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COVID-19 sharpens Medline’s resolve for long-term planning and transparency

Getting to the “health” in the healthcare supply chain: a conversation with Peter Saviola and Marc Phillips

June 01, 2021

At the end of 2019, Medline supply chain leaders were approaching 2020 with real optimism. While talk of disruption was bubbling up with the emergence of COVID-19 in January 2020, ideas of strategic diversification and continuity in supply chain were focal topics in an upcoming conference scheduled for March 2020 in sunny Naples, Florida. On the agenda: Innovative ways to eliminate supply chain interruptions. By the end of February, the program was finalized. By early March, like so many other conferences and events, everything was cancelled.

Fast forward to 2021. A lot of smart people—researchers, clinicians and scientists—predicted this type of pandemic, but few could have anticipated its long reaching impact. Online articles and whitepapers abound on the subject of “What have we learned through this crisis.” Companies as large as Amazon and as small as the mom and pop shop that had to move from brick and mortar to online sales, struggled against the strain of supply shortages. Everyone started questioning their strategies related to inventory reserves versus just-in-time (JIT) delivery, regional distribution planning and more. This was also true for us, being the largest independently owned medical supply manufacturer and distributor in the country. We too, experienced a test like we’ve never seen before.

“The Institute for Supply Management… found that nearly 75 percent of the companies it contacted in late February and early March [not only the healthcare industry] reported some kind of supply-chain disruption due to the coronavirus. And 44 percent of the companies didn’t have a plan to deal with this kind of disruption.”1

Peter Saviola, VP, Logistics and SCO, and Marc Phillips, Senior VP, sat down to talk about Medline’s supply chain and lessons learned throughout the crisis. Our ability to focus on a portfolio of solutions rather than just one strategy stems from Medline’s overall agility and visibility into our customers’ needs. Here are some of the key takeaways from the discussion.

The long view… from the start

Like every other major healthcare manufacturer and distributor, Medline has experienced the shockwaves rippling through the supply chain due to COVID-19. However, unlike many major public players, we had the benefit of a unique foundational structure. It was an important goal from the beginning for Medline to build and own the vast majority of our warehouses. These warehouses are also the largest in the industry. The benefit is Medline has more inventory on hand than others, and that, while giving a competitive advantage of better fill rates, also proved critical to our ability to have supplies on hand for customers—even if we had to put some on allocation—at the heights of this pandemic.

“We don’t typically put the “how much” in front of the “how.” – Peter Saviola, VP Logistics and SCO

It’s clear that the COVID-19 pandemic is changing attitudes on inventory. For many years, high levels of inventory may have been perceived as a strain on capital, with many companies favoring JIT strategies, or even evidence of a lack of supply chain sophistication.2 For Medline, the commitment to inventory appears to have been a lifeline through this crisis. The resiliency it provided has been critical. Many of the pandemic strategies, which are critical to partners beyond the crisis, focus around onsite and offsite storage strategies that bolster healthy supply chain efficiencies.

In addition, Medline continues to operate as debt free as possible, enabling to plan five to ten years out with many key customers. The idea is to figure out the strategy first—solving a problem and then implementing its solution—and then stabilize—optimizing efficiencies to reduce costs without sacrificing the plan. As Peter Saviola says, “We don’t typically put the ‘how much’ in front of the ‘how’.” This is a traditional approach to business that has led Medline through this crisis.

Crisis planning and communication

Medline’s commitment to meeting customers’ needs in times of crisis has never been so powerfully tested as this last year. Substantial investment in specialized equipment, systems and other resources allows active and immediate response to a wide range of disasters. Disaster Preparedness and Response Plans provide guidance to customers who are developing their own response plan. This can be seen in action with the massive wildfires in California and through disasters such as Hurricane Katrina and others.

Disaster Response Teams (DRT) are comprised of core operations professions from transportation, inventory management and warehouse workers, and work in conjunction with field sales and customers when pandemic events or emergencies happen. But when it comes to everyday operations, the goal is to keep the communication simple. The level of interaction required with stakeholders, primarily due to varied Medline resources used by a large IDN partner, is complex. Because of this, the approach has to be clear and uncomplicated. We typically have one person from the field sales team managing the relationship and the key communications. This establishes a very direct and meaningful relationship, which is critical—one person and one voice through “normal” times and times of stress and shortages. We prioritizes honest and direct conversations with our partners, because, as Marc Phillips responded, “we feel that shielding the problem gives people less time to react.” One of hardest things to do is deliver bad news. But it pays to be as transparent as possible.

According to Phillips, this is not always easy, but data can play a big roll. An ongoing challenge is how to help customers stay ahead of a crisis with data, and how to work with them to analyze and build the right contingency plans. This is an area Medline is focusing on, to better enhance and expand our impact and our reach.

“We feel that shielding the problem gives people less time to react.” – Marc Phillips, Senior VP

A key insight: from clinically preferred to clinically acceptable

What happens when a preferred item experiences a shortage due to a demand on raw materials that outpaces the resource availability itself? We’re not talking about quality here; we’re talking about preference, and that is an important differentiation. This is something that COVID-19 has brought to the attention of many IDNs and other facilities and has forced a broader-based selection process. For example: before the crisis, the clinical preference might have been the oatmeal exam glove, now, with shortages ensuing, another option is offered up. With a more flexible supply chain, partners are realizing that if preference A is not available, there are opportunities for fulfillment with preference B or C. Now its acceptability is measured primarily by spec, and not necessarily by brand, color, etc.

An expanded formulary is more flexible for systems to fulfill the needs of the clinicians on the ground especially in an emergency, but the commitment to quality and the ability to oversee the suppliers is critical. This is something we committed to in 2020 and beyond, and it was one key lesson learned from Yale, one of our valued partners. They were one of the first customers to go to clinically acceptable instead of clinically preferred, and this has paved the way for more customers to trust that what we provide is quality tested, safe and acceptable for the intended clinical use. Medline continues to provide “spot buy” catalogs to customers to make sure they always have what they need on hand, even if it is outside of their legacy choice.

The clear and present focus: resiliency

In a conversation in November 2020 with Advisory.com, Alex Gorsky from Johnson & Johnson spoke about global supply chain, a new vaccine, his inheritance of such a global icon and his plan to evolve and refresh the organization. He said this, “It comes down to a few fundamental principles; namely, understand what you are good at.”3

And this is key for Medline, as it speaks to a critical tool for companies today dealing with their supply chains: resiliency. As Peter Saviola says, “What we are good at is building for the future, not just for today.” What does this allow Medline to do?
1. Provide warehouse space for customers to hold supplies—proof of scale
2. Service customers faster and better than competitors—proof of agility

And as Marc Phillips summarizes, COVID has sharpened Medline’s resolve. The organization operates culturally in such a manner that we don’t, by design, pay consultants. Core to our success is a preference to become experts ourselves—to have the independence to make decisions quickly and answer customers’s questions immediately. We endeavor to own the assets that are core to success, giving flexibility in a time that demands that and more.

As Saviola speaks about the new discoveries crucial to supply chain continuity or even supply chain transformation, the early hypothesis was that healthcare supply chains would no longer want JIT inventory, and that everyone would suddenly be thrust back to the 1970s model of inventory holding in bulk (i.e. full cases only). But this is not what seems to be happening. Bulk to LUM is staying pretty consistent.

Customers are building resiliency in a couple of different ways

1. Service centers — customers are looking at virtual service centers without having to build brick and mortar warehouses

2. Leveraging Medline spaces for inventory through physical logistics — finding efficiencies and analyzing models for more transparent formularies and product inclusion

At the beginning of the crisis, McKinsey had detailed what would be needed for a supply chain recovery. “Armed with a demand forecast, the S&OP [integrated sales- and operations-planning] process should next optimize production and distribution capacity. Scenario analysis can be used to test different capacity and production scenarios to understand their financial and operational implications.”4 This is something Medline has tackled with new domestic manufacturing for both hand sanitizer and face masks, prioritizing those items specifically because of the demand.

The pandemic has also accelerated the transition to home healthcare, telehealth, customized kits that give patients control over their experience, alternate care sites and more—all areas that require a dedicated supply chain response. Medline’s overall approach to making healthcare run better is we bridge clinical expertise and supply chain efficiency through four key areas, thereby helping customers to do the following:

  • Improve care quality through caregiver readiness, reduction in variation and transitions of care
  • Be the preferred choice by care empowerment, care experience and reputation building
  • Work more efficiently through utilization, time and space optimization
  • Reduce supply spending through purchasing strategies, formulary management and inventory tracking

Conclusion

The pressures through this pandemic have been intense. Medline’s resiliency lies in our commitment to be an extension of our partners’ organizations and making sure they have exactly what they need to optimize performance. Beyond Medline, what this crisis means for everyone, is that chief supply chain officers (CSCOs) and supply chains leaders should learn from the strategy and leadership of one another, especially other top healthcare supply chains.

Insights in summary:

  • Resiliency comes through both tactical and strategic planning
  • Working with customers on integrated disaster preparedness plans is key to clearer communication and expectations
  • More receptiveness and better interaction with supply chain leaders and acknowledging early alarm signals from frontline staff
  • A wider acknowledgement of clinically acceptable over clinically preferred products can pave the way for a more nimble or flexible supply chain
  • “Sheilding the problem gives people less time to react,” so transparency is not only best practice, it is critical to the partnership

Most importantly, everyone must treat COVID-19 as a catalyst for change in all areas of an organization, as the lessons learned in one segment can significantly impact the heath and wealth of another.

Find out more about Medline and their approach to make healthcare run better.

References:
1. Centers for Disease Control and Prevention. (2017). “Important facts about falls.” Retrieved from: https://www.cdc.gov/HomeandRecreationalSafety/Falls/adultfalls.html
2. American Geriatrics Society & British Geriatrics Society. (2010). AGS/BGS clinical practice guideline: Prevention of falls in older persons. New York, NY: American Geriatrics Society.
3. Jarrett, N., & Callaham, M. (2016). “Evidence-based guidelines for selected hospital-acquired conditions: Final report” https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond/Downloads/2016-HAC-Report.pdf
4. Ganz, D. A., et al. (2013). Preventing falls in hospitals: A toolkit for improving quality of care (AHRQ Publication No. 13-0015-EF). Rockville, MD: Agency for Healthcare Research and Quality. Retrieved from: https://www.ahrq.gov/professionals/systems/hospital/fallpxtoolkit/index.html

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