CSCMP's Supply Chain Quarterly
January 24, 2020
Forward Thinking

Health-care industry continues to struggle with managing inventory

Hospitals could significantly cut costs by using technology to improve supply chain visibility, says a report from Cardinal Health.

Results of a recent national survey of 150 hospital executives suggest that the health-care industry could greatly benefit from implementing better inventory management practices. The research was conducted by SERMO Intelligence, a health-care data provider, and was sponsored by Dublin, Ohio-based Cardinal Health Inc., a provider of supply chain and business services for the health-care industry.

Two-thirds of the respondents said they "strongly agree" that improving the effectiveness of their supply chain will reduce overall costs, increase revenue, and lead to better quality of care. However, only one-third of hospital decision makers said that their hospital was "very effective" at managing its overall supply chain.

In particular, most hospitals are not doing an effective job of monitoring inventory levels, according to Cardinal Health. For example, 60 percent of respondents who were c-suite executives said they had incurred unnecessary transportation fees because they didn't have enough of the right products on hand and therefore needed to expedite shipments.

A large majority of survey respondents also admitted that they lack sufficient visibility into their supply chains. Only 15 percent of hospital decision makers said that they "strongly agree" that they have a "sufficiently broad view of their supply."

This lack of visibility could be at least partly solved if the health-care supply chain took advantage of technologies that are already being used by other industries, according to Cardinal Health. For instance, hospitals could better track supply levels if, instead of manual processes, they used technology such as high-frequency RFID tags and data analytics to monitor inventory. Technology improvements may already be on many hospitals' agenda: 85 percent of survey respondents said that their hospitals are either planning or are currently working to identify and implement new solutions that reduce supply chain waste and related costs.

The Cardinal Health survey echoes results from other recent reports that have looked at the health-care and life sciences supply chain. UPS' annual "Pain in the Chain" survey, for example, found that half of all health-care logistics decision makers are still struggling to manage supply chain costs in the face of rapid business growth, fluctuations in fuel and raw materials costs, increasing regulations, and new market expansion.

Likewise, a joint report by third-party logistics provider Kenco Group and Worldwide Business Research released in January found that a top concern for pharmaceutical and biotechnology companies is supply chain visibility. The report, "The Challenges, Solutions, and Strategies Driving Pharmaceutical Supply Chain Innovation," suggests that "big data" and analytics could help the industry better identify and control cost drivers, but says that health-care companies are struggling to implement these technologies and processes.

Cardinal Health's analysis of its recent survey can be found here.

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