Digitising the healthcare supply chain

The global healthcare sector is enhancing its technology capabilities to strengthen operations and improve efficiencies across the supply chain. MHD delves deep into the opportunities for digital transformation in Australia.

While patient safety is at the top of the agenda for the healthcare industry, there are other drivers that impact the success of the industry, many of which supply chain and logistics play a critical role in.

So far, 2020 has been one of the most challenging years on record for the global health care industry and the COVID-19 pandemic has put medical supply chains in the spotlight.

We’ve seen global shortages of testing kits, personal protective equipment (PPE), drugs, and critical medical equipment such as ventilators.

Before the COVID-19 pandemic unfolded in Australia, the bush fire crisis resulted in a nationwide shortage of face masks earlier this year. This was then exasperated as COVID-19 cases started to emerge in Australia from mid-March, and masks were in critical demand again, as they are used as a primary source of protection against the coronavirus.

Public discussion about supply chains and the nation’s exposure to shortages of critical items as a result of complex and global supply chains moved further up the news agenda, as people started to realise that access to adequate healthcare goes beyond doctor, patient relations.

Healthcare is a complex industry, and beyond the crucial role of patient safety, there are a number of different industry challenges. These include the ability to identify and authenticate pharmaceuticals and medical devices, track and trace products, improve efficiencies, have accurate visibility of inventory levels and more.
Catherine Koetz, Industry Manager – Healthcare Industry Manager at GS1 says when you compare the healthcare supply chain to the FMCG supply chain, healthcare has some catching up to do.

“When we think about one of the most sophisticated supply chain operations in this country it would be the grocery industry. It’s heavily automated and has been utilising barcode technology for a long period of time. Though they still have room to improve in some areas, in general they have good visibility of where their product has come from and where it is at any point in time. But when you look at healthcare, we just don’t have that,” she says.

According to Catherine, a large proportion of health supply chain in Australia still runs on paper. “Inventory levels are managed manually, dynamic locations are not utilised, there’s no real traceability and there is often a manual pick list as well as manual stock adjustments,” she says.

Many of the challenges that the health supply chain industry faces are unique to the industry, Catherine says due to the industries differences, so comparing the Health sector with the sophistication of say the FMCG sector is not always useful.

The health sector is complicated, there is Federal and State funding and management, as well as a blend of private and public providers, making collaboration and co-investment a difficult reality.

Some of these issues are around obtaining funding for key infrastructure. “It still surprises me that there is such a battle to get investment for things like Warehouse Management Systems (WMS) or similar technology, you would never see this in any normal distribution business,” Catherine says.

This creates a highly competitive environment for funding. “If you have the potential to invest in say an electronic medical record for the likes of the Royal Children’s Hospital in Melbourne, or a robot that can perform an operation, then that’s where the funding will go instead of on a WMS. That’s just the reality,” Catherine says.

Smarter supply chains

Despite the fact that supply chain is often overlooked in the healthcare industry, Catherine says if further investments are made, a number of benefits can be achieved.

“You have all the familiar benefits that this kind of investment offers in any industry, benefits around traceability, safety and increased visibility. But there are also some very positive advantages that are specific to the health sector,” she says.

Catherine uses a product recall as an example. “A few years back there was an issue around breast implants. It had been revealed that a certain batch of breast implants included industrial grade silicone and it was leaking into some patients, with devastating effects. But it was extremely difficult to trace which patients these implants had been used on.”

If the investment is made into increasing visibility and traceability, then these issues can be rectified much faster and more accurately. This is also relevant during the current issues around supply and demand during COVID-19.

“When you look at medicine shortages, if you have one central source of truth that shows you where your supply is at any given time, this can be extremely useful for the healthcare industry during times of shortages and supply issues,” Catherine says.

During COVID-19, as there has been a panic around trying to find alternative suppliers of PPE, implementing solutions such as a WMS could help prevent some of that panic, Catherine says.

“When we reflect, one of our biggest concerns was getting an earlier idea of how much PPE was available. If we were able to have greater visibility of what we had and where earlier, we may have been able to react sooner,” Catherine says.

These advantages can also be seen when it comes to wastage. “Many medical supplies have an expiry date, much like the food sector, if we can understand where our stock is when it’s about to expire then we can start to reduce waste,” she says.

A step in the right direction: Melbourne Health Logistics case study

A recent example where the health industry has made some great strides in utilising technology is the Melbourne Health Logistics Supplier Improvement Project.

The project involved ten small-to-medium enterprise participants. The emphasis was on digitising the supply chain, this included a focus on applying data capture technologies, making data quality improvements and introducing suppliers to Electronic Data Interchange (EDI).

Melbourne Health Logistics (MHL) implemented a transformative warehouse management solution, with the aim of solving challenges with their supply chain and inventory management.

Mike Sewell, Business Advisor – Medical Technologies and Pharmaceuticals at Australian Industry Group.

The new system meant that suppliers to MHL were required to adjust the way they provided product and information. To support this requirement, MHL engaged the AusIndustry Entrepreneurs’ Programme to work with suppliers in building capability.

“The aim of the project was for SME suppliers in the health sector to digitise their supply chains, ensuring the ability to meet the needs of MHL and the broader industry. This meant reviewing processes and technology capability and changing manual methods to the use of automation and digital technologies,” Brett Henderson, National Business Facilitator at AusIndustry – Entrepreneurs’ Programme says.

Included in the program is the help of a business advisor for 12 months, in this case that was Mike Sewell, Business Advisor – Medical Technologies and Pharmaceuticals at Australian Industry Group.

Mike says the project was a truly transformative one and one that he thoroughly enjoyed working on.

“One of the things that surprised me was how unsophisticated some of the systems were at first. But many of the companies were extremely invested in this project and ensuring that they improved their capabilities not just to work with MHL but anyone across their supplier list,” Mike says.


When Mike was first bought on board, he recognised that there was a lot of manual work being done across these suppliers. “Lots of faxes, a lot of toing and froing. When products dropped out of the system, they would be handled multiple times. It really was quite inefficient.”

Both Mike and Brett echoed Catherine’s thoughts around the healthcare being behind the FMCG sector when it comes to digitising its supply chain. “In the FMCG sector there is the Australian Food and Grocery Council who create supplier guidelines, this alignment is not the same in the healthcare sector and it puts them behind the grocery sector by decades in terms of collaboration and transparency,” Brett says.

While there is intent to improve things across Australia’s health supply chain, if there isn’t the collaboration and coordination that is found in other sectors it will be difficult, Brett says.

Brett Henderson, National Business Facilitator at AusIndustry – Entrepreneurs’ Programme

However, Brett found the level of engagement and commitment from the SMEs in this project very impressive. “They took on the challenge by investing considerable time and money, in many cases up to $100,000,” he says.

Brett says that the majority of the participants not only embraced the pilot, but they looked for more ways the technology could help their business.

“They took a holistic approach and as they did this, they started to recognise opportunities to really improve revenue-generating capabilities and productivity improvements. There is a real change in a majority of the businesses who are in the program, in terms of capability-building and finding new opportunities for the business,” he says.

At the very core of the project was benefits around increased visibility and transparency but Mike says that the benefits ran much deeper. “All of the businesses have productivity benefits and are all experiencing a return on investment. They certainly wouldn’t go back to manual processes now. In fact, one of the businesses even introduced their own WMS after seeing the benefits,” he says.

“While it is still early in the process, there’s a real change in a majority of the businesses who are in the program, in terms of capability-building and finding new opportunities for the business,” Brett says.


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