Nowhere are the stakes of shortage and demand higher than in the supply chain of the healthcare industry. The challenges facing organizations in the industry are formidable, but a well-orchestrated supply chain can also be the strategic lynchpin on which the rest of the organization depends.
Done well, healthcare organizations stand to unlock significant savings by managing their supply chains efficiently. In turn, the key to logistical efficiency is locked inside their data.
What Makes the Supply Chain of the Healthcare Industry So Hard to Expensive?
Driven by a complex matrix of manufacturing and demand factors, post-pandemic medical supply shortages are expected to continue throughout the country, and a shifting legal landscape puts pressure on pharmaceutical distributors to shore up their supply chain processes and tools as the final phase of the Drug Supply Chain Security Act looms near the end of this year.
With pharmaceutical costs already one of the highest spend categories for healthcare provider organizations, the additional pressure placed on distributors is poised to have downstream effects. An overall lack of cooperation and coordination between pharmaceutical distributors and healthcare providers makes this one of the most expensive factors in the entire supply chain.
Building Smarter Healthcare Supply Chains with Data
The most innovative healthcare organizations have already turned to data tech to deal with the costly and unpredictable supply chain of the healthcare industry, using the latest and best tools to navigate the industry’s razor-thin profit margins.
These companies know they’ll need a data platform that can leverage predictive AI and deep data analytics to navigate evolving consumer behavior, infectious disease patterns, geopolitical shifts, and the aforementioned shortages.
But a delicate supply and demand balance isn’t the only problem healthcare and life sciences organizations face in the coming year.
The Supply Chain & Logistics Challenges Facing Healthcare Organizations
Aside from supply and demand volatility, there are several key areas where healthcare organizations can distinguish their supply chain and logistics approach, for better or for worse.
Companies also have to contend with ballooning costs while making strategic investments, navigate a higher-competitive market despite an overburdened workforce, and maintain ESG standards while tapping into modern technologies and navigating the inherent unpredictability of the international market. Like supply chains in other sectors, other obstacles include:
Rising Costs
- Record fuel prices
- Increasing seller and other 3PL fees
- Tech investments in AI and robotics
Labor and Operational Inefficiencies
- Increasing consumer expectations
- Labor shortages
- Reverse Logistics
Social & Environmental Responsibility
- Upskilling employees to digital age
- Sustainability and ESG
- Geopolitical Instability
Current Supply Chain Processes Lose Money and Fail to Deliver Consistency
Given an average profit margin of 0.8% across the healthcare industry, companies are forced to perpetually trim budgetary fat and eliminate inefficiencies in their processes to ensure they can continue to serve patients’ needs.
That’s why it’s so surprising to learn that hospitals are estimated to overspend on the supply chain each year by roughly $12.1M on average. Providers with higher case mix overspend at an even higher rate. That lost revenue can quite literally determine whether a healthcare company is able to keep its doors open, in a given year.
Those numbers aren’t going down without significant intervention, given that supply chain costs are expected to increase this year, thanks to inflation, global disruptions, and geopolitical market changes.
And despite significant overspending, healthcare workers and patients encounter situations where they don’t have the required product for a procedure all too often, exposing an inefficient supply chain approach that costs more without delivering consistency.
All in all, it’s no surprise that the most innovative healthcare companies are finding room to invest in data technology. It’s not just the average 124% ROI on data tech investments reported by healthcare organizations in 2023, though those returns certainly don’t hurt the bottom line. It’s also the fact that digitally transforming the supply chain has been shown to reduce process costs by as much as 50%.
Adapting to the modern data space is simply a cost-effective strategy for dealing with tight margins and preventable inefficiencies that disrupt operations. The supply chain of the healthcare industry calls for modern data solutions, and luckily the solutions are ready to be implemented through cloud data platform technology.
How the Modern Data Stack Can Address Supply Chain Woes for Healthcare Organizations
The modern data stack can provide an elegant solution to these challenges, using EHR data (including Epic) and Workday data ingested into Snowflake Data Cloud to provide a complete supply chain picture that empowers data-driven decision making.
The following outcomes can be built into organizational data processes to ensure inventory is allocated where it is needed most.
Clinical Outcomes
- Supply Standardization
- Usage Compliance
- Preference Cards
- Throughput
Operational Outcomes
- Inventory Optimization
- Expired/Recalled Product Management
Financial Outcomes
- Case Costing
- Variation Analysis
With these capabilities, healthcare organizations can cut down on manual oversight and mitigate labor shortages in one fell swoop, getting better data faster in order to make sure their supply chain processes are air-tight.
Transform Your Supply Chain Processes with Hakkōda
The average ROI on data tech investments for healthcare organizations speaks for itself, clocking in at an impressive 124% last year. A closer look at supply chain solutions makes it clear where that revenue might be coming from, as an innovative data approach is critical to mitigating the millions of dollars lost each year on supply chain management.
Money saved on logistics means more money to spend on patient care, and in the end, that money may be the difference in keeping the doors open in a tight market. It’s clear that organizations have everything to gain from taking a forward-thinking, data-driven approach to navigating the supply chain of the healthcare industry.
In a future article, we will take a deeper dive into the pillars of a modern, end-to-end healthcare supply chain solution that aligns stakeholders from the C-suite down while fostering collaboration between providers and distributors with the help of the right data talent and tooling.
If you’re ready to transform your data approach with a modern data stack centered on Snowflake, let’s talk today about how Hakkoda can help your organization build a truly innovative supply chain management strategy.
