The role of strategic sourcing in healthcare supply chain management

In healthcare, delays or shortages in supplies can cost lives. That’s why managing the supply chain well isn’t just about saving money — it’s about saving lives too. According to the Centers for Medicare & Medicaid Services, America spends more than $4.9 trillion a year on healthcare. This averages to $14,570 per individual. By 2026, healthcare spending will grow by 5.7%.

As spending increases, supply chain executives must find cost-effective ways of dealing with rising costs. Hence, strategic sourcing.

Lesley Barton

In healthcare supply chain management, strategic sourcing refers to the long-term, data-driven approach used in healthcare to procure medical goods and services. Strategic sourcing prioritizes cost efficiency, quality, patient safety, and regulatory compliance.

Why strategic sourcing is critical in the healthcare supply chain

To better understand why strategic sourcing is essential, let us look at a report published by Boise State University. According to the report, the scarcity rate of crucial medical supplies is 5% in U.S. hospitals.

This means that hospitals are scrambling daily to get essential equipment for their patients. Furthermore, because most hospitals still use an outdated manual process, the procurement process is affected by errors, delays, and inaccurate demand data.

In a nutshell, strategic sourcing is critical because it ensures fewer supply chain disruptions of vital medical supplies, such as diagnostic kits and wound care products.

Preventing shortages of essential medical supplies

Another key benefit of strategic sourcing is that it helps prevent shortages of essential medical supplies that can be used to save lives. Its effectiveness is amplified with technologies like artificial intelligence (AI), machine learning, and predictive analytics.

For example, hospitals can use AI to analyze historical data and seasonal illness patterns to forecast demand for specific medical supplies accurately. In addition, AI can also monitor stock levels across multiple locations and recommend reorders before supplies reach critical levels.

It saves money

With the rising cost of healthcare, hospitals must find ways of reducing operational costs without affecting quality. Traditional sourcing mainly deals with post-buying based on the needs at the time. However, when a supply chain shortage affects the entire industry, prices increase, resulting in inflated costs.

Strategic sourcing saves money because medical facilities secure contracts in advance, avoiding inflated costs during shortages.

Aligning sourcing strategies with clinical quality and patient safety

A good clinical sourcing strategy must look at the patient’s best interests. This should be in terms of costs and quality of care. Therefore, the purchased equipment must meet stringent safety, quality, and performance needs.

Reduced clinical risks

Strategic sourcing helps to combat infectious outbreaks and ineffective treatments. For example, a hospital purchasing substandard wound care supplies can increase the risk of hospital-acquired infections.

On the other hand, sourcing high-quality, clinically tested products helps reduce infection rates, medication errors, and post-operative complications.

Similarly, hospitals can source standardized supplies by aligning sourcing strategies with quality and safety. This is important because the facility reduces costs, such as training staff on new equipment. As a result, human error is reduced, enhancing clinical efficiency.

Building trust and reliability

By aligning sourcing strategies, medical facilities can choose suppliers based on clinical evidence rather than cost alone. This is because strategic sourcing encourages the use of vendor scorecards, pilot programs, and product testing before large-scale purchasing.

Lastly, patient safety is guaranteed by aligning procurement with regulatory and quality standards. For example, medical centers can align with the Quality System Regulation to ensure the products sourced meet safety and quality guidelines.

Leveraging technology and data for smarter healthcare sourcing

In today’s dynamic healthcare environment, technology is being used to transform sourcing decisions. For example, digital procurement platforms help healthcare organizations manage supplier contracts, place orders, monitor performance, and even track shipments. This helps healthcare providers align sourcing with clinical needs more accurately.

Apart from digital procurement platforms, healthcare providers can also use data analytics to analyze historical data such as usage trends and seasonal demands. Data analytics also analyses supplier reliability, delivery timelines, and the performance of healthcare procurement teams.

AI and machine learning are other technologies that can be used for smarter healthcare sourcing. AI can analyze large amounts of data to identify patterns such as rising costs and supply chain bottlenecks.

Cost containment without compromising care

Balancing cost efficiency with high-quality patient care is one of the most critical challenges in healthcare today. Rising operational expenses, inflationary pressures, and increased service demand have forced healthcare providers to rethink procurement management. Supply chain managers have adopted strategic sourcing to deal with these challenges.

One key strategy in strategic sourcing is the total cost of ownership approach. This approach considers the full lifecycle cost of a product, such as shipping, storage, maintenance, and waste disposal rates. This approach allows healthcare providers to make a more informed long-term decision.

Another cost containment strategy currently being used is bulk buying and contract consolidation. This helps providers negotiate for better prices, reduce transactional costs, and improve delivery timelines.

Another cost containment strategy is to standardize the products bought to improve clinical efficiency. This also reduces variability in price, making it easier to predict future prices. Lastly, healthcare providers must avoid hidden costs by only purchasing quality products. Low-quality products can result in recalls and treatment delays, part of the hidden costs.

In conclusion, strategic sourcing is more than just a procurement strategy. It is a critical pillar of healthcare operations. Strategic sourcing ensures healthcare providers align their procurement process with safety standards, increasing efficiency and reducing costs.

About the author

Lesley Barton is the National Clinical and Training Manager at Bunzl & AMHC, with over 40 years of healthcare experience. A Registered Nurse, Midwife, and Continence Nurse Specialist, she transitioned into healthcare sales and management, leading education in continence, wound care, and medical consumables. She serves as a Board Director at the Continence Foundation of Australia and founded the Clinical Care Connections (CCC) program, playing a key role in developing Atlas McNeil Healthcare’s education and training initiatives to support best practices in clinical care.

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