HEALTHCARE

SUPPLY CHAIN
MANAGEMENT
WHAT IS A SUPPLY CHAIN?

“Supply chain management is a set of approaches

utilized to efficiently integrate suppliers, manufacturers,
warehouses, and stores, so that merchandise is produced
and distributed at the right quantities, to the right
locations, and at the right time, in order to minimize
system-wide costs while satisfying service level
requirements."
 WHAT IS A SUPPLY CHAIN?
A supply chain is dynamic and involves the constant flow
of information, product and funds between different stages.

The objective of the supply chain management is to be efficient

and cost-effective across the entire system.
OBJECTIVES

1) To maximize the overall VALUE generated.

2) Minimize the cost of material and material
management.
3) Minimize inventory investment.
4) Ensure timely delivery of material at every level
of the supply chain and to customers.
5) Ensure quality of materials used in
services.
6) If needed, get product design help or other
services from supplier.
Important factors in supply chains:
1) The supply chain includes all activities and processes to supply a product or service
to a final customer.
2) Any number of companies can be linked in the supply chain.
3) A customer can be a supplier to another customer so the total chain can have a
number of supplier/customer relationships.
4) Although the distribution system can be direct from supplier to customer, depending
on the products and markets, it can contain a number of intermediaries (distributors)
such as wholesalers, warehouses, and retailers.
5) Product or services usually flow from supplier to customer , and demand
information usually flows from customer to supplier.
PROCESS OF VIEWS OF SUPPLY CHAIN

• The processes in the supply chain are

Cycle divided into a series of cycles each
performed at the interface between
View two successive stages of the supply
chain.

• The processes in the supply chain are

Push/ divided into two categories depending
on whether they are executed in
Pull view response to a customer order or in
anticipation of the customer order
CYCLE VIEW OF SUPPLY CHAIN PROCESSES
Customer

Customer order
cycle
Retailer
Replenishment
Cycle
Distributor

Manufacturing
Cycle
Manufacturer

Procurement
Cycle
Supplier
PUSH/PULL PROCESSES
Customer order Customer
cycle Pull
Processes

Retailer

Replenishment
and
Manufacturing
Cycle Manufacturer

Push
Processes

Procurement
Cycle
S
u
p
SUPPLY CHAIN MANAGEMENT
DECISION
• strategic decisions are made
typically over a longer time horizon
strategic

• operational decisions are short term

operational • focus on activities over a day-to-day
basis.
SUPPLY CHAIN DECISION
There are four major decision areas in supply
chain management:
1) location
2) production
3) Inventory
4) transportation (distribution)
* there are both strategic and operational
elements in each of these decision areas.
 Location Decisions
 The geographic placement of production facilities, stocking points, and
sourcing points is the natural first step in creating a supply chain.
 The location of facilities involves a commitment of resources to a
long-term plan. Once the size, number, and location these se are
determined, so are the possible paths by which the product flows through
to the final customer.
 These decisions should be determined by an optimization routine that
considers production costs, taxes, duties and duty drawback, tariffs, local
content, distribution costs, production limitations, etc . Although location
decisions are primarily strategic, they also have implications on an
operational level.
 Production Decisions

 The strategic decisions include what products to produce, and which

plants to produce
 These decisions have a big impact on the revenues, costs and customer
service levels of the firm.
 Operational decisions focus on detailed production scheduling. These
decisions include the construction of the master production schedules,
scheduling production on machines, and equipment maintenance.
 Other considerations include workload balancing, and quality control
measures at a production facility.
 Inventory Decisions

 These refer to means by which inventories are managed. Inventories

exist at every stage of the supply chain as either raw materials, semi-
finished or finished goods.
 They can also be in-process between locations. Their primary purpose to
buffer against any uncertainty that might exist in the supply chain.
 Since holding of inventories can cost anywhere between 20 to 40
percent of their value, their efficient management is critical in supply
chain operations.
 Transportation Decisions
 The mode choice aspect of these decisions are the more strategic ones.
 These are closely linked to the inventory decisions, since the best choice of mode is often

found by trading-off the cost of using the particular mode of transport with the indirect cost
of inventory associated with that mode.
 While air shipments may be fast, reliable, and warrant lesser safety stocks, they are

expensive.
 Meanwhile shipping by sea or rail may be much cheaper, but they necessitate holding

relatively large amounts of inventory to buffer against the inherent uncertainty associated
with them.
 Therefore customer service levels, and geographic location play vital roles in such

decisions.
 Since transportation is more than 30 percent of the logistics costs, operating efficiently

makes good economic sense.

BENEFITS OF SUPPLY CHAIN

1) Wholesaler keeps stocks of many suppliers, giving retailer

a choice of goods.
2) Wholesalers are near to retailers and have short lead time.
3) Retailers carry less stocks as wholesalers provide reliable
deliveries.
4) Retailers can have small operations, giving responsive service
near to customers.
5) Transport is fewer with simpler, larger deliveries thus
reducing costs.
6) Organization can develop expertise in specific types of
operations.
 NEW TRENDS IN HEALTHCARE
SUPPLY CHAIN
1) The healthcare industry is witnessing a sharp rise
in price in almost all its products and services.
2) The alarming high pace of upward movement of
cost is making the produce of the industry beyond
the reach of the mass.
3) Certain new strategies are emerging in this sector
contributing towards efficient Supply Chain
Management practices.
4) They are RFID, Supply Utilization Management,
Virtual Centralization of the supply chain and Vendor
Managed Inventory.
5) In hospitals, the supply chain strategy should be to
maximize patient care. It enables it by:
• Ensuring product availability
• Minimizing storage space
• Maximizing patient care space
• Reduce material handling time and
costs for all medical staffs
• Minimizing non-liquid
assets( inventory)
6) Healthcare industry is highly interdependent and
only one part can’t attain efficiency leaving behind
others.
7) That is the reason why strategy such as Virtual
Centralization is proving to be popular and
successful.
8) The specific benefits that RFID tags offer over bar
codes present an entirely new way of working in
the competitive business market.
POTENTIAL RISKS TO AN ORGANIZATION AND
SUPPLY CHAIN

Labor unavailability
Natural disasters
Accidents
Market challenges
Sabotage, terrorism, crime, war
Lawsuits
Political uncertainty

Supplier risks:
 Physical and regulatory risks
 Management risks
 Production problems
 Upstream supply risks
 Financial losses and premiums

Distribution Risks:
 Infrastructure unavailability
 Warehouse inadequacies
 Lack of capacity
 IT system inadequacies or failure
STRATEGIES TO IMPROVE HEALTHCARE
SUPPLY CHAIN MANAGEMENT

 Manage contracts
 Develop effective inventory management

 Use technology and analytics to make operations

run smoother
 Have an effective pricing system in place

 Improve order accuracy and order cycle times to

lower costs
 CONCLUSION
 Supply Chain Management (SCM) involves joint
collaboration between outsourcing partners, suppliers,
and customers.
 It comprises the transformation of goods from raw
materials through to the delivery of the finished product;
it also includes the management of key information
flows.
 SCM involves the integration of these activities and
aims to improve relationships between the various
parties, while achieving a sustainable competitive
advantage through high quality and lower cost products.
 SCM is closely linked with enterprise resource
planning (ERP) and electronic commerce systems