Supply chain managers feel pressure from healthcare providers

In the healthcare industry, the supply chain is apparently king.

That's the conclusion of Frost & Sullivan, which surveyed on behalf of FedEx more than three dozen healthcare executives to determine how critical the supply chain is to sustain their businesses in the coming years. The companies represented include medical laboratories, distributors, medical device manufacturers and other healthcare firms -most of which supply hospitals or work with them directly.

Seventy-eight percent of those surveyed said a supply chain would be extremely important to their ability to compete over the next decade. And more than 80 percent said the supply chain would be instrumental in meeting revenue and profitability targets.

A significant concern among those surveyed is the Affordable Care Act. Most of the respondents believe cuts in reimbursements for medical procedures will place pressure on them to remain cost competitive. Sixty-one percent believe cost reduction strategies will play an important role in their ability to respond to cuts in reimbursement. Some of the companies surveyed say they move toward central service centers and consolidated shipments. 

"When you can't show product differentiation you look at cost, efficiency and availability," said Paul Higday, a vice president of marketing and product development at Owens & Minor. "If you have something everyone wants and it's always available and done in a cost-effective manner, it's harder for a competitor to take away your market share without replicating those three things." 

Meanwhile, hospitals are also tweaking their own internal supply chains, ensuring that they have enough inventory in order to function at peak efficiency, according to Healthcare Finance News.

Another byproduct of healthcare reform is the ever-increasing numbers of mergers and acquisitions among providers. "Larger hospitals are consolidating networks to achieve greater cost savings and improve efficiency. This growing critical mass of providers means greater negotiating clout and thus the ability to wring price concessions from suppliers," the report read. As a result, 83 percent of the respondents said such consolidation has had an impact on their supply chain, and that the need to be innovative is highest when dealing with hospitals. 

And suppliers themselves consolidate in order to create more effiicencies, such as the recently announced merger between UHC and VHA, Inc.

To learn more:
- read the FedEx study (link will lead to .pdf download)
- check out the Healthcare Finance News article