COVID-19 Disruptions of Supply Chains are Challenge for Clinical Laboratories to Bring Value to Hospitals and Healthcare Networks

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Supply chain experts can explain ways clinical laboratories should evaluate their suppliers and sources

Suddenly, supply chain management has become a critical success factor as hospitals, health systems, and clinical laboratories throughout the United States respond to the COVID-19 pandemic. Demand for essential supplies has left many health network medical laboratories vulnerable and understocked.

One supply chain expert has several recommendations on how hospitals and clinical laboratories can respond to improve their access to needed supplies. Brent Bolton (Left) is Director of Supply Chain at Accumen, a developer of healthcare resource and performance solutions, including products specific to clinical laboratories. He says that expanding medical supply shortages—coupled with recently-issued federal regulatory guidelines—point to a potential “red-alert” disruption that will affect laboratories that want to maintain clinical testing services during this pandemic.

“There are important lessons to be learned from how the COVID-19 pandemic is disrupting the healthcare supply chain,” said Bolton. “It’s important to recognize that this is not a regional disruption for providers, such as what happens after a hurricane or a severe earthquake. It’s not even a national disruption. Rather, it is a global event where hospitals, physicians, and clinical laboratories in nearly every country are competing to redirect essential supplies to their organizations.”

Bolton said that, going forward, clinical laboratories would benefit from implementing Lean and Six Sigma process improvement techniques into inventory management and purchasing procedures when contracting for instruments, reagents, consumables, specimen collection supplies, and personal protective equipment (PPE), etc. These policies work well during periods of minimal supply/demand variability. But in the wake of COVID-19 it is imperative for supply chain professionals to be flexible and cautious. He described three useful steps:

  • “Many of the large medical laboratory distributors are partnering with American manufacturers that generally don’t create lab supplies—like Hewlett Packard, 3M, and Ford. Health systems can do the same. For instance, Accumen has created a distribution network of 3D printer manufacturers that have started creating 3D printed swabs to alleviate some of the supply issues.”
  • “Brokers who claim to have product are popping up everywhere, and some of them are scams. Most of the viable supply sources for swabs or masks, for example, require large purchases and payment in advance and generally health systems are not willing to take that risk. But these are unprecedented times and supply chains must be flexible and innovative to secure the products they need.”
  • Unfortunately, this is just the first wave of shortages. The demand for testing reagents, nasopharyngeal swabs, and transport media will normalize. But, resuming elective surgeries will create blood shortages, serological testing will create shortages in consumables and blood collection devices, and increased COVID-19 testing along with population surveillance will continue to stress PPE supplies. Supply chain teams must be proactive.”

Thus, the importance of strategic planning and awareness of alternative supply sources is key to the survival of clinical laboratories moving forward, especially during times of unpredictable upheaval.

“One big issue is having enough of the supplies needed to protect the health and safety of the laboratory’s staff,” stated Bolton. “For example, in the US, a nationwide shortage of nasopharyngeal swabs and personal protective equipment, among others, increased the chance of exposure among our critical frontline clinical laboratory workers fighting the current SARS-CoV-2 coronavirus outbreak.”

Some supply chain disruptions are unavoidable, but some may be predictable, said Bolton. As an example, he points to the 2018 bankruptcy and ultimate acquisition by Vela Diagnostics of Great Basin Scientific (GBS). At the time, GBS was gaining market share for Clostridium difficile (C. diff) testing, as well as manufacturing Staph ID/R Blood Culture panel testing. But Bolton says it was GBS’ predatory pricing strategy that was the key “warning.”

“The price for C-diff testing was a loss leader, it should have been a red flag to do an assessment on their financial status,” said Bolton. “If Abbott or Roche did that strategy it’s no big deal—for them it’s a loss leader.  But, with GBS, they had nothing else to fall back onto, so they were out of the market as quickly as they jumped in.”

Situations like these are visible clues that can warn clinical labs that a vendor may not be able to sustain its supply chain. When lab leaders see a growing company having financial problems that may cause difficulties in how it can keep its customers supplied with kits and reagents, they can consider that a useful warning that the possibility of a supply chain disruption may soon happen.

Most medical laboratories, Bolton explained, pick vendors based on the technology they are interested in buying for use in their labs. But at the moment that purchasing decision is made, there is seldom a strategic sourcing plan, nor have pre-approved and validated alternative sources been identified as backups should an emergency arise and the supply chain from that vendor is interrupted.

“The supply chain team and the clinical lab management team should initiate a long-term strategic sourcing roadmap together, which includes risk management and emergency preparedness plans. It is just another piece of managing the lab’s supply chain and having a robust supplier management program. Everything needs to be done holistically,” he advised.

Brent Bolton (Left), Director of Supply Chain for Accumen, and Adjunct Professor of Supply Chain and Operations at San Diego State University, recommends developing a strategic sourcing roadmap. “A big reason why the lab [supply chain] is complicated is that it’s constantly evolving with so many disciplines, and many of those disciplines don’t have much to do with each other,” he said during a recent Dark Daily webinar. “Being a chemist or a microbiologist or a blood banker, those are very different specialties. And on top of that, the rate of technological change is consistently shortening.”

During a recent Dark Daily webinar, Bolton said that the medical laboratory supply chain is constantly evolving and involves a myriad of sourcing variables that inevitably present challenges and opportunities.

For example, he said that in other industries, it’s common practice for vendors to receive performance reviews on a quarterly basis, measured by the facility. Companies score each supplier on quality, service response time, price changes, and on-time delivery. Other factors such as flexibility, customer service, effective e-commerce, and inventory management also can be monitored.

“Clinical laboratories should consider selecting supply vendors based on similar criteria,” suggested Bolton. “The current disruptions in lab supply chains because of the pandemic are a reminder to all labs that supply chain risk reduction and cost efficiency are two ways to think strategically about the clinical laboratory as an asset (instead of a liability) for hospitals and health systems.”

In today’s healthcare environment, hospital executives think differently about ancillary services within their health networks. Clinical laboratories, in particular, have the attention of leadership—often as a cost center. That is why lab managers should help health system leaders think more strategically and position their lab as an asset for the system and a service line to drive integration.

To help clinical laboratory leaders increase their lab’s value by preparing for potential disruption to critical supply chains, Dark Daily offers a free on-demand webinar that explains:

  • Prevailing trends and challenges of lab operations prior to COVID-19;
  • Long-term strategic supply roadmapping for lab initiatives;
  • Utilizing capital planning to improve supply costs;
  • And more.

COOs, VPs of ancillary services, laboratory leaders, and supply chain leaders will gain critical insights from this crucial resource.

—Tammy Leytham

 

COVID-19 TESTING DATA

Helping Your Lab Stay Afloat During Challenging Times

Dear Colleague,

Robert L. MichelIn these challenging times for our colleagues in clinical laboratories, pathology practices and hospital administration, The Dark Intelligence Group (TDIG) — through generous grants from our partners — is bringing you the COVID-19 STAT Intelligence Briefings.

We’ve added analysts, writers and skilled editors to the COVID-19 STAT team to uncover, analyze, and immediately report to you what’s happening with the SARS-CoV-2 pandemic, packaged with the insights you need to deliver quality testing for patient care and keep your lab’s financial ship afloat. As part of our mission, we are also bringing you real-time data from our partners around testing that you will not find anywhere else.

Please let me know how we can better improve this service to fit your needs. If you would like to offer a grant to keep our mission going with this site, please contact me at rmichel@darkreport.com.

Sincerely,

Robert L. Michel
President, Founder
The Dark Intelligence Group