Sourcing components, pharmaceuticals, medical devices and everything else needed to deliver healthcare services effectively depends on supply chains spread out across the globe – all with dozens of moving parts arranged in a complex web. Getting data to flow efficiently through that maze is no easy task. From order processing and inventory management to temperature control and many other variables, the data map of the healthcare supply chain is ever-more complicated and prone to bottlenecks. After all, the global healthcare supply chain management (SCM) market is growing rapidly: it was valued at $2.99bn in 2023 and is expected to reach $10.65bn by 2032.
And as the healthcare sector strives to cut costs, the agility, resilience and efficiency of SCM data solutions becomes paramount. But, to be effective, they must overcome many challenges. For one, being able to handle complicated supply chains that have lots of different partners. “Today, products are highly complex, there are many suppliers providing various goods and services, and supply chains are almost always global,” says Professor Wesley Randall of the Department of Supply Chain Management at the University of North Texas. “In search of greater cost efficiency, manufacturers go global, which increases risk…a global supply chain with many partners has a higher probability of a disruption.”
“A combination of fragmented systems and silos across healthcare makes it hard to get the data you need to predict demand or to communicate with disparate facilities,” adds Mutaz Shegewi, senior research director for worldwide healthcare provider platforms and technologies at market intelligence firm IDC. “That leads to inefficiency in decisionmaking, which was exaggerated during the pandemic. Organisations came out of that with lots of lessons learnt about improving efficiency and removing data silos to better understand trends in demand.”
But there may be a way of improving outcomes and efficiencies, and cloud-based solutions are emerging as a top contender for helping to connect these various systems to smooth supply chains.
Navigating the data maze
The probability of disruption may be low in a hospital supply chain, but its impact can be severe. One example is Hurricane Maria in 2017, which wiped out the highly consolidated IV fluid production capacity in Puerto Rico. This alerted the healthcare industry and regulatory bodies, since the disruption impacted the entire healthcare industry by creating a critical shortage of IV bags.
“This shortage created a cascading effect, leading to shortages of other essential medical supplies like syringes, electrolytes, amino acids and certain medications that require IV administration,” Randall explains. “Hospitals had to rapidly create contingency plans, such as converting patients from IV to oral medications where possible, using IV push for antibiotics instead of IV bags, and rationing the limited supply of IV fluids. Patient care was impacted.”
Such instances have fuelled investment in cloudbased SCM solutions, which provide a cost-efficient infrastructure for many disparate data streams, partly to allow supply chains to become more agile in the face of disruption. “Patient outcomes and business outcomes are not separate,” remarks Shegewi. “When the supply chain is ineffective that impacts patient outcomes and employee experience, too.” And to run well, most supply chains will need data on “anything to do with tracking and monitoring to enable forecasting of demand data. Inventory data, stock levels, expiration dates for medications – all are critical data sets,” he adds. “So, too, are supplier metrics around reliability, pricing and capacity. Then there is logistics data, regulatory data, compliance data, traceability and more.”
Though many existing SCM technologies seek to create total visibility in supply chains, the harsh reality is that few manufacturers or suppliers are willing to share information with complete transparency – hence the emergence of data silos. Regulatory concerns – notably the Health Insurance Portability and Accountability Act (HIPAA) in the US and the General Data Protection Regulation (GDPR) in Europe – elevate that risk as they limit the sharing of patient data.
“Early SCM systems generated silos and locked organisations into ecosystems without opening the data up to a wider context,” notes Shegewi. “It is not just about outdated legacy systems, but also vendor lock-in to tie in customers. Also, the language did not exist to enable communication between systems. The cloud offers transformative potential to disrupt the status quo in healthcare. It provides more centralisation of data storage, more interoperability, and better real-time collaboration.”
A recent survey by Sage Growth Partners, which sought opinions from 103 hospital and health system leaders, found that nearly 70% of hospitals are likely to have adopted a cloud-based approach to SCM by 2026. Furthermore, almost 80% of respondents that had transitioned to cloud-based SCM technologies characterised the move as positive.
Seeking solutions in the cloud
Cloud-based technologies are very good at consolidating data and breaking down silos. They can facilitate inventory tracking for medical supplies, equipment and pharmaceuticals, particularly if there is a single third-party logistics provider (or 3PL). A large 3PL or vendor can also create savings and improve responsiveness by risk pooling across multiple customers. “If the information in the cloud is sound, and can be trusted, and is available to all partners, then it is going to be a more efficient and effective supply chain than one that does not share or have a cloud architecture,” Randall explains.
“Scalability allows cloud-based SCM to handle greater volumes of data and without any big on-premises infrastructure investment,” adds Shegewi. “Real-time updates to allow stakeholders to make better decisions and design strategies to enhance efficiency are being delivered by the cloud. Centralised data management eliminates silos, and interoperability means you are better able to integrate and standardise data, with the promise of cost-efficiency over time.”
Though concerns linger when it comes to cloudbased solutions. Security is usually at the top of that list, but much has been done to mitigate that risk. Initially, the cloud was thought to be a no-go because people perceived that they would have less control over their data, and that it would be less secure.
According to the HHS Office for Civil Rights (OCR), cyber incidents in healthcare are rising. From 2018–2022, there was a 93% increase in large breaches reported to OCR (369 to 712), with a 278% increase in large breaches involving ransomware. Cyber incidents affecting hospitals and health systems have led to extended care disruptions, patient diversions to other facilities, and delayed medical procedures, all putting patient safety at risk. Fortunately, the huge tech companies running public cloud services are able to invest huge sums to promote both resilience and security, which benefits everyone.
“There are some who hold a level of apprehension knowing that the data is [not being stored on their own system], particularly in healthcare where data is very sensitive,” says Shegewi. “That is a lingering concern, as are downtime, service disruption, and data loss, but there is a move to the cloud across healthcare. There is still a lot of private cloud infrastructure, but many are moving to public cloud.”
The shift to cloud-based SCM
For many observers, it will be hard to slow the move to cloud-based services in the healthcare sector. There will be some debate around whether public or private cloud infrastructure is best, and the answer will depend on the context. In some areas, there is a move from public to private because no one size fits all, and some healthcare providers want an extra layer of security. The sheer scale and resiliency of public cloud infrastructure, however, is a big draw.
“The choice comes down to risk, probability and the addition of core competencies,” says Randall. “If a major healthcare provider has a core competency in cloud computing or cloud storage – and a case could be made for a healthcare provider to have such competencies – then it may wish to use a private cloud. If those conditions are not met, then it is likely that it would use a public provider like AWS.”
Whether public or private, the fact remains that the cloud can do a lot to make supply chains better. Ultimately, it allows everyone to move in a coordinated fashion. Even in cases where there are very few suppliers, as with the IV fluids example, and there is not a lot of choice, the cloud might still help with supply and demand prediction, as well as identifying any possible constraints across the chain. It enables organisations to step back strategically and foresee risks, assess potential disruptions, and improve risk management. “There are many success stories,” says Shegewi. He gives an example: hospital networks are using predictive analytics driven via the cloud to anticipate demand and eliminate waste.
Cloud-based SCM is all but inevitable in healthcare. Its benefits in terms of performance, scalability and resilience make it the best way to unlock the value of data from the many partners that make a supply chain work. The question now is when, not if, organisations will take the plunge.
