Healthcare Supply Chain Management: Importance & Practices

Delivering quality healthcare requires extensive behind-the-scenes coordination. Nowhere is this more evident than in managing the massive and complex supply chain that underlies every aspect of healthcare—from basic office supplies to sophisticated medical equipment and essential medications.

In this low-margin industry, where expenses often rise faster than revenues, healthcare leaders face mounting pressure to lower costs yet maintain high-quality care. Effective supply chain management (SCM) is a powerful means of achieving both aims.

What Is Supply Chain Management?

Supply chain management (SCM) includes all activities involved in the design, planning, execution, and oversight of an organization’s supply chain.

• For a manufacturer, SCM covers raw materials, suppliers, logistics, distributors, and customers.
• For professional services, SCM focuses on sourcing and managing resources necessary to deliver work.
  

The most efficient SCM efforts integrate processes and communication with partners across the value chain—minimizing costs, maximizing efficiency, improving quality, and ensuring customer satisfaction.

What Is Healthcare Supply Chain Management?

Healthcare supply chain management emphasizes the strategic coordination of procurement and distribution of goods required to sustain both business operations and patient care.

Healthcare supply chains are especially complex because they must account for:

• Strict regulatory and compliance standards
• A wide variety of products (from pens to surgical implants)
• Multiple vendors, systems, and data sources
  

The goal is to ensure products are manufactured, delivered, stored, and used in a way that supports high-quality and cost-effective patient care.

Key Takeaways

• Healthcare organizations need the right products at the right price at the right time.
• Supply chains are vast and fragmented due to the wide variety of products required.
• Complexity and frequent disruptions make supply chain management challenging.
• Improvements include better data, automation, lean practices, and process standardization.

Healthcare Supply Chain Management Explained

Managing a healthcare supply chain involves:

• Planning & forecasting demand for supplies, equipment, and medications.
• Collaborating with clinicians on product selection and standardization.
• Procurement & purchasing from manufacturers and distributors.
• Inventory management—receiving, storing, and tracking items.
• Distribution across departments and facilities.
• Usage tracking and quality control.
• Returns & disposal of expired or unused items.
• Supplier relationship management, often through Group Purchasing Organizations (GPOs).

Why Healthcare Supply Chain Management Matters

Healthcare organizations face rising costs, reimbursement challenges, and frequent disruptions.

• PwC projects a 7% increase in treatment costs in 2024, up from 6% in 2023.
• The COVID-19 pandemic exposed vulnerabilities in global supply systems.
• Failures at one point in the chain can have life-threatening ripple effects.
  

Strong SCM improves operational, financial, and clinical performance by enabling visibility, automation, and contingency planning.

Challenges in Healthcare Supply Chains

According to Premier’s 2024 Supply Chain Resiliency Survey:

• 80% of providers expect challenges to persist or worsen.
• 67% spend 10+ hours weekly mitigating shortages.
• 40% had to cancel or reschedule cases due to shortages in 2023.
  

Other challenges include:

• Drug shortages (due to production issues and global dependencies).
• System silos from mergers and acquisitions.
• ERP limitations in handling regulatory and legacy integration.
• Clinical time wasted on manual inventory management.
• Regulatory hurdles, such as FDA and HIPAA requirements.

15 Best Practices to Improve Healthcare Supply Chain Management

• Improve Data Quality
• Enhance System Integration & Data Sharing
• Increase Supply Chain Visibility
• Focus on Demand Forecasting & Inventory Management
• Leverage Technology
• Automate Processes
• Optimize Network Design & Distribution
• Diversify & Strengthen Supplier Relationships
• Build Resilience
• Increase Supply Chain Agility
• Manage Supply Chain Costs
• Utilize Strategic Sourcing & Bulk Purchasing
• Apply Lean Principles
• Integrate Data With Workflows
• Standardize Processes

(Each practice supports efficiency, cost savings, and improved patient outcomes.)

The Future of Healthcare Supply Chain Management

Looking ahead, healthcare supply chains will increasingly focus on:

• Digital transformation through cloud ERPs and AI-powered analytics.
• Resilience & risk management with stronger supplier diversification.
• Sustainability, including greener logistics and recyclable packaging.
• Quality control & compliance, with innovations like blockchain traceability.
  

Organizations that adopt these strategies will improve efficiency, resiliency, and responsiveness to patient needs.

Redefine Your Healthcare Supply Chain With NetSuite

NetSuite’s cloud-based healthcare management suite helps organizations:

• Improve visibility with real-time inventory and financial data.
• Streamline supplier relationships and demand forecasting.
• Automate procurement, ordering, and compliance tracking.

With integrated data and systems, healthcare leaders can build efficient, resilient, and patient-focused supply chains.

Healthcare Supply Chain Management FAQs

How does supply chain management work in healthcare?

It involves designing, planning, and managing procurement and delivery of supplies for patient care—from software to prescription drugs.

What is the focus of the healthcare supply chain?

To ensure supplies are available at the right price, in the right quantities, at the right locations, and at the right time—supporting patient care and financial health.

What is a supply chain in healthcare?

It’s the network that delivers the goods and services required for healthcare operations and patient treatment, spanning vendors, logistics, data, and processes.

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