July 2023 | From HIDA's Healthcare Distribution & Supply Chain™ magazine

As healthcare supply chain models continue to evolve, the benefits of using a distributor are stronger than ever.

Healthcare providers are taking a fresh look at their supply chains — and realizing that distribution value is clear. Yes, some healthcare systems are holding more emergency inventory. Others are eliminating storage space in individual facilities and opening consolidated service centers to support multiple locations. But providers continue to rely heavily on their distribution partners for access to products, logistical support, and product management.

HIDA reexamined the value its distributors bring to the healthcare supply chain as part of a recent webpage refresh. Visitors to StreamliningHealthcare.org can examine the role of distributors in enhancing access, improving patient care, managing costs, and building partnerships between the public and private sectors.

The Upshot

The core competencies distributors bring to their manufacturer and distributor partners are even more important today, as all trading partners struggle to contain costs while meeting patient needs.

The COVID-19 pandemic elevated the importance of supply chain, forever changing the way providers think about the availability of medical products that HIDA member companies make and deliver every day.

“For many healthcare providers, 2023 has been a year of unprecedented financial challenges.
They need the efficiencies gained through a strong distribution partner.”

Matthew J. Rowan

Matthew J. Rowan
President & CEO
HIDA

Is Self-Distribution Gaining Ground? In A Word, No.

Many healthcare providers increased their bulk purchases of critical medical products during the pandemic, and some secured warehouse space to store these items — leading some observers to conclude that self-distribution as a supply chain model is growing.

HIDA Senior Vice President Elizabeth Hilla disagrees. She’s tracked the number of healthcare systems pursuing a self-distribution model, and it hasn’t changed much over the past decade.

“In fact, a few long-time self-distributors have closed or curtailed their operations in the last few years,” she said.

Self-Distributing Healthcare Providers:
  • 2015: 41 health systems
  • 2023: 40 health systems
The Term “Self-Distribution” Is Used In Many Ways:
  1. Common: The provider buys some products directly from manufacturers. This is common, since some manufacturers don’t sell through distributors.
  2. More common with growth: The provider operates a warehouse or consolidated service center (CSC). This is more common today as health systems grow. The CSC allows the organization to free up space in its patient care facilities. Most systems with CSCs collaborate with a distribution partner.
  3. Rare: The provider takes on all the activities that would otherwise be performed by a commercial distribution partner. This model is rare — even systems with sophisticated distribution facilities tend to use distributors for some product categories.

At a recent meeting of HIDA’s Channel Partnership Council, manufacturer and distributor leaders discussed evolving supply chain trends. Manufacturers reported that providers sometimes want to buy direct but still expect the full suite of distribution services. “We discourage these requests,” said one participant. “We are set up to make deliveries in truckloads, not pallets or cases. Our distributor partners allow us as a manufacturer to focus on the clinical sale rather than all the logistics services that providers need.”

Distributors Help Providers Manage Costs And Add Value

More than ever before, the COVID-19 pandemic highlighted the importance of a streamlined medical supply process. Healthcare providers scrambled for appropriate personal protective equipment (PPE), which grew difficult as demand quickly outpaced supply. Distributors stepped in, sourcing products from around the globe to meet provider needs.

HIDA’s updated value of distribution webpage highlights some of the benefits distributors provide, helping their customers navigate both crises and day-to-day challenges.

Distribution warehouse Enhanced Access
HIDA members manage 76 million square feet of warehouse space and process 650 million orders each year. Distributors offer more than 1.4 million healthcare products from 7,300+ manufacturers.
USA on globe Nationwide Network
More than 94% of Americans live within 100 miles of a healthcare distribution center, with 500+ across the United States serving 550,000+ sites of care – translating to millions of patients. View Map >
Improved Patient Care Improved Patient Care
Providers working with a distributor gain 30% more time and resources for patient care. Distributors serve 550,000+ healthcare locations, including 6,000 hospitals, 267,000 labs, 23,000 physician offices, and 18,000 EMS agencies.
Business partnershipProfitable Partnerships
Sales reps of self-distributing manufacturers spend more than 50% of their time involved in non-selling. Distributors can focus on order consolidation to ensure high fill rates, prompt deliveries, and streamlined customer service.
Cost Efficiency
Top-performing hospitals in supply chain management save $23 billion compared to others in supply chain costs. Hospitals can save as much as $9.9 million by improving supply chain management, e.g. by saving on storage space.
Superior supply chain management by health systems can produce an average of
18%
in expense reductions.
Providers save
68%
of staff costs on every order by working with healthcare products distributors.

Members: Check out the full magazine PDF for all articles in the July-August 2023 issue.