The "Amazonification" of the health care supply chain

Amazon up-ended the retail industry and dramatically changed its supply chain dynamics by pulling the power away from big retailers and moving it into the hands of the consumer. Now the online giant is setting its sights on taking the lessons it learned from transforming the business-to-consumer (B2C) space and applying them to the business-to-business (B2B) world.

The industry that it sees as having the biggest potential for growth? Health care. When Amazon was looking to roll out Amazon Business, which provides a purchasing solution for registered businesses, it noticed that a disproportionate amount of organizations that were already making purchases on Amazon.com were large hospitals, said Chris Holt, leader of global healthcare for Amazon yesterday at the Gartner Supply Chain Executive Conference.

The reason, said Holt, is that many of the enterprise resource planning and e-procurement solutions that hospitals were using were antiquated. "Current services and solutions were so painful, that [users] were willing to get in trouble with corporate procurement for ordering on Amazon.com," he said.

So it made sense to have health care be one of the first industries targeted by Amazon Business. Just as Amazon Business mimics the consumer Amazon experience for ordering medical supplies such as sutures, syringes, and procedure trays, Holt imagines a day when other Amazon technologies developed for the B2C space are adapted to the health care market. For example, nurses could use Dash buttons to reorder syringes, and patients could use Alexa to call nurses or raise and lower the blinds in their room.

Implementing more consumer-like technology systems is just one way that the health care supply chain can be reinvented, according to Holt. The segment is also in need of more efficient supply chain processes. Currently the supply chain has too many intermediaries and too many touches, said Holt. On the procurement side, organizations are sending out 30-page requests for proposals for what should be considered "tail spend" (or low-value spend) items, Holt said.

Furthermore, Holt says that the health care industry needs to change from "a paternalistic system" that tells patients what to do and where to go, to one that is more customer-centric. "Patients are expecting a consumer-like experience, and they are not getting it," he said.

Holt believes that in five to ten years, we will see a health care industry that is driven by the consumer just as the retail industry is now.