January 19, 2021

Supply chain strategies shift to meet pandemic-induced demands

By: Elizabeth Wood
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Resiliency, a term that has cropped up repeatedly during the COVID-19 pandemic, is often considered a key defense against burnout. But it is also important in the context of the healthcare supply chain, says Ed Hisscock, senior vice president of supply chain management at Trinity Health, a 22-state healthcare system headquartered in Livonia, Michigan. Although Trinity Health had taken steps in 2019 to enhance its supply chain resiliency, the work is ongoing, with lessons learned during the early phases of the pandemic informing changes that need to be made for the future.

Ed Hisscock

“We should have been more aware that 96% of the raw material for PPE [personal protective equipment] comes out of Wuhan, China, and the surrounding provinces,” he says. “Had this been known, we could have invested in capacity from other suppliers who have US or near-shore manufacturing capabilities.”


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Nonetheless, like other healthcare leaders, Hisscock and his team took quick action as the crisis unfolded. In March 2020, he says, they set up a dedicated capability around N95 sourcing, a FEMA-style (Federal Emergency Management Agency) command system, an inventory system to sequester and control PPE, and a PPE mailbox to collect COVID-19 information.

“We stood up a team to triage the mailbox, which helped save a lot of energy, and we pushed everything through one channel,” he recalls. “At one point, we got as low as 3 days’ worth of face shields on hand across our entire system. We were watching demand, which was thousands of times what it normally is.”

By late October, however, only exam gloves and thermometry were on the “watch list,” he notes. “We had plenty of thermometry in March, so demand is still volatile. We’ve targeted to carry 120 days of each item. It takes 30 days to vet and get a source and get product ordered, and to get it from the manufacturer to us and out to each facility takes upwards of 90 days.”

 

Shifts in supply chain strategy

Stephen Downey

“There’s a lot of movement toward domestic sources, especially for PPE, and a lot of movement to bring manufacturing into the US and in multiple locations,” notes Stephen Downey, group SVP, supply chain operations, at Vizient, a healthcare performance improvement company.

For example, in spring 2020, Medline Industries, Inc, converted manufacturing at its Hartland, Wisconsin, plant from an antiseptic for surgical procedures to hand sanitizer, which was in greater demand. Medline later announced plans to begin manufacturing face masks at its suburban Atlanta plant beginning in January.

Owens & Minor, headquartered in Richmond, Virginia, has ramped up production in anticipation of facial protection needs. Between February and November 2020, company leaders made capital investments and focused on improved rates of production as well as increased operation capacity to achieve:

• a more than 1,000% increase in surgical N95 respirators

• a nearly 100% increase in surgical and procedure masks

• a more than 600% increase in face shields

• an additional dedicated meltblown fabric manufacturing line in Lexington, North Carolina.

“Frontline workers need protection now, and we are working tirelessly to meet that need,” says Edward A. Pesicka, president and chief executive officer of Owens & Minor.

Downey says healthcare leaders need greater trust transparency, and predictability with their suppliers, and offers four key recommendations:

• increase domestic product purchases

• identify critical supplies and where they are produced and held

• formalize informal relationships with non-healthcare suppliers to ensure availability in the most critical situations

• create visibility into necessary supply chain data sets.

In an ideal world, Downey says, customers and suppliers would understand each other’s inventory at all times and would establish backup plans. “Let’s say you knew about a storm that was hitting glove manufacturing areas, and how it would affect certain ports and shipping lines. Understanding who was impacted would allow the facility to set up backup plans—approach a supplier not impacted by the storm, and approach that supplier before inventory ran too low, and possibly even place a long-term order,” he says. “This is a proactive, not reactive, approach.”

 

Building resiliency

Drawing from concepts described in a 2015 article by Melnyk et al, Hisscock says he has reflected on challenges from the spring and early summer of 2020 to determine what is needed for greater resiliency going forward.

The authors define supply chain resilience as “the ability of a supply chain to both resist disruptions and recover operational capability after disruptions occur.” The two components of resilience, they say, are resistance capacity and recovery capacity, which they define as follows:

• Resistance capacity is the ability of a system to minimize the impact of a disruption by evading it entirely (avoidance) or by minimizing the time between disruption onset and the start of recovery from that disruption (containment).

• Recovery capacity is the ability of a system to return to functionality once a disruption has occurred. The process of system recovery is characterized by a (hopefully brief) stabilization phase after which a return to a steady state of performance can be pursued. The final achieved steady-state performance may or may not reacquire original performance levels, and is dependent on many disruption and competitor factors.

In applying these concepts to the Trinity Health supply chain system, Hisscock explains that he thinks of avoidance as the safety stock that is built into their perpetual inventory at point of use, as well as a registry of equivalent products that can be swapped in when something is on back order.

“From a containment perspective, we learned we couldn’t depend on government stockpiles, and we didn’t know what was coming,” he says. “So we’ve deployed some inventory from our central distribution center out to regional stockpiles, which gives us redundancy and the ability to contain more rapidly.”

In terms of recovery, he says, there will be drills at each facility, and product will be pushed from Trinity Health’s pandemic stockpiles. Doing so will keep the inventory fresh, and for any products that differ from what is usually used, in-services will be conducted to familiarize staff with those products.

Hisscock has found it valuable to base inventory analysis on a Resistance and Recovery Matrix that characterizes supply chain resiliency as “fragile,” “vulnerable but responsive,” “resistant but sluggish,” and “hardy” (sidebar, “Resistance and Recovery Matrix”).

Source: Ed Hisscock. Used with permission.

“As you think about how inventory is positioned—whether technology is involved, what the regulatory constraints are, and whether there is third party dependency—you can plot products where you believe the industry is,” Hisscock says. “I tend to plot med-surg supplies as ‘vulnerable but responsive.’ That’s because crisis management is the forte of healthcare providers—we can respond like no other. But we’re not as resistant as we could be. We could move up into ‘hardy’ if we knew more about where raw materials come from, where products are manufactured, where suppliers have their distribution channels, and whether there’s redundancy.”

 

Sourcing supplies

Efforts to better understand Trinity Health’s supply chain risk and uncertainty began with the creation of a Supplier Quality & Performance Management capability, Hisscock says. This is a platform that allows comparison of data on suppliers’ financial status, Trinity Health’s contractual status with different suppliers, and potential supply chain disruptors such as natural or manmade disasters, socioeconomic issues, or political unrest.

Trinity Health is seeking information on the origins of raw material. Although some suppliers say such information is proprietary, he notes that there are grassroots initiatives such as HTI (Healthcare Transparency Initiative) that advocate for greater understanding of where the raw materials and warehouses are, and how prepared suppliers are for disasters.

In June 2019, Trinity Health began publishing a scorecard as a formal third-party risk requirement to understand where risks are. Four types of risk—financial, cybersecurity, source type, and quality—are assessed, and then a risk score is calculated and color coded. That risk score must be established before the organization can enter into a significant contract or other business relationship with a particular supplier, Hisscock explains. “This is a work in progress, but it’s something that the board of our organization now requires,” he says (sidebar, “Risk Scorecard”).

Source: Ed Hisscock. Used with permission.

“Now we’re taking time to understand where each category of product—for example, respiratory or safety products—are plotted in the Resistance and Recovery Matrix. Should we have a sole source for a particular category? If so, can we recover rapidly? We’re working to build out the criteria and how to develop a questionnaire that our sourcing team can apply routinely to each category. It will inform how and where to invest as an organization,” he says.

Hisscock believes as healthcare organizations delve into supply sources and the risks associated with each, they will have more influence in shifting industry norms. “We owe it to our patients to make sure our supply chain is as resilient as possible,” he says.

 

That was then, this is now

Chris Torres

That same patient care mindset is the driving force behind the passion and commitment Chris Torres brings to her role as system vice president of supply chain and biomedical engineering at Main Line Health, an integrated delivery network serving the area around Philadelphia.

“In supply chain, people often don’t consider themselves involved in patient care, but everything they do supports patient care,” Torres says.

Drawing a contrast between pre-pandemic and post-pandemic supply chain management, Torres says the focus must shift from one of maximizing efficiency to risk mitigation and resiliency.

Like Hisscock, Torres sees greater visibility as one of the keys to managing the future supply chain. Before the pandemic, she notes, there was heavy reliance on vendors and distributors to manage supplies, yet they were experiencing shortages themselves. Torres says she procured isolation gowns through a furniture vendor.

“Develop visibility in the upstream and downstream components of your supply chain,” she says. “Know where the manufacturing facilities are, what the lead times are, and what the alternatives are. Some vendors do not want to give you this information, so you have to keep asking.”

Torres recommends revising the MoU (memorandum of understanding) to gain greater transparency into vendor operations. As part of that, she says, it’s important to make suppliers understand that they, too, are accountable for patient care. Ask them how they can help deliver care, she suggests. “It’s also worth leveraging clinicians to sit at the negotiating table with you,” she adds.

PPE conservation has become an important supply chain strategy, and the focus on burn rate has intensified since the pandemic began. “We have a 180-day target for PPE,” Torres says.

She also notes the critical importance of enhanced communication—which has actually been a benefit of the pandemic. Her health system now has a command center that runs from 7 am to 5 pm every day.

“It’s one-stop shopping; people can call in if they have a concern,” she says. “We huddle at 11 am, after the 9:30 am hospital huddle. We talk about how we’re going to manage things, and use a red-yellow-green system for supplies.” With some staff working remotely and some at the front line, she says, this communication system brings people together.

Torres strongly advises developing a pandemic preparedness plan and establishing relationships. “If I hadn’t had relationships with my clinicians and team, we wouldn’t have been able to do what we did,” she says.

In addition, she says it’s important to set expectations early on with suppliers. “We relied a lot on them being able to manage their business with little insight into ours. We have to give them information to help them help us maintain our operations,” she says. “What I do with my distributors today—hold them accountable in the delivery of care model for supplies—I should have done 5 years ago.”

Some of the keys to developing a more resilient supply system, says Vizient’s Downey, are having a better understanding of supply sources and where to get backup supplies; identifying critical supplies; establishing relationships with local, state, and federal sources; and using PPE conservation.

At one healthcare facility with an annual spend of $2 billion in operating expenses, he notes, a total projected annual savings of more than $4 million can be achieved by reducing rush orders, substitutes, carry costs and cost of capital, and inventory write-offs—along with increases in on-time payment discounts and improved labor efficiency.

The COVID-19 pandemic has brought supply chain resiliency into a more prominent position. “Supply chain is at the forefront,” Downey says, adding that it is getting more attention from the C-suite than in the past. “Everyone now understands the importance of this.” ✥

 

References

Downey S. Improving supply chain reliability: A plan for increasing supply resiliency. HealthLeaders Media webinar. November 13, 2020.

 

Goldberg S. Medline to make face masks in US. Crain’s Chicago Business. November 20, 2020.

 

Hisscock E. Resiliency: A Healthcare Supply Chain Context. HealthLeaders Media webinar. November 13, 2020.

 

https://investors.owens-minor.com/news-releases/news-release-details/owens-minor-prepares-flu-season-increased-made-americas-mask-and

 

Melnyk S, Closs D J, Griffis S E, et al. Understanding supply chain resilience. SupplyChain 24/7. November 20, 2015. https://www.supplychain247.com/article/understanding_supply_chain_resilience

 

Torres C. Healthcare Supply Chain: The ‘New’ Normal. Supply Chain Resiliency Tactics. HealthLeaders Media webinar. November 13, 2020.

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