Upgrading Health With Scm

Conditions are right for another round of major healthcare supply chain improvements due to  pressure on management to reduce costs and increase efficiency and have a customer-responsive approach

Supply chain management techniques which have successfully been employed almost throughout the segments of industry are employed in healthcare sector too. Like other segments, here also these techniques have successfully been employed to match supply and demand so as to supply the material in the right quantity, to the right place.

Why Supply Chain Approach?

Like every enterprise, hospitals and health systems are equally under pressure to control their rising costs of supplies primarily locked up in inventories consisting of pharmacy, surgery, medicines and drugs and yet maintain their ultimate obligation in providing timely, efficient and effective treatments to their customers (patients). The supply chain costs represent today the second largest expenditure category of hospitals’ operating expenses next to costly manpower. These costs are increasing exponentially due to growth in usage of medication and very expensive and clinically-sensitive devices and implants, rise in IT budgets at healthcare institutions and cost of packaging and labeling requirements of drugs.

The subject popularly known as Hospital Supply Chain Management System (HSCM) due to its potential in saving heavy costs and in satisfying patients has gained its prime importance in healthcare industry. Senior financial executives these days need to recalculate the strategic significance of the supply chain and plan accordingly.

Supply chain of hospitals integrates suppliers, transport and warehouses and hospital services so as to serve the patients by optimum utilisation of resources. The resources in terms of materials/medicines used in the hospital can be classified majorly based on their applications such as diagnostic, surgical, therapeutic, bedside, service, engineering, housekeeping and ICT. To substantially reduce supply-related costs, a hospital must develop a fully integrated enterprise wide supply chain in which all processes as mentioned above are coordinated and supported by state-of-the-art technology.

Areas of Improvement

The most effective action is to develop systematic contingency plans, including factors like alternative production sites, manufacturing flexibility, factory-direct shipping capabilities, offsite backup distribution center capacity, and critical safety stocks.

New technologies, such as radio frequency identification (RFID) offer the prospect of ensuring supply chain integrity.

Healthcare supply chains need to move toward an integrated “demand-pull” model, so that manufacturers have much earlier visibility into actual consumption.


The supply chain as such should be part of the enterprise strategic plan, incorporated across all components and service lines of hospitals. A hospital’s or health system’s strategic plan should include supply chain management as a key strategy for maintaining fiscal goals, improving quality and satisfaction levels, and addressing industry trends and developments. There is a tremendous scope of applying IT, telecommunication techniques and automation in hospitals. The mantra is to concentrate on improving efficiency, quality, and responsiveness to patients and apply innovative methods of supply chain coupled with technology to achieve the end goals.

Senior financial executives these days need to recalculate the strategic significance of the supply chain management