For the fast changing $3 trillion healthcare sector, it seems that supply chain is becoming an important differentiator.
Earlier this week, FedEx Corp. released Frost and Sullivan research on the dynamics shaping the future healthcare supply chain.
“Consolidation and other changes within the sector means healthcare companies are experiencing growing financial and pricing pressure,” stated Carl Asmus, vice president Global Supply Chain Solutions, FedEx Services. “More healthcare companies are using their supply chain as a way to realize their financial goals,” added Asmus.
Over 80% of healthcare supply chain executives surveyed agree supply chain is ‘extremely important’ to reaching profitability targets (89%) and revenue targets (83%), while 61% agree cost reduction strategies in the supply chain have been ‘extremely important’ in responding to customer pricing pressure.
One way that healthcare companies are using information to drive efficiencies is by rationalizing consumer ordering patterns. This is done by better matching the speed of delivery for a product to when it really needs to be onsite, as opposed to how providers were used to stocking it in the past, the study reports. “Stryker’s own data showed [hospitals] how to reduce transportation costs by shipping once a week versus 20 times per month,” says Kristin Hilbert, senior manager, Global Transportation, Stryker.
Stryker’s investment in a central distribution center in 2012 is another example of how a company identified an opportunity for innovation and put the people, infrastructure and systems in place to respond to cost pressures. Hilbert described how this system now offers a unified strategy compared to ten years ago when each division managed its own supply chain. “By being at one location, we are able to consolidate shipments across divisions, leverage technology and utilize the transportation advisory council which has reduced the cost on freight in relation to cost of goods sold,” states Hilbert.
By 2020 supply chain will be the biggest hospital expense – today it is second, only to labor, according to Hospital Impact.
“Product differentiation can take many forms beyond just the specific clinical attributes of a product, and the supply chain plays a critical role in separating one product from another,” said Paul Higday, vice president, Owens & Minor – a healthcare logistics provider. “If a product is always available and delivered in an efficient and cost effective manner, it’s harder for a competitor to take away your market share.”