The medical supply chain remains at heightened risk levels. For example, according to an American Society of Health System Pharmacists (ASHP) survey, drug shortages last year hit their highest levels in a decade, with 99% of hospital and health system pharmacists experiencing shortages. This shortage situation is expected to remain the same or worsen according to a Premier Inc. survey. In addition to ongoing shortages, geopolitical, cyber, and other supply chain risks are at a red alert level, creating volatility and uncertainty in the supply chain. Thus, forward-thinking companies are creating a robust supply chain so that they can take advantage of the opportunities left behind by weaker competitors.

Geopolitical Risks Surge

Geopolitical risks are raging. The Russia-Ukraine war created inflationary pressures due to oil and gas price increases as well as concerns about shortages of materials and commodities used in surgical instruments. For example, aluminum, nickel, titanium, neon, gas, and iron are mined in the region. In addition, Iran-backed militants, such as Hamas, Hezbollah, and Houthi rebels, attacks on Israel created significant disruption in the supply chain. Israel is a hub for advanced computer chips required in the production of products such as medical devices. Additionally, Houthi rebels started attacking container ships transporting goods through the Suez Canal, creating diversions, delays, inflationary pressures and a series of disruptions in the supply chain.

Supply Chain Risks Surge

Other supply chain disruptions such as those caused by Hurricane Helene have also surged, directly impacting the medical supply chain. For example, Baxter’s largest manufacturing site in Marian, North Carolina, that makes 60% of the U.S. supply of dialysis solutions and IV fluids shut down for several weeks after the hurricane and doesn’t expect to ramp up fully for another few months. According to a survey by Premier Inc., 86% of health care providers are experiencing shortages of IV fluids. Adding fuel to the fire, the East Coast and Gulf Coast ports shut down for a few days due to a strike over wages and automation. Although it was temporarily halted, there is a risk it will recur if labor negotiations stall. A J.P. Morgan analyst estimated the economic impact at $5 billion a day.

Creating a Robust & Resilient Supply Chain

The most successful companies are assessing their end-to-end supply chain to ensure diversification, backups, and stability. Although these immediate actions are essential, they are not enough. Proactive companies are reviewing their infrastructure, expanding regional manufacturing capabilities, sourcing additional partners, formalizing agreements, and vertically integrating to secure supply to support growth plans.

Second, they are creating a resilient and transparent supply chain. They are rolling out a SIOP (Sales Inventory Operations Planning) process to better predict demand, get ahead of materials and component requirements, and determine machinery and labor capacity needs. This is critical to the successful fulfillment of customers' needs during times of growth, volatility, and uncertainty.

For example, an equipment manufacturer experienced unexpected aggressive growth and was concerned about keeping up with requirements. Engineering got behind, and so the lead times for purchasing, planning, and operations were squeezed to serve the customer successfully, thereby creating inefficiencies, increased costs, and chaos. By rolling out a SIOP process, they focused attention on how to translate likely quotes of engineer-to-order products and sales forecasts of repetitive products into meaningful supply requirements upfront. By doing this, they were able to take the appropriate actions such as secure supply of materials from conflict zones and purchase new machinery to resolve a critical looming bottleneck before it impacted customers. It switched the company's process from reactive to proactive and allowed it to stay ahead of changing conditions to grow the business with high service levels.

Third, successful clients are upgrading their infrastructure, talent, and technology to increase flexibility, agility, innovation, and bottom-line business results. For example, a healthcare products manufacturer invested in key talent and technology (advanced planning systems) when their competition was laying off people during recessionary times. This talent designed and developed new products and leveraged ERP and advanced technologies, achieving 20% growth with increased margins and working capital.  

Opportunities for Growth

Successful companies will take advantage of the non-stop disruptions and volatility to secure their position as the trusted partner in the supply chain. There will be more opportunities than at any time in history to increase market share and surpass your competition if you are pre-positioned for growth in a resilient, forward-thinking, and scalable way while keeping focused on profitability and customer value. This is especially true in the medical products industry as it is core to health, and disruptions can impact lives.