Managing Inflation and the Medical Supply Chain During COVID-19

The COVID-19 pandemic disrupted global supply chains in nearly all sectors. The medical supply chain took a particularly bad hit, as demand for personal protective equipment, or PPE, and other equipment soared far beyond supply. In fact, between March 2019 and March 2020, providers saw a surge in spending—428% for isolation gowns, 1,310% for surgical masks and 14,302% for N95s and KN95s. These numbers have multiplied further since.

Shipping delays, production stoppages in countries with low vaccination rates and an increase in the price of raw materials further exacerbated stresses up and down the supply chain. The resulting inflation affected even health providers with strong manufacturing partnerships.

While healthcare supply chain management has improved in some ways since 2020, this inflation continues to cause or stress supply issues for healthcare providers. Fortunately, smart adaptations and strategies have helped them adapt and prepare for the long term.

Short-term strategies to manage supplies

Hospitals and medical providers should cautiously manage their PPE. Some strategies recommended from government agencies include:

• Reviewing your PPE burn rate: Even if you replenished your PPE stockpile, it could be strained by future variants. Use tools available from the Centers for Disease Control and Prevention, or CDC, to calculate how long PPE will last and get tips on extending the life of your existing equipment.
• Working with government agencies for PPE access: State and city governments have had time to replenish their PPE stockpiles and could be a source of materials during a future surge. Contact your local health department for information on how your organization can resupply.

Long-term strategies to strengthen supply chain

For the long-term, providers and hospital supply chain experts should start thinking about how to prevent future disruptions. Here's a starting point.

• Diversify your supply base. If all of your materials come from one supplier, or all of your suppliers are in the same country, it's a weak link in the chain—including for potential supply chain fraud. Consider expanding to other producers, especially domestic ones, to avoid shipping delays. Some manufacturers and providers are also investing in technology solutions like 3D printing as well.
• Add redundancy to your chain. While keeping costs low is a top priority, the massive spike in healthcare inflation over the past few years shows that this strategy isn't without risk. Consider adding more redundancy to your supplies by holding more reserves and preparing backup contracts. This investment could pay for itself should further supply chain disruptions and inflation continue.
• Track supply issues up the chain. Supply chain issues can seem like they happen overnight, but it's possible to predict them earlier. For example, if the price of rubber is spiking, it's likely that the price for gowns and gloves will also go up. This could be a way to stock up ahead of any price jumps.
• Use supply chain technology for tracking. Supply chain software can help you track inventory, automate orders and link with more suppliers to avoid interruptions. There are software programs available specifically designed for healthcare.

As you plan your supply chain management strategies, consider speaking with your business banker. They can help you understand the potential impact and your financing options for dealing with another potential hit.