Health Supply Chains Improve Using Retail Best Practice

A report released today by the University of Arkansas indicates that the healthcare industry is falling behind the retail industry when it comes to effective supply chain management. The report suggests that the healthcare industry could benefit significantly from adopting several of retail’s best practices.

“The retail industry has a long history of adopting automation, complemented by scientific and mathematical models, to improve supply-chain operations,” says Ed Pohl, Associate Professor in the Department of Industrial Engineering. “Conversely, healthcare has been relatively slow to adopt these methods. Based on survey responses, we believe that considerable efficiency gains might be available to the healthcare supply chain through the adoption of best practices from the retail supply chain.”

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Researchers found that the retail supply chain has done a better job in the critical area of collaborative planning, forecasting and replenishment, which involves suppliers and retailers – or healthcare providers – working together to adopt order forecasting and inventory planning to create an integrated supply-chain network.

Also critical, healthcare is struggling to catch up with retail in the area of scanning technology, which is used to track materials by means of barcodes and RFID technology.

Furthermore, according to the report, the healthcare supply chain is lagging behind retail when it comes to professional training and education, specifically the skills associated with materials management, purchasing and warehousing.

Considering retail’s success, researchers conducted the survey to get a better understanding of the gaps between the two supply chains and to learn how the healthcare supply chain might benefit from adopting some or all of the best practices used by retail.

The first step involved identifying best practices. The researchers came up with an initial list of 22, based on an extensive literature review and guidance from a steering committee made up of industry leaders. The steering committee scored and ranked all 22 best practices according to their potential impact on business and their associated cost and ease of implementation.

From this ranking, the top 10 best practices were identified and included in the report. In addition to collaborative planning, forecasting and replenishment, scanning technology, and education and training, best practices included >>>

• Centralized purchasing and supply
• Supply chain services reorganization
• Regular cycle counting and stock rotation
• Performance management
• Actual usage inventory management
• E-commerce
• Data standardization

By using retail supply chain management as a benchmark, healthcare supply chain executives should consider implementing best practice strategies to bring healthcare standards up to par. 

The study was conducted for the Center for Innovation in Healthcare Logistics at the University of Arkansas.