An Efficient Supply Chain Equals a Value-Add for Healthcare Institutions

American healthcare organizations unintentionally waste $765 billion each year on drugs and supplies they never utilize. Some of these items are thrown away due to expiration. Others are tossed simply because they're niche items and they're taking up valuable space.

Besides unused supplies, healthcare groups often spend more than they have to on medical products/devices, transportation, and sorting through inventory. Many of these costs can be recouped with efficient supply chain management.

Efficient supply chain management adds incredible value to healthcare organizations. Discover what that means in practice and how value is added in this brief guide.

Strong, Resilient Healthcare Service

Efficient supply chain management will undoubtedly make healthcare organizations stronger and more resilient. During the COVID-19 pandemic, shortages of critical supplies, unfortunately, put healthcare workers' lives at risk. Now, resilience is a priority.

Management strategies must be iterative, so they can respond to urgent events. These responses need data from a wide range of sources to be effective.

For example, supply chain analytics software can account for overseas manufacturers. It can also calculate the value of domestic manufacturers and community-based resources.

These resources have a higher value during emergencies. Efficiency requires managers to coordinate with multiple sources of supplies. This rule holds true in response to both emergency events and broader trends.

The right software can facilitate this coordination. Analytics programs should ensure data accuracy and breadth. They should also make data highly visible.

This visibility empowers healthcare teams to adapt to new information quickly. Actionable healthcare analytics software enables managers to:

  • Change or add suppliers quickly
  • Coordinate horizontal collaboration to share resources effectively
  • Prevent acute product shortages
  • Focus on price negotiation
  • Optimize on-hand inventory and labor management

With the right software, efficiency and strength go hand-in-hand.

Efficient Supply Chain Tools, Customized

Customization and specialization add value to healthcare services. But specialized tools can be cost-prohibitive if only a few physicians prefer them.


Physician preferred items (PPI) are practical tools physicians use in their work. They may be gloves, surgical instruments, implants, or any other medical product. Research shows physicians' preferences center on an item's traits, including:

  • Unique, functional technical features
  • Long-term reliability
  • Innovative therapeutic benefit
  • Items that they were trained to use in residency and fellowship programs

Physicians also prefer items from high-service vendors. Unlike inventory managers, physicians don't factor price or reimbursement options into their preferences.

Physicians often don't have the same preferred vendor as one another. And they disregard vendor-hospital consulting relationships. This impedes cost-saving measures like bulk pricing. Strong, interdepartmental Value Analysis committees help educate physicians and streamline ordering supplies.

Efficiency-Boosting Tools

Hospital supply chain management resources enable customized service without bespoke pricing. To do this, managers must optimize inventory and get accurate data.

One way to get accurate data is to automate data input. Tools like RFID scanners can automate inventory data input. Analyzing this data helps managers keep track of which items are truly used by physicians, and which are just on standby.

Another way to make inventory visualization easier is with a Kanban system. These systems reduce the average inventory holding cost by 25%, reduce medical supply expense by 5-7%, and it increases supply chain efficiency by 30%.

This enables healthcare teams and physicians to work together. Collaboratively, they can choose bulk or custom supplies when appropriate.

Cut Unnecessary Spending

Cost-efficient healthcare adds further value, as it empowers organizations to cut unnecessary spending. Typically, healthcare practices are able to cut down on transportation costs. They can also share costs and resources through horizontal integration.

To cut transportation costs, partner with local and regional manufacturers and distributors. The closer the supplies are to their destination, the fewer transport costs must be factored into the price. In rural areas, or if local or regionals are not available, a well-thought-out warehouse that is ready to accommodate a logical buffer supply is essential.

Another option may be on-demand transportation. On-demand transportation services are a form of 3rd-party logistics or 3PL. These services add value by combining transportation tasks for many different suppliers' clients.

3PL companies are able to adjust rates based on availability, which can cost less than a flat rate as markets and needs change over time.

Horizontal Partnership, Efficient Supply Chain

A related efficient supply chain strategy is horizontal integration.

Horizontal collaboration lets organizations share resources. Then, they split the cost burden of those resources. Hospitals and other healthcare groups can negotiate alliances, enabling each member to:

  • Enjoy bulk discounts - share the cost
  • Distribute the resources they need
  • Not spend on supplies they don't need

Similar alliances among logistics service providers forge a lean supply chain. These savings are returned to the customer in the form of reduced costs.

Reduce Product Loss

Supply chain efficiency reduces product losses. In 2017, a case study of a neurosurgery unit found the unit unintentionally wasted $2.9 million in supplies each year. Surgical teams disposed of these supplies without using them.

Other supplies are lost due to expiration or damage. And beyond that, others are trashed because managers ordered them accidentally.

Thoughtful and visual supply chain management strategies can cut out this waste almost completely.

In that case study, researchers shared with the surgery staff the cost of their resource use. Then, they incentivized the surgical team to reduce supply costs by 5%. The team successfully cut costs by 6.5% (roughly $836,000) by the end of the year.

In contrast, the control group's cost increased by 7.5%.

Clearly presenting data and setting goals does a lot on its own. That's why excellent hospital supply chain analytics is key to effective management.

For example, consider Seattle Children's Hospital & Research Foundation. It had an inefficient system for managing supplies, and waste increased every year. Then, it began to use what they called “Demand Flow” and built an analytics platform to see when and how supplies are being used, then adjust orders as needed. Demand Flow was the birthplace of BlueBin’s turnkey Kanban solution and robust BlueQ Analytics platform that was launched to the healthcare market in 2010.

With this tool integrated into a lean replenishment system solution, Seattle Children’s saved $2.5 million. And it cut the time clinicians spent searching for supplies by 50%.

Improved Negotiation With Suppliers

Data is the best tool anyone has to negotiate with. Analytics software can give healthcare organizations a fair platform and proper insight into their negotiations.

Effective, organized data clarifies the healthcare organization's priorities and goals. A supply chain audit process can glean the information you need.

Internal data lets you know how much a given supplier helps your team reach your goals. External data helps you understand the competitive landscape, which sets expectations.

Actionable data drives smart decisions on price limits and contract terms. When you know this ahead of time, you can communicate this to a vendor clearly. And, crucially, those data-driven price limits help you understand if you need to focus your vendor relationships elsewhere..

Efficient supply chain management helps bring all that data to the table for better visibility into business decisions and supplier relationships

Supply-Chain Solutions And Beyond

An efficient supply chain ensures patients get what they need. From the factory line to the hospital bed, management ensures quality products at a reasonable price and nurses don’t have to search for supplies.

Improve your healthcare services with a variety of BlueBin offerings. Our supply chain consultants offer turnkey solutions, including inventory management, POU replenishment, analytics, hands-on training/certification, and sustainable continuous improvement for years to come.

Cost-efficient healthcare is possible. Contact us about our services today.


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