3 ways to improve the efficiency of health sector supply chains

25 August 2022

The Covid-19 pandemic boosted the perception of supply chains throughout the US healthcare system, research has found, but there are still opportunities to improve efficiency. 

Shortages of gloves, gowns, and masks during the pandemic “highlighted the importance of a well-performing, strategic supply chain”, according to a report by consultancy McKinsey & Company. 

In the survey of US health officials two-thirds of respondents said the pandemic has improved their perception of the supply chain function’s impact within their health system. 

Consequently, nearly three-quarters of the 121 hospital executives surveyed said supply chain management has since developed an even more strategic role.

McKinsey said: “A high-performing supply chain function can boost resilience, enhance care, increase satisfaction among physicians, reduce supply spend by up to 10%, and better position health systems to achieve their growth ambitions.”

It also found 26% of C-suite executives said strong data and analytics was their priority for supply chain investment, followed by engagement with frontline clinicians (19%), robust team building and talent development (15%), effective collaboration across health systems (12%), a comprehensive category knowledge (12%), mindset to create value beyond cost savings (8%) and C-suite engagement in supply chain (7%).

McKinsey said: “The pandemic has forced health system supply chains to become more resilient and proactive, stretching their limits while elevating their strategic position in the organisation. Engagement from health system executives and clinical leaders in targeted, critical areas will be imperative to continue to improve supply chain performance.” 

McKinsey's top tips for improving the efficiency of health supply chains are:

1) Clinician-directed supply chain functions

The survey found respondents who reported of consistently well-performing supply chains said strong engagement with executives and frontline clinicians was “imperative” to this.

Collaboration between supply teams and clinicians was seen as vital for the success of contracting strategies, supplier selection, compliance with contract terms, and managing suppliers to achieve financial, quality, and other business goals.

Health system executives identified that a lack of clinician engagement in supply decisions and an unwillingness to adjust supply preferences were the “biggest barriers” to better supply chain performance.

2) Cross-functional goals 

A lack of goal sharing across departments can lead to misaligned incentives between supply chain teams and other stakeholders, siloed decision-making, resistance to supply chain initiatives, and “the perception that the supply chain function is focused solely on cost savings rather than broader organisational goals”. 

To avoid this, health executives can improve alignment and foster collaboration by implementing joint savings targets, providing incentives for reaching targets and ensuring frequent and transparent reporting.

3) Invest in accurate, actionable data and analytics

“Analytics is the backbone of supply chain excellence,” McKinsey said. However, while a quarter of health system executives and supply chain leaders said data and analytics capabilities were their number one investment priority, McKinsey said a lack of data means health systems may be unable to effectively negotiate or identify savings. 

It said it is important to invest in data cleaning and embedding dashboards into daily operations, but further that health teams must invest in data and analytics talent to make the most out of information gathered.

“Building a robust analytics engine requires an integrated team comprising analysts, data translators, visualisation experts, and data engineers, among other roles.

“Recruitment that focuses on these skills, regardless of previous industry experience, can expand the talent pool and ensure that leading practices are brought into the organisation, including from industries such as tech that have invested substantially in developing data and analytics as part of their core businesses.”

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