Health Systems Look to Strengthen Partnerships with Distributors

June 2018

HIDA Post-Acute Insights

By Ann Peters
Manager, Research & Analytics

Distributors are helping their health system customers rise to the challenge of reducing costs while improving the quality of care, according to HIDA’s 2018 Horizon Report: Health System Supply Chain Strategies. The vast majority (88 percent) of these providers are satisfied with their prime vendor distributor, and 40 percent say they plan to increase the role medical-surgical distribution plays in their supply chain.

Drawing on a survey of 171 integrated delivery network executives, this new Horizon Report looks at how health systems work with their distributor partners. Key insights from this research include:

Hospitals and health systems rely on medical-surgical distribution
Most (90 percent) health systems have a prime vendor distributor, and 24 percent purchase most or all of their physician preference items from distributors. Providers are also generally happy with their distributors, with only 4 percent reporting some level of dissatisfaction.

Health systems highly value their distributor partners for driving supply chain efficiency by streamlining ordering and procurement, reducing supply chain costs, and managing demand spikes.

Most providers not planning to invest in self-distribution
While many (71 percent) health systems perform some internal distribution of medical supplies to care settings, the majority are not planning to build new supply chain facilities. Only 8 percent of respondents say they will build new distribution centers within the next three years, and only 7 percent say they will build consolidated service centers in this time frame.

A Director of Supply Chain from the Northeast commented that they look to source products through a distributor whenever possible, as it allows them to save on freight costs. A number of supply chain executives highlighted the value of distributors’ expertise, saying they were looking for a “partnership relationship” as they look to enhance efficiency and outsource non-acute distribution.

Cost-reduction at top of buyers’ agendas
Cost reduction is top-of-mind for supply chain executives. Perceived cost reduction is the leading reason executives cite for purchasing direct, and the most common difficulty they have when purchasing direct.

By working with distributors, supply chain executives can lower costs in a number of ways. Three-quarters of respondents say working with distributors reduces their need for real estate or inventory, 66 percent say it lowers their supply chain costs, and 55 percent say it reduces the need for capital investment.

While respondents rank cost reduction as the leading benefit of working with a distributor, there are several other factors that supply chain executives value when working with distributors. To learn more about this research, and what supply chain leaders value about their distributor partners, visit


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