The Significance of Hospital Supply Chain Management

By Izzie • General, State of Healthcare • 11 Oct 2012

Action in the HospitalWhen we talk about the rate of economic growth in a particular sector or the effect of inflation on the same, we almost never include the hospital business. This could very well be because hospitals are not commonly perceived as profit making units. However, it is important to understand that the fluctuating market trends affect hospitals as much as any other business, if not more. To top it all up, the scale of purchases made by hospitals is so huge that if there were to be any kind of miscalculation or fraud or wastage in a hospital, it could lead to losses beyond imagination. To do away with any such problems, the hospital supply chain management needs to be undertaken efficiently.

The abovementioned supply chain forms the backbone of any hospital and it includes the functions of the retailers, wholesalers, manufacturers, distributors, suppliers and the customers. The medical agencies these days are having a tough time dealing with the forever escalating costs of resources and although it is understood that there should be no compromises made as far as the health of the patient is concerned, the appropriate and optimum utilization of available resources is of paramount importance. Research has proven that about 20-30% of the operating expenses of a hospital are comprised of the supplies. If this expense is controlled efficiently, the hospital can save a great deal of money.

There are many different stages involved in the supply chain that need management. These stages are planning, sourcing, moving and paying. At the planning stage, the products that are to be bought are chosen amongst the available options and the suppliers are selected. At this point, management would mean looking at the products that the market has to offer instead of blindly buying the expensive drugs that the physicians demand. The sourcing stage marks the placing of orders and agreeing on the contract terms with the suppliers. Effective management at this level would involve entering into contracts with the suppliers that offer best rates and placing maximum orders with one supplier so as to attract impressive discounts.

At the moving stage, the products that have been ordered by the hospital are dispatched from the supplier to the hospital and the used by the hospital for treating their patients. Here, if the hospital maintains an inventory of the products available and stocks them in a warehouse, the money wasted on buying urgent medication from retail outlets can be avoided. Also, understanding which hospitals requires what kinds of drugs and storing a good amount of the same can also be economically beneficial.

As the name suggests, the payment stage involves the clearing of all the dues of the suppliers, manufacturers and any other providers. Here, the hospitals must refrain from involving too many employees into this payment scenario so that the chances of fraud and mistakes in calculation can be avoided. The abovementioned hospital supply chain management ideas might seem very petty and typical. However, considering the volume of money that is spent by hospitals each year on their supplies, these simple policies, if implemented well can change the entire face of the finances of the hospital.

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