Michael Needham, director of Efficio, a global consultancy for supply chain, sat down MobiHealthNews To discuss how worldwide disruptions as a result of the proposed and current rates force purchasing leaders to reconsider sourcing strategies, improve the visibility of the supply chain and to stimulate the resilience of the supplier.
MobiHealthNews: How do rates affect healthcare technology?
Michael Needham: In the short term it created a lot of uncertainty and indecision for business. So when companies are afraid, it does a few things: initially the approach is reactive. In essence, it is about determining whether we can endure the storm. The next step is to implement safety measures and strategies to reduce potential risks.
In health care and pharmaceutical sectors we have observed a joint effort to strengthen supply chains, where companies choose the attacker. For example, trade flows from countries such as Ireland, rose considerably in the first quarter as companies looked at Stockpile, but fell sharply in the second quarter when those initial purchases were made. Although this strategy can be effective in some cases, it does not always work because it assumes that the Supply Chain has sufficient stock for immediate use.
In the short term, the potential and real impact of President Trump’s rates contributed to this buffering effect. In the medium term, it has encouraged companies to re-assess their risk management strategies, in particular in sectors such as medical devices, where the absence of critical products-such as heart equipment can be effective for life or death. As a result, companies are now aimed at developing unforeseen plans to reduce such risks.
MHN: How do worldwide disturbances force purchasing leaders to reconsider sourcing strategies, to improve the visibility of the supply chain and to strengthen the resilience of suppliers?
Needham: A sourcing strategy is how you can join your extensive network. The Supply Chain is not only in the first place the company you buy the item, it is what is processed in that actual purchase.
In the medical devices sector, for example, a customer of ours specializes in diagnostic equipment for scanning the retina-high products with a high investment. These devices depend on components from several countries, which emphasizes the complex global character of the supply chain. You have nuts and bolts in China, high-end engineering from Switzerland and you have the last meeting in the US, there are many different elements.
The most important thing, in terms of strategic purchasing and risk reduction for business, is knowing what you have and where it comes from, and you would think that it would be easy, but that is not. The visibility of the supply chain is really complex, so think back to different countries with different customs mechanisms and ways of working.
For example, the EU has publicly available information – you can deprive data for goods coming in and goods that come from the US, you have a similar transparency to get it to the ports.
But if you go to China, it’s a bit opaque. Insight into where your supply chain starts, what comes in and how it connects, is absolutely crucial in terms of understanding your costs and creating the visibility of potential risks in the future.
That undertakes to this idea of resilience.
The rates of the Trump government for the pharmaceutical sectors in the US and West -Europe are not really a new shock. They are new in terms of rates, but what we had was a playbook. Almost five years ago it was now with the pandemic where we had a huge global shock. Unparalleled. Undoubtedly it was a much larger scale than the impact of the Trump government.
MHN: What tactics do you recommend to manage the volatility of the rate? For example, forwarding purchasing and fixed volume, the balance between financial risk and operational agility.
Needham: What we say to customers is number one visibility. Know what you have and where it comes from.
Buying inventory for the short term has been a clear tactic in the short term. We have seen that a lot of everything, from consumer goods to the nuts and bolts that are used in production facilities. That happened. It is a bit more difficult in the pharmaceutical pharmaceutical, because of the complexity of producing and then approving the quality standards before they are distributed.
The problem there for companies is cash flow in terms of managing it. Bulk purchases in advance requires reserve money to do this. Sticking a lot of money in advance and it takes six to nine months to get that money back.
The other that companies do with regard to managing risks is not to take a knee shock reaction, but to take a measured response and to collaborate with a partner in the supply chain. Robust medical supply chains have partnerships about them. They are not based on raw materials where the oil drops to 50, we sell or we buy; Oil goes up to 100 and we sell.
Pharmaceutical companies, hospital networks, not for profit, should think about the patient’s life cycle.
Many suppliers work together in this space, they do not necessarily think of the short -term profit, but what will happen next month and next year. Many of these contracts in these relationships are multi -year.
MHN: Does rising cost pressure accelerate the need for purchasing transformation through automation, strategic sourcing and supplier consolidation?
Needham: Yes. Organizations, especially healthcare systems, are usually large complex organizations, which grow organically and also through acquisition over time.
So when you have acquisitions, you call in new suppliers with the old one and there is usually too much of the same and there is a consolidation, simplification piece.
So we have many clients in the Private Equity sector and they buy medical clinics, for example in the health sector for women.
And what we found was that there was a need to simplify the company by consolidating suppliers and using that volume to get better prices for the overall new entity. That is where the strategic sourcing piece enters. Once consolidated, you simplify and then use that volume to get better prices.
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