- Esteban Lizarazo
Looking Healthcare from the Supply Chain Lens
Updated: Sep 18, 2022
The Supply Chain field has emerged in the last decades and has contributed to the development of the manufacturing sector. The idea of performing better as a chain of companies and getting competitive as an SC and not as a single entity or company has gained terrain (Christopher, 2000). Some factors, like the development of the Information Systems (IS) field with the Enterprise Resource Planning (ERP), helped to accelerate SCM adoption in the '90s in the past century (Spekman and Sweeney, 2006).
The adoption of IS in the point of sales allowed for Efficient Consumer Response (ECR). It contributed to boosting performance in Inventory Management by knowing in actual time demand of the medical service or ward. In the service field, however, the study of SC has recently taken more importance, and there is still room for academic research. One of the areas of service SC is Healthcare. This sector is getting pressure to reduce costs worldwide while maintaining quality-care service because of the severe consequences that may occur to the patients if the service is not provided in terms of quality and opportunity. A good source of improvement in healthcare performance is the development and appliance of SC concepts and tools, and research in the field is getting more attention from Academia.
The US spent 18% of GDP on HC in 2010. Similarly, the UK spent almost 14% of its GDP on HC. Some factors like the ageing of the population, new treatments for chronic that increase the time- expectancy for most diseases, better technology, and continuous development of new pharmaceuticals and medical devices products have pushed healthcare systems under tremendous pressure all over the world (McKone-Sweet, Hamilton and Willis, 2005). Supply Chain in the HC industry is responsible for a large amount of the expenditure, and literature agrees that the SC explains 30 to 40% of the expenses in an HC delivery. At the same time, HC managers see themselves as entirely different in operations from other businesses because of the complexity of the system they manage (Jarrett, 1998). Variability is the basis of the HC SC, and the impact of a large number of stakeholders determines the difficulty in applying practices from SC (De Vries and Huijsman, 2011)
In the SC of an HC provider, Inventory Management (IM) is vital for good performance. The Supply Chain Council proposed five performance metrics in SC: reliability, responsiveness, flexibility, costs, and efficiency in managing assets (Lega, Marsilio and Villa, 2012) and in HC, the impact of IM is extremely important for improving the performance of a hospital in any of the previous five system metrics. IM for a hospital can be defined as a balance between an excellent level of service (100% is desired), avoiding stock outs and at the same time decreasing the costs of inventory like the carry cost and the administrative cost. Stock-outs in HC determine patient safety and, if not correctly managed, could even cause the death of a patient. Therefore, it is common for IM in HC to allow stocking avoiding the risk of unsafety delivery for patients or disruption of treatment. On the other hand, the shaping of an Inventory System is affected by different types of variability like physicians' preferences, new products, needs of patients, lack of standards for product classification, and special conditions for storage and handling to avoid spoilage and expiration. In conclusion, IM in HC is more knowledge-intensive and complex than in other SC industries (De Vries, 2011).
Literature about IM in HC mostly takes place in a developed world context. It is essential to address research for the developing world where best practices are not taking place. Colombia is a country that has improved over the past 15 years in economic terms. However, the Colombian HC system is still struggling, and many of the HC sector initiatives are seen from medical lenses, though it is a system that wants to achieve universal coverture. In the recent four years, the system has engaged initiatives for purchasing efficiently with government regulations in price control for medical procedures and pharmaceutical products. The expenditure per capita is one of the lowest compared to the OECD list of countries with less than $850 compared to an average of $3.500 (OECD, 2013), and the pressure for decreasing costs is high with a deficit in the government budget of more than $1 billion. IM research in this context can help countries like Colombia and countries where the expenditure per capita is low. The potential impact is enormous for practitioners in HC and policymakers. On the other hand, there could be a contribution to knowledge from HC IM practices from a developing context to the HC literature and the IM practices literature.