How to Navigate Supply Chain Issues
on May 19, 2023
By Ted Metcalf, Regional Account Manager, VGM & Associates
The DMEPOS supply chain was significantly disrupted by the COVID-19 pandemic, and the industry is gradually making its way back to a more typical state. Nevertheless, certain procedures that were developed out of necessity during the pandemic’s onset and peak have evolved into effective best practices. One of the most crucial lessons learned is the importance of close collaboration between providers and their trusted vendors, manufacturers, or distributors to ensure success.
What Can Companies Do to Help Alleviate Supply Chain Issues?
Our vendor partners are a valuable resource to providers in helping alleviate supply chain issues. Many of our vendors have taken a commercial approach to understanding more about what the demand estimation is.
Demand estimation is the process of trying to understand what level of products they need and at what point to properly forecast. For example, let’s say a DME needs 50 hospital beds per month on average. If the DME works closely and is transparent with the distributor about what their needs are, the distributor can understand what the demand curve looks like. Then, they can buy ahead and forecast that supply chain into their software or ERP system and plan in advance.
Receiving equipment that is being shipped from overseas takes time that the distributor must factor into their demand plans. During the pandemic, the demand plan for equipment could take anywhere between four to eight months. Companies that wanted an extra 40 beds were unfortunately forced to wait. Now, the time it takes to ship equipment has gotten a little bit better, but there is still a time lag.
It’s important for providers to be transparent, to open their books, and show vendor partners what they are forecasting. When providers are transparent and show their forecast of the product levels they need, vendor partners can better understand how to plan, not just now, but for 60, 90, or even 120 days into the future. And they can build an inventory to supply that product at appropriate levels.
How Can You Start to Build Forecasting Models?
You do not need to have software to help you forecast. To start building a forecasting model, you only need a simple spreadsheet and knowledge of what your numbers are. Look at the last 24 months of your orders, maybe pre-pandemic levels of product delivery/availability, and product deliveries. Then find an average per month and per quarter of what volume you ordered and delivered in a specific SKU to help develop a forecast of quantities of product you will need. You could also add in a factor of what opportunities you possess to find new business, whether that’s 5% to 20% of future opportunities.
For example, if you’re supplying beds to a local hospice provider, maybe you look at your numbers and see that you averaged 10 per month, or 30 beds per quarter. You can add in a factor of new business, say 20%, so you add another six beds. So, your forecasted number is 36 beds. Then, you can work with a distributor like Medline, McKesson, or Compass Health Brands and let them know that you need 36 beds and will need this to be factored into your utilization or buying habits.
You don’t need a fancy enterprise resource planning (ERP) system to help you forecast. You simply need to know what you’ve purchased in the past and what you anticipate purchasing in the future to help your vendor partners know what you anticipate purchasing.
Working With Multiple Vendors
When it comes to sourcing products, I always encourage our members to have a strong second and maybe a good third vendor partner secured. It’s good practice to have strong partners who can support you in times of need and assist if you need to make a quick delivery or help resolve a supply chain issue. Maintaining relationships with one to three vendor partners for your business will give you the support you may need.
If you do have supply chain issues and you’re unable to source all the products you need, you will need to find a revenue cover. Talk to other vendors that have unique revenue opportunities. What other products fit well into the landscape of what you’re providing? These could be items that have HCPCS or cash retail items.
If you’re providing DME, consider adding continuous glucose monitors, wound care, or retail items. An O&P provider could look at providing knee braces or bone growth stimulators. Don’t leave a stone unturned—talk to your vendors about what other product opportunities exist to be a cover for any type of revenue shortage you have.
Are You Using Distributors to Your Advantage?
Distributors have a unique ability to source and stock products, which makes them major buyers of DME equipment across the globe. Providers should use this to their advantage. Inventory costs are high, and they aren’t going to go down. High costs of product and limited space could be a problem. Use distributors to your advantage.
READ THE FULL ARTICLE HERE
This article was originally featured in the VGM Playbook: Safeguarding Your Future in DMEPOS. To read the full article and more like this, download your copy of the playbook today!
- supply chain