Sponsored: Cardinal Health – January 2024 – The Journal of Healthcare Contracting
During respiratory season, unsteady demand and the erratic nature of seasonal viruses and illnesses makes demand planning and inventory management of critical products such as diagnostic tests a major challenge. With high demand and limited supply of these products, many providers need the same products at the same time, and issues like supply constraints, backorders and product allocations can run rampant. Secondary issues like lot number tracking and product dating can also be a risk, as organizations that bring in extra inventory during respiratory season face the possibility of having to throw away expired product.
According to Paul Farnin, Director of Customer Solutions Team at Cardinal Health, unpredictable seasonal planning takes collaboration between providers, labs, supply chain, and distributors using historical data to identify potential patient volumes and formulary needs for the season.
“In this age of data, a major component to respiratory season is both access to data and ability to convert that data into information. Hospitals are investing money into technology and automation, and on the other side of the equation, customers are getting more savvy in understanding data usage,” said Farnin.
“There is an art that goes with the science when it comes to anticipating needs.”
Some hospitals and health systems have made the decision to self-distribute in the pursuit of greater control and resiliency. Self-distribution, which encompasses anything from buying select products directly from manufacturers to the use of consolidated service centers (CSC) and even sophisticated distribution facilities, is an established trend that gained heightened visibility during the pandemic, as many organizations assumed distribution responsibilities and the related costs to ensure critical supply of products like personal protective equipment (PPE).
Benefits of self-distribution include consolidation of supply chains, quick vetting of new suppliers, space savings, and reduction in transport costs. However, with the advantages of centralized supply come the risk of the CSC being a single point of failure, as well as the many challenges that come from managing your own distribution. Disadvantages of self-distribution include the initial capital needed, lack of in-house supply chain talent, and the time and complexity required for implementation.
According to the Health Industry Distributors Association (HIDA)1, organizations considering self-distribution strategies should ask questions including: Will self-distribution add to or detract from patient care? What savings are possible, and does the return offset the cost and risk of such a major initiative? How much risk is the organization willing to assume? And can your organization commit the needed resources for 5-10 years?
Farnin stated, “Since bringing distribution in house, some health systems have discovered that distribution is a thankless business, not cheap, and requires investment over time including the startup costs of building a warehouse and investing in labor, technology, and transportation that can quickly grow and become more expensive.”
For organizations considering self-distribution or alternate distribution strategies, your distributor can help you understand all that this decision entails. Because distributors like Cardinal Health maintain a broad view of the complex ecosystem of hospitals, integrated delivery networks (IDNs), group purchasing organizations (GPOs), and suppliers, we can help healthcare providers leverage data and our distribution capabilities to add value while managing costs.
To further help our customers navigate unpredictable demand and get the critical products their patients need, Cardinal Health is continuously investing in distribution solutions like Kinaxis® that enable intelligent demand planning and forecasting. We also have solutions like the Reserved Inventory Program, a unique offering that helps ensure customers have an identified level of seasonal diagnostic testing inventory available. Ask your Cardinal Health Laboratory Representative how your organization can start planning smarter for respiratory season.
1 Evaluating Self-Distribution: A Guide for Healthcare Executives | White Paper. www.hida.org. Accessed November 8, 2023. www.hida.org/distribution/resources/white-papers/Evaluating_Self-Distribution.aspx