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Health care suppliers need to think long term, expert says

May 20, 2010

Companies in the health care supply chain need to engage in more strategic, long-term preparation even as the health care industry faces uncertainties and upheaval in regulation as well as logistics disruptions from volcanoes to flu pandemics.

The challenge was delivered by Mahender Singh, research director of the MIT Center for Transportation and Logistics, at the opening session of the Midwest Healthcare Supply Chain Conference.

More than 150 people are registered for the two-day conference at the Indiana Convention Center in downtown Indianapolis. The event was launched last year by the Indianapolis Airport Authority and the Indiana Health Industry Forum.

Singh said many firms are too focused on day-to-day cost and operational efficiencies and need to look more at experimentation and innovation as a way to prepare for a rapidly evolving and uncertain future for the health care supply chain.

Even if anticipated scenarios don’t occur, the effort could have payback in ways not anticipated. For example, a firm that believed an earthquake might strike Southern China could in advance set up alternative sourcing of materials from Latin America.

The earthquake might not occur, but that arrangement could pay off if avian flu again disrupts China, Singh said.

“Many, many different events tend to have similar effects … There are a lot of things happening around us today, events that are happening that we are not thinking about.”

The health care supply chain, which involves everything from pharmaceutical companies to medical device makers and logistics firms, has been hit with a number of disruptions, from volcanic disruptions in Iceland to the financial meltdown in Europe to continuing uncertainty involving the implications of federal health care reform.

But Singh noted that there are also some trends that can be anticipated with more certainty, such as the implications of an aging demographic and the rising percentage of care that will be delivered for chronic diseases.

Chronic disease will require care to be delivered around the clock and, more often, in the patient’s home rather than in a hospital.

That might mean the supply chain may swing more from deliveries to the hospital to deliveries to residences.

“These events we know are coming,” Singh said.

One conference participant asked Singh how such preparations can be justified to upper managers reluctant to spend money toward longer-term, hard-to-anticipate events.

He suggested looking beyond short-term costs and more toward other potential future benefits.

For example, FedEx and UPS could have balked at the cost of developing such a precise package-tracking system for merely their own internal use. But those companies thought beyond internal use, realizing that such costly and sophisticated systems had value to customers.

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