A study by Ebel et al. provide some interesting perspectives for strengthening healthcare’s supply chain. Based on a comparison of the operational metrics vis-a-vis fast moving consumer goods industry, the study highlight following opportunities for operational improvement:
The paper reports that supply chains accounts for nearly 25 percent of pharmaceutical costs and more than 40 percent of medical-device costs. The annual spending is in the range of about $230 billion on pharmaceuticals and $122 billion on devices. By adopting straightforward advances well established in other industries, the study estimates that total costs (from the supply chain and external areas, such as patient care) could fall by $130 billion.
The following figure presents opportunities from the transformation of supply chains across the whole value chain:
The study identify five capabilities that can improve performance and bottom lines in the healthcare sector. The first three are internal capabilities that need to be developed by pharmaceutical and medical device manufacturers. The final two are external capabilities that require working with customers, suppliers and potentially also with competitors:
1) Better segmentation of products, markets and customers
2) Greater agility to reduce cost and increase flexibility
3) Measurement and benchmarking
4) Alignment with global standards
5) Collaboration across the health-care value chain
Source: Thomas Ebel, Erik Larsen, and Ketan Shah, 2013. Strengthening health care’s supply chain: A five-step plan. McKinsey & Company.