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COVID-19: Implications for Supply Chain Management

Francis, James R. FACHE

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Frontiers of Health Services Management: Fall 2020 - Volume 37 - Issue 1 - p 33-38
doi: 10.1097/HAP.0000000000000092
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Abstract

To respond effectively to a pandemic, time is of the essence. Effective responses require continuous monitoring of world events and potential disruptions. In today’s operating environment, advanced healthcare providers have business continuity plans for a wide range of third-party risks. These plans are more sophisticated than the basic disaster plans that most providers have in place to deal with a fire, flood, hurricane, or tornado. Business continuity plans further enable an organization to monitor critical products and their countries of origin for potential disruption.

Proactive action based on monitoring improves a supply chain’s agility and resilience in the face of uncertainty, and uncertainty arrived on January 19, 2020, in the United States with detection of the first case of COVID-19 (Holshue et al. 2020) and the subsequent first confirmed case of local transmission (Ghinai et al. 2020).

Before the declaration of a public health emergency on January 31 and a national emergency on March 13 (Aubrey 2020), Mayo Clinic’s supply chain was moving forward with mitigation activities to prevent, or at least minimize, any potential disruption to patient care. Despite our best efforts in planning, COVID-19 illustrated just how fragile the healthcare supply chain can become in a few short weeks when there is an overreliance on overseas manufacturing.

In late January, the business continuity unit within our supply chain alerted the organization to the potential disruptions associated with the coronavirus’s occurrence in China and its imminent downstream impact on the personal protective equipment (PPE) supply chain. We also assessed the longer-term implications for other products manufactured in China, considering the US government’s actions to control the virus. Supply chain management immediately recommended activation of Mayo’s hospital incident command system (HICS) to coordinate supply chain management with its emergency operations center and, eventually, the newly conceived sourcing command center. And so, Mayo Clinic’s response to COVID-19 began.

Days turned into weeks of daily briefing calls to manage PPE inventories systemwide. Our traditional sources of products were quickly overburdened with orders. Manufacturers and distributors placed all customers on allocation in an attempt to evenly distribute scarce products and limit hoarding. Healthcare organizations, including Mayo Clinic, turned to group purchasing organizations (GPOs) and other nontraditional sources for products and assistance. International sourcing is not a common skill set among healthcare supply chain professionals—it brings many risks, such as counterfeit products, profiteering, constantly changing terms and prices, unfamiliar foreign and US customs rules, international transportation and gridlock, and minimal clarity on when products are to be shipped and received.

Taking Reality to the Extreme

Healthcare providers operate in a disruptive environment. That is a given. We are accustomed to the uncertainties that accompany difficult situations. However, the pandemic is taking that reality to the extreme and raising many urgent questions. How severe will it be? How will our service areas be ultimately affected? How many patients will we care for? Will we run out of supplies? Why are no N95 masks available? When will our orders be delivered? How do we drive supply conservation? Do we trust this new supplier to deliver? These are just a few of the thoughts supply chain professionals contemplate daily. This uncertainty leads to worry, fear, anxiety, and stress—all commonly experienced by leaders in a crisis (Kraemer 2020).

Despite the difficulties, our organization benefited from many bright spots in the supply chain that lightened the impact of this pandemic. After several years of business continuity planning, our supply chain realized dividends that enabled Mayo Clinic to meet constantly changing requirements. New supply replenishment and inventory management technology powered by advanced analytics brought visibility to enable centrally controlled, demand-based inventory and logistics for products distributed across the five states we serve. In addition, supply chain management staff provided clear data and analytics modeling of PPE burn rates compared to inventory levels, which yielded days inventory on hand (DIOH) metrics based on patient mix. With these analytics, we can quickly gauge our ability to meet the needs of patients and caregivers.

Continuity of effort was complicated by the fact that supply chain staff had to work remotely, but we learned how to coordinate supply availability and logistics information across the organization in new ways. We worked extensively with the clinical practice and leadership, HICS, infection prevention and control (IPAC) committees, and a PPE task force charged with creating a PPE formulary and standardized practices. Enterprise collaboration—including standardized practices, significant conservation of PPE by all clinical staff, and identification of new sources of PPE (such as 3D printers for face shields and local manufacturers)—contributed to our ability to meet demands.

Lessons Learned: Implications for Supply Chain Management

Early in our efforts to meet supply demands, we began to keep track of what we learned, and the list became quite lengthy. All healthcare organizations should take time to reflect on lessons from the COVID-19 pandemic and then refine their strategic plans or directions to better prepare for future crises. Among the lessons learned and applied at Mayo Clinic are the following:

Develop and Update Robust Business Continuity Plans

Healthcare, like many other sectors, is part of a global economy. Understanding potential and real-time market disruptions is important to an effective response. Identify where key suppliers manufacture critical supplies, and monitor interruptions in those areas. Act at the first appearance of a disruption that could result in either a short- or a long-term impact on supply availability. Developing such plans and assigning staff accountability are very important—capabilities can be developed in-house or through partnerships with your GPO or other suppliers.

Instill an Agile and Innovative Culture in the Supply Chain

This has proven to be a vital contributor to our successful response to COVID-19. Managers should understand that it is not enough to have “all hands on deck” and that staff will also likely be asked to do something different that requires new skills or accountabilities. Having an innovative culture in times of crisis enables creative minds to envision new methods of executing strategies that may involve manufacturing PPE, forging new partnerships, finding alternative sourcing and procurement, and honing new capabilities within the supply chain. At Mayo Clinic, these attributes enable our supply chain to shift resources where most needed.

Develop and Align Communication Practices in Advance for Business Continuity

Most healthcare organizations have developed communication practices over time as the pandemic has evolved. There are myriad audiences—staff, patients, visitors, clinicians—that frequently need to be told of changing precautions and PPE protocols in addition to updates on other topics such as financial impacts, furloughs, reductions in salaries, and so forth. For us at Mayo Clinic, strong collaborative relationships among leaders, physicians, public affairs staff, and the IPAC and HICS committees are critical in communicating changes that result from the pandemic.

Develop and Adhere to PPE Protocols

Not only is standardizing the manufacturer and type of PPE used in the facility important, so is ensuring adherence to the developed protocol for its use. With COVID-19, the protocols for PPE usage for patient and nonpatient contact have evolved, often as dictated by availability of supplies. In addition, following guidelines of the World Health Organization, Centers for Disease Control and Prevention, and state health departments is important in providing safe and effective care for staff and patients. In most situations, we have found that supply chain’s collaboration with safety, IPAC, and nursing in establishing protocols also contributes to adherence.

Increase Suppliers and Capacity

COVID-19 has placed significant strain on supply availability for many healthcare organizations. Traditional suppliers were initially unable to meet a growing worldwide demand, allocations placed more constraints on available supplies, and unfamiliar international sources brought a great deal of uncertainty. Healthcare leaders must continue to work to increase supply availability, which may mean securing new manufacturers and seeking increased production from existing suppliers.

In any case, there is no silver bullet to slay the problems of supply and capacity. Creative partnerships must be formed, some potentially involving financial investments and others based on committed volume purchases in return for assurances that supplies will be available when needed. We have learned that establishing key leadership contacts with suppliers is critically important when issues must be resolved. We will be at an immediate disadvantage if we have to hunt for the right contact during a crisis.

Invest in Information Technology and Analytics

Successfully managing inventory and having continuous visibility of DIOH calls for investments in inventory management tools and point-of-use replenishment. Such technology is imperative.

Work with your suppliers and distributors to increase order transparency and visibility of inventory all the way back to the manufacturer. Know what DIOH is at your distributor and manufacturer. Fully understand the allocation methodologies implemented at both the distributor and manufacturer. Also invest in staff capable of analyzing data, running models associated with PPE burn rates, and other reporting needs to effectively manage inventory. The Mayo Clinic enterprise resource planning system enables efficiency in sourcing, procurement, accounts payable, and operations.

Assess Your Overall Sourcing Strategies

COVID-19 has forced healthcare organizations into new international sourcing overnight. Will this continue through and after the pandemic? Domestic sources may gain new prominence, but for the foreseeable future, products will be primarily sourced from foreign countries, just as they are today. It is best not to always rely on such sources, considering the host of unknowns about how other countries are also being affected by the virus.

At Mayo Clinic, we have been able to respond quickly on sourcing-related issues thanks to our product cross-reference database and retention of vendor evaluations performed during previous sourcing events. Our clinical quality value analysis (CQVA) team provides the glass through which all alternative products are selected. CQVA coordinates with the various clinical stakeholders, logistics, procurement, and sourcing managers to ensure that clinically effective products are obtained at the right time. For anyone seeking evidence of the value of a clinically integrated supply chain, COVID-19 demonstrates it.

Determine Your Inventory/Distribution Model

Assess your current model and determine how well it has performed during the pandemic. Many healthcare organizations found themselves in the distribution business overnight after the arrival of COVID-19. Our organization has multiple distribution models to ensure just-in-time service at some locations. Having the ability to distribute PPE supplies to where they are most needed across a health system in five states also is a key to our successful response to COVID-19. We have found that centralized management of supply inventory, along with the ability to allocate based on COVID-19 patient demand, is the way to go in the future.

Achieve a Balance Between Price and Availability

Healthcare has been focused on cost savings and value creation largely because of financial pressures. Historically, pricing and product performance are two of the most important determinants in awarding a supplies contract. Today, given our experience with a pandemic, there also is heightened interest in the availability and assurances of a reliable supply. Paying more for products in exchange for these assurances makes good sense.

Develop Governmental/Regulatory Relationships

The pandemic thrust healthcare organizations and their respective supply chains into the world of federal agencies to a greater degree than before. Developing relationships with federal and state agencies by identifying a contact individual for each proved important at Mayo Clinic as we looked for answers to pandemic-related questions or needed assistance. Know who you need to know at the Department of Health and Human Services, Federal Emergency Management Agency, White House, Centers for Disease Control and Prevention, Food and Drug Administration, and any other entity you must deal with.

Conclusion

Much work remains to fully address lessons learned from the COVID-19 pandemic. In doing so, it is worthwhile to reflect on the mission and values of your organization as you contemplate new strategies and directions for making improvements. Keeping the proper perspective on the essence of your work in serving staff and patients should always inform your performance improvement activities. Thus, action plans need to be strategically developed and prioritized.

As the pandemic ebbs and flows, the constant task is to resume full operations and ensure the supply chain is ready to provide support all along the way. I am particularly proud of how the Mayo Clinic supply chain team stepped up to address the challenge of COVID-19—and continues to do so—for countless hours above and beyond normal workloads. I am certain that we will build a stronger supply chain. However, to do so, many changes will be required. A collection of lessons learned offers a starting point, but only through a comprehensive evaluation of supply chain functions can a healthcare organization find the best ways to prevent and react to future challenges.

References

Aubrey A. 2020. “Trump Declares Coronavirus a Public Health Emergency and Restricts Travel from China.” NPR. Published January 31. www.npr.org/sections/health-shots/2020/01/31/801686524/trump-declares-coronavirus-a-public-health- emergency-and-restricts-travel-from-c.
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Holshue M. L., DeBolt C., Lindquist S., Lofy K. H., Wiesman J., Bruce H., Spitters C., Ericson K., Wilkerson S., Tural A., Diaz G., Cohn A., Fox L., Patel A., Gerber S. I., Kim L., Tong S., Lu X., Lindstrom S., Pallansch M. A., Weldon W. C., Biggs H. M., Uyeki T. M., Pillai S. K.. 2020. “First Case of 2019 Novel Coronavirus in the United States.” New England Journal of Medicine 382 (10): 929–36.
Kraemer, H. 2020. “Leading in Time of Crisis.” Strategic Marketplace Initiative Vision 2020 webinar, May 28.
© 2020 Foundation of the American College of Healthcare Executives