What the Heck Is Supply Chain Transformation?

Supply chain transformation has been the buzz phrase in the Healthcare world for some time now, but what the heck is it?  The answer to this depends on who you are talking to.

The traditional supply chain involved the movement of goods from supplier to demander, so from manufacturer to retailer, or manufacturer to distributor, or distributor to retailer and so on.  These physical supply chain activities are governed by the whole procure-to-pay transactions sets, paper or electronic, of purchase order, invoice and final payment. Certain experts in Healthcare have proposed to extend this supply chain definition to include the patient as the final demander and so the supply chain extends to the hospital room and patients Electronic Health Record (EHR/EMR).

This theoretical extension to the patient and patient record has taken the attention of many, when in fact the traditional supply chain in healthcare today for the most part lies stuck in the 1980’s.  This needs to be fixed before the extension can be addressed.  In Canada less than 30% of purchase orders are delivered electronically resulting in needless paper processing that is adding billions of dollars to healthcare costs.  These costs are hidden in the back office and result in increased product costs from manufacturers.

In the modern retail world 100% of issued purchase orders are delivered electronically and thus invoicing is returned in the same format.  Then an auto-match-pay process eliminates all the paper processing saving that industry many 10’s of billions of dollars annually.

In fact, Gartner estimates the COVID-19 pandemic has fast-tracked digital adoption by five years. While the healthcare industry has made great progress in automating supply chain processes, COVID-19 illustrated that large gaps in procure-to-pay automation remain. Moving forward, the healthcare industry must bring even greater levels of automation to the procure-to-pay cycle. One area of focus for both providers and suppliers will be to speed the adoption of electronic invoicing and payments. This will reduce the costs associated with manual processes and enable more fluid decision-making around cash management

A recent survey by EY found that improved supply chain visibility is the number one business priority during the next three years. To achieve this, healthcare must fix its data issues. The first step is to establish a modern data strategy that integrates and normalizes data across multiple stakeholders and ensures it is clean, accurate and can flow easily across systems

Gartner forecasts the enterprise resource planning (ERP) market will reach $44 billion by 2022, with much of that growth driven by the adoption of cloud-based systems. In healthcare, moving to a cloud-based ERP system enables real-time integration with other cloud-based systems, such as electronic health records and accounts payable. By linking the supply chain with financial and clinical systems, organizations can better assess how supply choices influence total cost of care, revenue and reimbursement, safety, quality and the patient experience. However, cloud-based ERP systems are only as valuable as the data that power them. In developing a cloud ERP strategy, healthcare organizations must find a technology partner with healthcare and supply chain expertise to ensure that the supply chain data powering the ERP system will provide the insight necessary to improve patient outcomes and lower the cost of care.

Key Drivers of Supply Chain Transformation

Several factors are driving the need for supply chain transformation in today’s business landscape. Here are some key drivers:

1. Technological Advancements: Rapid advancements in technologies such as artificial intelligence, blockchain, Internet of Things (IoT), and robotics have revolutionized supply chain operations. Integrating these technologies into the supply chain can unlock new levels of visibility, automation, and efficiency.
2. Changing Consumer Expectations: Customers today expect fast, reliable, and personalized experiences. To meet these expectations, businesses need to optimize their supply chains to enable faster order processing, seamless omnichannel experiences, and real-time visibility into product availability.
3. Globalization: With expanding markets and complex global networks, supply chains have become more intricate. Supply chain transformation helps businesses navigate complexities such as cross-border logistics, diverse regulatory requirements, and cultural differences, enabling them to compete effectively in the global marketplace.
4. Sustainability and Social Responsibility: The increasing focus on sustainability and social responsibility has prompted businesses to transform their supply chains. By adopting environmentally friendly practices, reducing waste, and ensuring ethical sourcing, companies can meet the growing demands for sustainable and socially responsible products.