How Mercy Health Consolidated Its Supply Chain

Rob Austin in Supply Chain Dive

When Mercy Health began partnering with Medline, a medical supply manufacturer and distributor, in April 2017, products flowing through its medical-surgical distribution channel were 2% standardized. Now, they're more than 50% standardized. Mercy has also slashed its distribution centers from 14 to two and reduced its manufacturers by 50%.

Healthcare supply chains lag 15-20 years behind those of other industries, said Rob Austin, director and healthcare expert at Navigant. Labor constitutes the largest portion of health system costs, but supply chains take second place at as much as 30% to 35% of costs — and that percentage might be growing.

Faced with lower reimbursements and inpatient volumes, most health systems have already implemented standard cost-cutting measures, and now need new places to trim. Enter supply chain reorganization. The healthcare system is slow-moving, but the tide is shifting toward stronger supply chains, Austin said. "It's a slow trickle, but eventually the spout is going to be turned on, and the water will flow."

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