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Reducing healthcare supply chain costs cuts value - and hurts patients

Covid-19 shows the need for resilience during a crisis – and a rethink on the price-value trade off

The priority of healthcare supply chains is to ensure reliable and safe product supply – that’s a key learning from the coronavirus pandemic that has left a trail of economic and social devastation in its wake.

Supply chains haven’t escaped unscathed, and climate related, geo-political or healthcare disruptions of various shapes and sizes are becoming ever-present.

Volatility in the markets is challenging the long-held focus on low-cost supply and low inventory management, and the truth is that low cost supply chains short of value and resilience have simply not coped during the Covid-19 crisis. 

While risk taking on supply chain effectiveness might be possible in a low-risk environment, the reality is it’s unlikely we will see this scenario for some time – if ever. This is particularly important in the healthcare sector, where supply chain resilience is a matter of high public importance – and can literally be the difference between life and death on a mass scale. As the graphic from Bain & Company suggests, appropriate investment in supply chains will ensure resilience, even when the storms come.

Vulnerable supply chains
Healthcare product volumes going through DSV rocketed between February and March. Issues around product availability pushed the private sector to buy in a week ahead of the lockdown starting. The buy in focused on immune support products (most noteworthy vitamin C), chronic medicines, and “Covid-19 products”, including those where there was no medical proof that the product prevented or treated Covid-19.

Outbound shipments rose rapidly in March, with the most dramatic spike being 147% higher than the daily average for this year. The March average daily volume was 38% up on the year to date average daily volume.

Gross sales
In terms of receiving pallets into the warehouse, March 2020 was 48% up on March 2019, while June 2020 was 72% up on June 2019.

The movement of parcels and sales volumes tells its own story in March, as the market initially responded to buying in to meet anticipated demand. Not all supply chains are resilient, and not all keep delivering no matter the circumstances.

DSV Healthcare has invested significantly over the years to offer the South African market an end-to-end service that meets the highest quality and product integrity standards – and has the capacity and capability to withstand the most severe stress tests and dramatic spikes in volumes, as seen during the current Covid-19 pandemic.

Given there is fixed capacity from a warehouse perspective and limited variability (in the short term) from a staff and fleet perspective, managing dramatic variances is extremely challenging. 

It’s DSV’s investment in technology, people and processes which have helped the company manage the most extraordinary circumstances – and keep supply chains moving.

Covid-19 has reminded all involved in healthcare that price cannot harm the reliability of delivery if patient wellbeing is not to be compromised. Resilient supply chains which keep delivering, no matter the circumstances, provide value which will be reflected in the price – which is essentially an investment in healthcare, not a cost in delivering healthcare.

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