have come as no surprise, yet many healthcare executives and government officials were shocked just the same. As the dust began to settle, the just-in-case model began to look far more attractive, and the healthcare industry was looking for a better alternative.

The fact that the alternative to just in time (JIT) supply chain management was actually called just in case, or JIC, only adds to the irony, but no one was laughing as PPE inventory ran dangerously low and doctors, nurses, and patients were put at risk.

A Healthcare Supply Chain Evolution

In the world of business, changes are often evolutionary rather than revolutionary. After decades of the just-in-time (JIT) inventory management and supply chain model changing overnight is simply not an option, even in the face of a worldwide pandemic.

The evolutionary nature of business changes had meant that the healthcare industry was often slow to respond and that no doubt put many people at risk. Even so, change is happening, albeit slowly, and there are already some glimmers of hope on the horizon.

Even today, more than a year and a half after the first COVID-19 cases were identified and the world changed overnight, healthcare management teams are still scrambling to find a better way forward, a supply chain management model that reduces the risk of future shortages and better protects patients, healthcare personnel and the public at large.

An Uneven Playing Field

It should be noted that the realities of the healthcare industry are playing a role in how well the transition from a completely just in time (JIT) supply chain management model to one that incorporates just in case (JIC) strategies is likely to be uneven. Indeed, the unevenness of the playing field in a large for-profit healthcare arena has already been playing out, and in this new world, some segments of the industry have been rebounding more quickly than others.

Large hospital chains and healthcare conglomerates, for instance, have been able to harness the efficiencies that come with size, allowing them to keep more inventories on hand without putting their bottom lines at risk. Large hospital chains, for instance, are more likely to have unused space that can be allocated for the storage of personal protective equipment (PPE). They are also more likely to be better capitalized, making that stocking up process more affordable.

Smaller players in the healthcare landscape have had to be a bit more creative as they respond to the new reality and begin to move away from the purely JIT model they had been following for years or even decades. In the wake of the COVID-19 pandemic healthcare providers have often been forced to work together even when competing with one another. They have pooled their resources to facilitate the purchase and storage of critical supplies, and they have benefitted from the expertise of their colleagues and competitors alike.

Even now that the dust has begun to settle, there is still a great deal of uncertainty about what the future will hold for doctors, nurses, patients and others who rely on the healthcare industry for their livelihoods – and their very lives. One thing is certain, however – the just in time (JIT) model of supply chain management, while not exactly dead, is certainly on life support.

LAC Healthcare Solutions develop wholesale solutions for large healthcare organizations through the use of next gen procurement and sourcing technologies. Learn more about how we can help you manage your supply chain risks, contact us here or visit our wholesale service page.

You can also reach me, Gabriel Nieves at gnieves@lac.us.