Welcome to a blog post series on Exiger’s fight to secure supply chains, sponsored by Exiger LLC. In this series we will explore the ongoing efforts of Exiger to lead the discussion and enhancement of Supply Chain Risk Management. In Episode 1, I visit with Erika Peters, a Senior Vice President (SVP) with close to two decades of experience, working across the financial, corporate and government industry, and focuses on the firm’s supply chain and third-party risk management practices, and Tim Stone, Senior Director, Supply Chain Risk Management, for Exiger Federal Solutions. We discuss supply chain issues in the healthcare industry, including hospitals, life sciences, pharmaceuticals, medical devices, and medical services.
We began with key challenges in supply chain risk management in the healthcare industry. Peters said the “way I think about the healthcare sector and how it differentiates from the other sectors is that the ultimate risk is trying to mitigate fatalities. This means thinking about the third parties that healthcare companies must work with and then their supply chain makes it one of the most extremely critical industries to really be thinking about. In the current era of the post-pandemic, it is one of the timeliest topics. Equally important is that if you must switch out a key vendor, the entire process can take between 12-18 months, which can really put your organization in bind. This means you need to put a rigorous process in place and then follow that process.”
Stone noted there were key lessons learned on healthcare industry supply chain issues from the pandemic. He stated that the federal government created a Joint Acquisition Task Force in the Department of Defense (DoD) during the pandemic. This was an interagency push to source products across various pandemic related areas like therapies, vaccines, ingredients, testing, materials and equipment, personal equipment, even items such as no touch thermometers. The task force illuminated dozens of product areas across those different sectors, then used market intelligence tools to identify companies in each sector. Further, they used modeling to estimate production capacity and entered information into the Exiger software product DDIQ to risk-rank based upon these and other inputs.
This led to the finding of supply chain fragility. This is because many components in the healthcare supply chain come from state owned enterprises and many of these were China. Even when the team began to focus on migrating to India, it turned out that many underlying components came from China. Another problem discovered was concentration of raw goods and manufacturers. Stone noted, “we saw really an otherwise obscure examples of concentration risks arise during COVID that you had never thought about before. In Malaysia, for example, we realized it was a top producer of nitro gloves that it owns about 65% of the market. This led to COVID driven disruptions which impacted our ability to get nitro gloves. This was kind of the way the world turned and focused on supply chains and where goods are ultimately sourced.” Just-in-time supply chains saw equal if not more disruptions as well.
We then turned to how healthcare industry supply chain can improve its approach to managing risk. Here Peters noted there were two key areas. The first is programmatic and the second involves a technological solution. Companies need to create a truly risk-based program, for instance, looking at entities that will cause an operating room to shut down, or will prohibit a company from getting materials that are needed for medicines. These critical entities need to have the most in-depth due diligence, taking that strategic risk appetite and having it trickled down to the tactical level is an important way of making sure that the people at the bottom who are doing the actual work that they are hitting the right risk lens that the company wants to take.
The other piece is to have technology in place to facilitate this and that “we need to improve on that technology.” She noted, “we get to this higher level of more of a predictive posture, which is really the golden standard where we need to be. We need to have these teams that are looking at their own individual risk and bringing it into one view of this entity, especially these critical ones.” It is looking at a wide variety of risks, from legal/regulatory to geopolitical to operational. It is doing so quickly and efficiently so the front line supply chain professionals can make decisions for the long-term care and health of their organizations.
Stone concluded that down the road, supply chain professionals in the healthcare sector, “can improve the bottom line, through greater fluidity, greater understanding of their supply chains, greater ability to on the fly to gauge the credibility of vendors, and have that due diligence information at their fingertips through technology.” It is also going to help to avoid a lot of fraud, waste and abuse and create a more well-oiled machine from a supply chain perspective.
Join us tomorrow when we put our spotlight on the manufacturing and consumer markets.
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