What does the future of the healthcare supply chain look like?

Technology will play a big role in solving today’s supply chain challenges.
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5 min read

The healthcare supply chain is getting a post-pandemic makeover.

The Covid-19 crisis illuminated shortfalls like just-in-time inventory practices that left hospitals short on necessary medical supplies and reliant on other countries for drug products, which resulted in numerous drug shortages. The supply chain of the future, however, can employ technology to gain increased visibility into every step in the chain and to better anticipate future disruptions, experts told Healthcare Brew.

“There’s a lot more focus now that’s been placed on understanding the true end-to-end supply chain vulnerabilities,” said Jamie Barker, SVP of supply chain at pharmaceutical distributor Cardinal Health.

Emerging tech can increase visibility

Historically, healthcare leaders have put heavy emphasis on where products are manufactured and sourced from, but there hasn’t been much focus on individual points in a supply chain and what Barker calls “single points of failure,” i.e., the places where vulnerabilities lie.

Emerging technology is likely to give supply chain professionals more visibility into every step of the supply chain, according to Chris Jones, EVP of industry and services at Canadian logistics software company Descartes Systems Group.

For instance, high-tech sensors could track each time a product changes hands as it’s loaded on and off a plane, which Jones said is a “black hole for most supply chains.” Sensors would also be able to track how long a product has been sitting in one location.

“It’s becoming more and more important to make sure that you understand where your product is at every step of the supply chain,” Barker said.

Beyond measuring a product’s location, sensors can track its condition as it moves through the supply chain, Jones said—conditions such as the product’s temperature or whether it’s been exposed to factors like smoke or vibrations. Sensors may also help reduce cargo thefts and other types of organized crime.

Sensor technology has evolved very quickly in recent years, Jones said, and he expects to see the technology become much more sophisticated. The tech is “still evolving and getting better,” Barker said.

AI’s role

We’d be remiss to talk about evolving technology in the supply chain without mentioning everyone’s favorite topic: artificial intelligence (AI). Barker said that at Cardinal Health, AI is already integrated into inventory management systems. 

Cardinal Health’s AI tool called Chime—which stands for Cardinal Health Inventory Management Engine—uses both AI and machine learning to anticipate supply chain disruptions “like we’ve never been able to before,” Barker said.

“As this technology continues to evolve, it’s going to allow us to do things around product substitution where there’s a supply disruption, moving demand to a different product […] so that we have ample supply on demand,” Barker said. “It’s certainly something that we’re investing in and utilizing now.”

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AI and machine learning currently also help Cardinal Health automate certain processes, like auto-scanning invoices, he added. The company is looking to further automate “things that would have been repetitive motion in the past for employees to be able to take some of that burden off of them.”

As AI and machine learning become more advanced, the technology also has the potential to help reroute products when the supply chain is interrupted by external factors like natural disasters or while a product is in motion, Barker said.

“Ultimately, what we want to do there is provide not only efficiencies for the business or the quality of the work that’s being done, but also improve the safety of employees every day,” Barker said.

Keeping it close to home

Another trend that experts expect to see more of in the future is nearshoring, or when a company partners with manufacturers close to home, like a US company working with manufacturers based in Canada or Mexico rather than China and India, which is where most pharmaceuticals are sourced from today.

Jones said he expects to see more “friend-shoring,” which is when a company moves its manufacturing operations to countries that are “more politically friendly or politically aligned.”

Paul Kreder, a principal at Deloitte Consulting’s supply chain practice, said he’s also seen a “sizable” amount of nearshoring in the last two years, and Barker said Cardinal Health has done some nearshoring of its manufacturing as well.

“We’ve also looked at how we can diversify [and] where we are sourcing different products from so that everything’s not coming from one region,” Barker said.

Ripe for disruption

Overall, the healthcare supply chain is ripe for disruption, Kreder said. There’s lots of room for improvement on processes like utilizing data to more efficiently forecast supply and demand patterns, increasing interoperability between disparate points in supply chains, and improving transparency across supply chains.

“We have an opportunity to really come together and be a lot more transparent when we think about the end-to-end supply chain,” Barker said. “We have the ability to bring our data together to ultimately improve the performance of the supply chain, and that’s something I’d like to see people lean into a bit more.”

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Navigate the healthcare industry

Healthcare Brew covers pharmaceutical developments, health startups, the latest tech, and how it impacts hospitals and providers to keep administrators and providers informed.