PerformanSC, in collaboration with Jamie C. Kowalski Consulting LLC, has published the sixth edition of the Health Systems Supply Chain Insights research series. Taking direct inputs from health system supply chain leaders, the biennial research series charts the evolution of the health system supply chain’s scope, strategies, and operational priorities.
In particular, the series focuses on health systems that operate a Centralised Service Centre (CSC) or Self-Distribution model – taking direct responsibility for materials sourcing, central receiving, storage, and last-mile distribution of materials to points of use within their health systems.
We estimate that approximately 70 health systems in the US (out of approximately 550) operate a variation of a CSC. Supply chain leaders from 16 of these health systems participated in a detailed operational questionnaire that forms the basis for our 2023 supply chain insights report.
Our previous report, published in 2021, was compiled in the middle of the initial response to the Covid-19 pandemic. It highlighted the very real challenges associated with accessing critical supplies in an environment of unprecedented demand. Supply chain leaders felt that having their own internal supply chain operations helped their response to the clinical demands of the pandemic, but they recognised weaknesses, particularly in relation to sourcing strategies and over-reliance on distributors and single-source suppliers.
The 2023 report confirmed that healthcare supply chain leaders have moved forward on these intentions.
- Less reliance on single source suppliers – 93%
- More regional and local sourcing – 82%
- Increased use of inventory to mitigate supply risk – 82%
Over the last three years, supplier performance has continued to decrease, impacted by the follow on from the pandemic, logistics disruptions, and fill rates dropping from 2019 to 2021. Transportation rates have also gone through an evolution driven by global logistics congestion and more recently by fuel price increases and driver shortages. While much of the inbound transportation is supplier controlled, we see early signs of health systems taking a more proactive approach to overall transportation cost management.
Health system leaders have indicated that they saw the CSC as an opportunity to take control of their own supply chains. 92% indicate that they look to increase the value and volume of products within their supply chains. The scope of CSC services and products continues to evolve.
Inventory changes are requiring increased physical infrastructure, while the scope of services remains broad within CSC operations. What is emerging from the research are options for health system leaders to maximise the value that they gain from their supply chain operations. There are choices to expand the service range and the product range, and we see many systems choosing to focus on product coverage rather than continue to expand services.
From 2018 to 2023, we see the percentage of health systems managing physician preference items increasing from 38% to 79%. This is an indication of the type of value shift that we are seeing within CSCs as confidence increases in internal capabilities and health systems look to increase the benefits that they can get from their CSC investments.
The people side of supply chains is critical to success, particularly in times of uncertainty. The report indicates that the supply chain function sits within the C-Suite in 42% of health systems, which is a significant profile and recognises the importance of supply chain. We provide an indicative profile of the supply chain organisation and recognise the pressure on the availability of front-line resources and labour inflation.
For the first time in our research, we approached the topic of sustainability within health system supply chains. The evolution of the journey is highlighted in that:
- 70% of health systems have completed a sustainability assessment.
- 30% are already reporting some non-financial disclosures in the area of sustainable and
- 12% have made public commitments about their targets.
The full results of the research have been shared with participating health systems and will be discussed with supply chain leaders in an online workshop in May. We would like to thank these participants for their contribution to the research.
If others wish to receive a copy of the latest report, it is available for purchase below or by contacting Jamie Kowalski or Lorcan Sheehan.
Supply Chain Enabled