Supply chain has been disrupted heavily during the pandemic, and not solely because of the pandemic. Historically, sourcing has been heavily regimented and siloed, with processes governing every sourcing action, from vendor onboarding to receiving goods. In 2022 supply chain has to be flexible to keep at the fore in procurement.
Vendor Management & Validation
While the past two years have brought out the suppliers that are long-standing and reliable, 2022 still presents vendor-related issues such as supply chain transparency, reliability, ability to deliver and more. Post- and pre-pandemic this was more a matter of supplier innovation, account management and supplier issues, while during the pandemic it is simply supplier validation – whoever is trusted and proven and can deliver the goods.
Rebuilding and re-designing supply chains
Pulling through the other end of the pandemic, a broken and fragile supply chain must be rebuilt. This is a huge challenge as supply chain still remains so volatile. Events such as natural disasters, the brutal war against Ukraine, ships being stranded in the Suez Canal, political conflagrations and economic weaknesses all play their part in applying significant pressure to the supply chain.
Practically this involves
- Re-assessing and re-engaging vendors
- Rebuilding processes
- Policy groundwork to allow flexibility
- Improving security
- Overhauling contract designs
- Removing red tape for fast action
Which leads us onto the next point:
Risk mitigation has always been important in procurement but especially highlighted by the pandemic. In a Westlab/Santé study in early 2021, over 15% of procurement professionals interview had purchased fraudulent product.
The most important procurement criterion for healthcare is interesting: approval and compliance. Mitigating risks is hugely important, doing all due diligence to ensure that from manufacture to consumption is a secure, valid, audited and assessed supply chain. Using a consultancy can be highly beneficial here, where existing partnerships with vendor management and auditing teams can be invaluable.
Part of the risk mitigation strategy is obvious but includes
- Frequently communicating on supply chain
- Engaging multiple vendors
- Using a program like Westlab’s WeStore to secure product
- Negotiating terms that will benefit both parties (i.e., flexibility and limited liability)
- Running public RFQ’s for large procurements to stay in touch with the market
- Establishing good relationships with suppliers to ensure long-term loyalty
- Selecting two or three main suppliers while keeping options open
- Implementing validation steps for vendor onboarding
- Clinical validation processes
Conflict in Ukraine
The conflict in Ukraine has serious knock-on effects for particularly the EMEA region. Russia is one of the world’s largest oil and gas producers, and all but cutting off all oil transactions between Russia and the West presents its own problems. Additionally, insecurity in Ukraine, where many European companies own premises or outsource, is causing a plethora of difficulties.
Starting with oil and gas, a simple scenario that is affecting western medical and healthcare markets is high diesel prices. Any significant margin in diesel expenditure higher than the normal will have ramifications far down the line, in this instance with saline solution. The cost of extracting and transporting salt has risen suddenly, bringing a shortage of salt and resultant price and availability problems in the market for any related consumables. Universally, freight prices are increasing and causing higher expenditure across the board.
For an in-depth Procurement Consultancy Insights meeting with our supply chain experts, click here.