Five Significant Changes Driving the Healthcare Supply Chain’s Evolution

Fifteen years ago, Gartner began assessing and ranking the top healthcare supply chains. A look back to that starting point reveals an immense amount of progress that has been made and serves as a counter to those who might feel they are still fighting the same battles from 15 or 20 years ago.

Below I review the five most notable changes in how healthcare supply chains have evolved and show how far the industry has come.

1. Maturity of healthcare provider supply chains

We started the Healthcare Supply Chain Top 25 as an across-the-value-chain ranking that included manufacturers, distributors and retailers as integral partners with healthcare providers in the delivery of products and services. While we still believe in that connection and the value of collaboration, the healthcare providers’ maturity across the top supply chains has accelerated.

This advancement reached a new milestone in 2021 when we decided that healthcare providers had emerged to the point of needing their own Top 25, with the maturing life sciences companies and retailers better suited to be ranked among companies featured in Gartner’s all-industry Global Top 25.

Over the past 15 years, things have evolved. Perhaps the best indication is the evolution of the title chief supply chain officer from nearly zero in 2009 to now accounting for 34% of the titles of top leaders in the healthcare supply chain. Another example was the growth beyond sourcing of mostly medical surgical products to an increased focus at mature organizations with five-year strategies on clinical alignment, sourcing, logistics, risk, ESG and analytics. Even the way Gartner asked peer and analyst voters to assess maturity in 2009 has evolved into how we now look at things.

2. Growing size and the role of governance

In 2009, the size of the health systems in our ranking was all under $10 billion. Fast forward to now when more than 50% of the 27 health systems we ranked were above $10 billion — with many that are multistate enterprises with $20 billion or more in operating expenses — and it is a much different level of complexity. Governance and span-of-control have taken center stage. Size of the enterprise has grown and so have the areas under supply chain influence to include listening to end users, setting specifications, sourcing, delivering and holding the organization accountable. Our benchmarking initiative consistently shows that a fully counted supply chain represents 36% of the operating expense of a health system.

3. Disruption response builds risk and resiliency maturity

In 2009, risk and resiliency in healthcare was mostly a binder on a shelf providing guidance in a local weather event. In 2013, I wrote a lightly read research note about the state of risk management in healthcare. By 2018, disruptions primarily to the IV solutions manufacturers in Puerto Rico from Hurricane Maria accelerated leaders in the industry and the pandemic cemented the need for maturation. A recent research project with Healthcare Industry Resilience Collaborative (HIRC) shows that 56% of the health systems polled have independent risk and resiliency teams. Of the health systems surveyed in Gartner’s 2022 organization design research, 46% indicated that risk management is a top-three priority for investment in the next three to five years.

4. The rise of digital supply chain

Digital supply chain was a fuzzy concept in 2009. The loose concepts of “timely accurate data” and “aligned metrics” in 2009 transformed into “digital supply,” “guiding metrics” under change management and “utilization analytics” in 2023. These are big ideas to capture in a few phrases. But the progress has been mighty with service-line analytics maturity, the advent of digital supply chain leaders and control-tower technology all taking on growing importance. In our organization design research, 81% of supply chain leaders indicated digital supply chain was a top-three area of investment in the next three years. Digital touches everything including risk and ESG.

5. ESG initiatives to the forefront

ESG was not a consideration when we started in 2009. Now it’s not only in the qualitative model, but we have added quantitative metrics representing 10% to our ranking. More importantly, CEOs at leading health systems are supporting all the facets of ESG from diversity spending to sustainability to community health. The recognition that supply chains impact all these initiatives directly and that most health systems are large employers in every region they serve makes this a great place to make an impact. We expect it to accelerate in the next ten years to a hopefully unrecognizable maturity level from today.

The 15th edition of the Gartner Healthcare Supply Chain rankings will be unveiled on Dec. 13, 2023. Interested parties can register for the free webinar which will reveal the rankings.

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