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Supply Chain Case Studies

How Northside Hospital Learned to Swim with a ‘Black Swan’

Northside Hospital’s supply chain team developed an enterprise-wide strategy that directly linked to the organization’s corporate mission.

Over the past several months, the world has experienced the full impact of the COVID-19 pandemic. The pandemic has been referred to in the media as a “Black Swan” event. According to Jim Chappelow of Investopedia, a Black Swan is defined as “an unpredictable event that is beyond what is normally expected of a situation and has potentially severe consequences. Black Swan events are characterized by their extreme rarity, their severe impact and the widespread insistence they were obvious in hindsight.” 

From a supply chain perspective, the pandemic almost immediately created a severe shortage of personal protective equipment (PPE) such as masks, isolation gowns and gloves. The shortage was caused by a perfect storm resulting from diminished manufacturing capacity in China where most of the PPE is produced, coupled with a spike in demand created by the need to protect front-line healthcare workers treating COVID-19 patients in the United States and abroad. This perfect storm became the Black Swan for healthcare supply chains. 

Identifying and Assessing Black Swan Risks

Preparing for a specific Black Swan event can be very difficult since by its very definition it is unpredictable. So how do you prepare for the unpredictable? Identifying and assessing risks in anticipation of a Black Swan event regardless of origin is possible as there are some common risk attributes.

In Atlanta, Northside Hospital’s supply chain team developed an enterprise-wide strategy a few years ago that directly linked to Northside’s corporate mission. Essentially, the strategy established the direction for the supply chain organization in the context of the corporate goals and objectives. The strategy was the catalyst for the development of action plans to fundamentally restructure supply chain processes and technology to accommodate growth and meet increasing stakeholder demands.

A critical component of the strategy involved identifying and assessing risks associated with worst-case scenarios that could affect business continuity across the health system’s five hospitals and more than 250 outpatient locations. Types of risks identified included severe disruption in supply chain logistics, critical product shortages, loss of financial liquidity, force majeure events such as a pandemic, loss of key personnel, supplier bankruptcies, threats to patient safety and degradation of infrastructure.  

The risk assessment influenced key strategic decisions affecting logistics, sourcing and vendor management. Risk mitigation plans for these worst-case scenarios were embedded in the fabric of the strategy. “Although separate business continuity plans are valuable, it is important to incorporate critical elements of those plans into day-to-day operations to ensure that the organization can rapidly respond to adversity,” Vice President of Supply Chain Management Carl Waller says. “This is fundamental to the achievement of supply chain resiliency.”

 As Mike Tyson famously said, “Everyone has a plan ’til you get punched in the mouth.” In this environment, the objective is to avoid being punched in the mouth by having a good defense characterized by the proactive implementation of effective risk mitigation plans.

Mitigating Black Swan Risks

Based on extensive analysis that incorporated the risk assessment, Northside diversified its distribution channels for medical supplies based on best of breed capabilities. “We have discrete channels for our hospitals, remote locations, drugs and services,” Waller says. 

“In case of severe supply shortages, the rationale was that our distribution partners would be in a better position to source and deliver product than if Northside warehoused and distributed supplies on its own,” he adds. “Northside has fully integrated technology and processes with key distributors, so it would be difficult for an outside observer to determine where our distributor supply chain ends and Northside’s begins.” 

 In addition to traditional distribution, an alternate supply channel was established with an international importer to add scale and the ability to capitalize on global sourcing opportunities. “By diversifying and expanding distribution channels, we are able to concentrate on the ‘last mile’ of the supply chain, which allows us to better serve and protect our clinicians and patients during these difficult times,” Waller says.

Swimming With a Black Swan

When the pandemic hit, Northside was immediately put on monthly allocations of PPE by key suppliers based on historical usage. This created a huge gap between the availability of PPE from traditional sources and the increase in demand resulting from COVID-19. To close the gap, Northside enlisted the help of its import partner. 

Since the relationship with the importer was already well established, the international supply network was able to fill the PPE gap in a timely fashion at reasonable prices given the volatile environment. “There was no need for us to waste time vetting the hundreds of ‘pop-up’ PPE suppliers that flooded the marketplace, many of which were scams,” Waller says. 

Northside also asked a global consulting firm to identify potential sources of PPE. The result was a digital platform designed by the firm that connects suppliers and healthcare providers. In a very short period, the platform has grown to over 50 health systems, representing nearly 700 hospitals.  

Due to the diversification of the supply chain, Northside was able to quickly ramp up PPE inventories to meet the dramatic increase in demand by leveraging its distribution channel partners’ capabilities. The Atlanta metropolitan community was also very supportive and made contributions of PPE. “We were able to increase PPE inventory threefold in the first two weeks of the pandemic,” Waller says. “Today, inventories are set at levels to accommodate current demand and potential future waves of COVID cases.”

Northside continues to closely monitor consumption patterns of PPE and other medical supplies as elective surgeries begin to ramp up. The supply chain team is working daily with clinicians and physicians to safely bring outpatient locations on-line. “We are proactively working with our vendor partners to realign sourcing and procurement strategies as the environment changes,” he says.

Thanks to the incorporation of risk mitigation plans into the supply chain strategy, Northside has been able to weather the storm resulting from the pandemic. “The most important aspect of this strategy has been the ability to provide the necessary PPE to keep our employees and patients safe,” Waller says. “Our frontline workers and support staff are doing a phenomenal job treating patients during this pandemic and deserve to be well protected. Although the situation is and will continue to be extremely challenging, we are able to swim with the Black Swan.”

Sidebar: A Force for Health in the Southeast

Northside Hospital is an integrated health care delivery system that serves the Atlanta region. It operates five acute-care hospitals with 1,558 licensed beds and more than 250 outpatient locations across the state of Georgia.

Northside says it is one of the most respected and fastest-growing health care organizations in the Southeast and is committed to balancing clinical excellence with compassionate care. The health system leads the U.S. in newborn deliveries and is among the state’s top providers of cancer care, sports medicine, cardiovascular and surgical services.

It has been recognized by Healthgrades, the leading online resource for information about physicians and hospitals, as one of the top U.S. hospitals for outstanding performance in delivering a positive experience for patients during their hospital stay. Northside also has been ranked as one of the Best Places to Work among all top large employers in the United States by both Glassdoor.com and Comparably.com.

More than 24,000 employees and a network of 3,900 physicians serve approximately 4.6 million combined inpatient and outpatient visits a year across a variety of services, including cancer care, heart and vascular, maternity, pediatric and adult imaging, GI, surgery, spine care, urology, sleep disorder and emergency medicine. Follow @NorthsideHosp on social media, and for more information visit northside.com.