Backorders and Shortages Erode Customer Trust

September 2019

HIDA Insights

By David Forbes
Director, Healthcare Supply Chain Collaborative, HIDA

When Supply And Demand Are Out Of Alignment, Bad Things Happen

When demand outpaces supply, shortages occur, and patient care is threatened. If supply exceeds demand, products expire and risk of obsolescence kicks in.

Better aligning supply and demand in the healthcare supply chain is the ambitious goal of the Healthcare Supply Chain Collaborative’s new “supply chain visibility” initiative. HIDA created the collaborative to bring all types of leaders together – providers, GPOs, tech companies, manufacturers, and distributors – to work on problems like this that impact the entire end-to-end supply chain.

A few articles I read recently highlighted the importance of this work. In one instance, providers were complaining that their new distributor had too many backorder issues. In another, clinicians were disparaging their own health system because of product stock-outs. I’m betting that in both cases the problems were tied to larger shortages across the supply chain – but the users didn’t know that and the blame was misdirected.

The takeaway was that backorders and stock-outs erode trust. But at the same time, trust is critical to improving the situation:

  • If clinicians trust their supply chain departments, they’re less likely to hoard products and exacerbate shortages.
  • If customers trust their suppliers, they’re more likely to share information about usage changes that are likely to shift demand patterns.
  • If manufacturers trust their distributor partners and their end customers, they will be more transparent when supply disruptions occur.
Industry Workgroups Focus on Finding Solutions

HIDA's Supply Chain Visibility Initiative aims to help build that trust. We’ve formed four workgroups so far, and each includes leaders from across the supply chain. We are accepting more participants, so please contact me at Forbes@hida.org if you’d like to get involved.

Workgroup Goal Current Project
 
Supply Chain Visibility Steering Committee Better align supply and demand, alleviating product shortages and overruns Standard definitions and metrics
 
Demand Planning Workgroup Improve demand planning and forecasting Demand planning maturity path
 
Shortages and Back Orders Workgroup Ensure product availability Best practices for product substitutions
 
Supply Chain Disruption Workgroup Ensure emergency readiness and supply chain resiliency Event response guide for a weather emergency
 

The Healthcare Supply Chain Collaborative’s second annual Supply Chain Visibility Conference takes place Feb. 5-6, 2020 in Coral Gables (Miami), Florida. Contact David  for questions.

David Forbes, MBA»

Program Director for the Healthcare Supply Chain Collaborative
HIDA | 703-838-6110