Healthcare industry could learn from supply-chain practices of retail industry, study finds

University of Arkansas researchers survey healthcare, retailing managers

FAYATTEVILLE, Ark. — The healthcare industry's supply chain may have a few tips and tricks to pick up from the retail industry's supply chain, according to a new study by researchers at the University of Arkansas.

The researchers, led by industrial engineering professor Edward Pohl, surveyed 96 healthcare industry managers, mostly hospital providers, and 20 retailing managers, finding that the retail industry has done better at collaborative planning, forecasting and replenishment, which involves suppliers and retailers working together to adopt order forecasting and inventory planning to create an integrated supply-chain network. The managers working in retail were all from Walmart, Pohl told Drug Store News, and respondents also included vendors and manufacturers.

"The retail industry has a long history of adopting automation, complemented by scientific and mathematical models, to improve supply-chain operations," Pohl said. "Conversely, health care has been relatively slow to adopt these methods. Based on survey responses, we believe that considerable efficiency gains might be available to the healthcare supply chain through the adoption of best practices from the retail supply chain."

The researchers drew up an initial list of 22 best practices based on a review of existing literature and guidance from a steering committee of industrial leaders. Based on the steering committee's review, they narrowed the list down to 10 best practices: centralized purchasing and supply; supply chain services reorganization; regular cycle counting and stock rotation; performance management; actual usage inventory management; e-commerce; and data standardization.

Larger retail stores and hospitals were found to be more likely to have implemented best practices, and across both industries, 80% of respondents thought the identified best practices had a significant or very significant effect on business. Meanwhile, 40% of retail respondents perceived implementation of best practices as easy or very easy, while most healthcare respondents perceived implementation as easy, as well as cheaper and requiring a lower minimum rate of return.

"This may indicate that the healthcare industry is underestimating the investment necessary to achieve the full benefits from some of the best practices," said another researcher, Vijith Varghese.

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