Forecasting the laboratory supply chain use

This past year culminated in unforeseen supply chain challenges for clinical laboratories, forcing many lab directors to reevaluate their inventory levels, sources, and the value of forecasting.

Focusing on inventory strategies, operational efficiency, reagent efficiency and test utilization stewardship, labs can leverage their suppliers’ analytic capabilities to mine data from instruments and/or middleware to generate an analysis that provides detailed breakouts on the use of reagents, calibrations, quality control (QC), repeats and troubleshooting.

Reviewing usage and ordering levels allows lab directors to establish their average daily and weekly forecast levels of supplies needed, providing insight on testing volumes, which can be leveraged to eliminate reagent waste for low-volume assays, improving inventory management of both reagents and consumables, and eliminating excess QC testing.

Track supply utilization and keep records

Lab directors should review reports on supplies ordered, as compared to the number of invoiced tests. Utilization goes beyond the lab to the entire organization. A facility’s chief medical officer can help review the tests the organization runs, educating peers on Lab Stewardship and eliminating unnecessary supply ordering.

According to Mark Krhovsky, Vice President of Laboratory Sales, Medline Industries, there are three primary areas that lab directors should focus on: (1.) consumable standardization, (2.) instrumentation and capital contracts, and (3.) distribution programs.

He noted that hospital labs can be notorious for product variation. “The lack of purchasing oversight has allowed each individual clinician [his or her] own procurement power, leading to a more fragmented sourcing approach. There are undoubtedly areas where high brand preference is excusable and even necessary, but many of the general consumable categories offer prime opportunity for standardization.” Review the costs of basics, such as microscope slides, and even slightly more complex products, like pregnancy tests, for potential savings.

A key benefit of knowing the supply needs is cost savings. To capitalize on savings, a number of sources advise reviewing reagent rentals contracts, and considering lower-cost alternatives. Rethink “big-box closed systems,” requiring use of a supplier’s proprietary reagents and consumables after buying the supplier’s analyzer.

“Instrumentation, and their subsequent reagents, are typically one of the highest spend categories within any hospital lab,” Krhovsky said. “This includes, but is not limited to, chemistry, immunoassay, hematology, molecular, centralized urinalysis and blood bank. The majority of these contracts are manufacturer-direct, run five-plus-year terms, and the amount to spend that can quickly get into the tens of millions of dollars. Incredibly clinical in nature, there is undoubtedly a technical element to these decisions that is rooted in the needs, dynamics and testing requirements for that particular lab. That being said, there is always room for supply chain to be involved with product negotiations and contract review.”

Being aware of individual situations, what is and is not offered and available at specific locations, some laboratory departments prefer to operate on their own unique circumstances, processes and technology, regardless of rudimentary skills in contracting, negotiating and procurement. A lab director might not know the questions to ask or what to look for, but supply chain, finance and other organizations can help labs forecast their inventory needs.

Plastic pipette tips and tubes are amongst the supplies that labs report in high demand.

The ability to forecast and predict volume fluctuations can help with more than potential savings, as suppliers advise clients on an improved and balanced structure between instruments, reducing time for quality control and calibration. If there is a fluctuation or change in volume, suppliers can also advise on creating a new operating model. Reviewing instrumentation and capital contracts is important, as is the distribution programs.

“If you compare lab distribution to the current standard of medical/surgical distribution – where supply chain has been an integral partner for decades – the disparity is hard to ignore,” Krhovsky noted. “And yet the lab is as important as any clinical department at the hospital, so why the lack of change to the status quo? I believe lab clinicians and leaders are busier than ever, and also experiencing the pressure of more impactful outside stressors. Their focus has been on turnaround times, staffing, reimbursement changes and other tangible elements that are paramount to their long-term relevance and viability.”

In looking long-term, dedicating departmental resources and helping to build relationships can make a big difference, too, according to Barbara Strain, MA, SM (ASCP), CVAHP, Principal, Barbara Strain Consulting LLC, formerly Director of Value Management at University of Virginia Health System, and current member of MLO’s Editorial Advisory Board. Strain has experience in helping labs apply value analysis to its decision-making.

“Assign specific buyer and contracting staff to the clinical laboratory, including, but not limited to, the core laboratory and specialty testing laboratories, [such as] microbiology, molecular, immunology, toxicology, pathology, phlebotomy and blood bank,” Strain recommended. “This assures that the supply chain values the laboratory operations and wants to have a firsthand understanding of their needs.”

Together, they should set up a lab-centric inventory management program.

“If one does not already exist, co-designing an inventory management system to guarantee laboratory reagents, test kits, PPE and other products needed for patient testing are ordered and delivered on time every time is key,” she continued. “Supply chain and the laboratory might also draw on internal process improvement coaches or use services offered by laboratory supplier contracts to assist in 5S and other LEAN activities to organize workflow and create nearby supply availability locations.”

Labs that have embraced value analysis, according to Strain, recognize that the process helps to keep initiatives on track by:

presenting contracting options
organizing supplier meetings and presentations
assisting in collecting and providing product evaluation reports
scheduling end-user reference account calls
analyzing current versus estimated new costs, ROI and other analytics
facilitating consensus decision making
establishing key performance indicators (KPIs) to monitor efforts in meeting their goals

Forecasting challenges

When trying to forecast the supply chain, one tiny mishap can put a kink in the entire chain, resulting in unexpected delays across the globe.

“The Suez Canal blockage is a huge impact on laboratory supplies at the moment,” explained John C. Masserant, MD, a retired OB/GYN who now analyzes stocks, noting events that impact supply chain issues and the stock market. “They say around 12% of the world trade flows through that canal, and that was blocked for nearly a week. Add to that the increased demand of lab supplies from the pandemic, with a worldwide demand of swabs, lab media, syringes, and anything else associated with checking for infection or administering vaccines.”

Masserant pointed out that some areas have decreased the amount of recycled plastic during the pandemic, which increases the need of new plastic production. “Plastic is made from petroleum. Increasing cost, with a decreased supply of petroleum, shipping delays, and the whole situation is compounded by the shortage of domestic supply.” Pipette tips and centrifuge tubes have been in short supply since the plastic shortage.

Labs have been feeling the impact, reporting supply shortages for blood agar, an enriched culture medium used to grow and identify bacteria; Mueller Hinton (MH) media, a type of growth to measure antibiotic susceptibility of bacteria; chocolate agar; fungal culture media; viral transport media; vaginal panels; chromogenic agar plates; selective agar for streptococci; tryptic soy broth; buffered charcoal yeast extract agar; sabouraud dextrose agar; calcofluor white stain; and BD MAX Enteric Bacterial Panels, resulting in some labs resorting to Gram stain, fungal culture and PCR, instead of the panels.¹

Effective demand management emerges from a chain of events focusing on supply chain visibility, supply network mapping and real-time data accessibility, analysis and transparency, according to Ranna Rose, Vice President, Operations and Customer Success, Resilinc.

Rose shared that there are currently multiple ripples intersecting through the supply chain ecosystem. COVID-19 is still disrupting global supply chains with sudden extreme and widespread demand shifts. “In the last 12 months, we’ve seen a record hurricane season, California fires, multiple large factory fires globally, a Texas freeze, semiconductor shortage, container shortages, plastics shortages and most recently, the Suez Canal delay. Due to these factors, we forecast a three- to six-month delay in global supply chains for most products, including materials needed to make lab equipment and other healthcare-related goods.”

Rose added, “COVID-19 has been a black swan event of historic proportions and has opened the eyes of procurement officers and supply chain professionals who quickly realized they had limited information about their suppliers’ global operations, and most dramatically, they learned they had little visibility to their suppliers’ suppliers. Many woke up to the fact they needed greater visibility into their second, third or fourth-tier suppliers. It took many unprepared companies more than three months to react to the impacts of COVID-19 and get their mitigation efforts stabilized and moving forward.”

Best practices from the bench

According to a recent MLO State of the Industry survey³ conducted in February and the resulting report, recommendations from lab directors included a review of their test platforms and working with public health officials to forecast supply level needs.

The survey found that:

64% used multiple testing platforms
57% worked with state public health officials to gain access to needed testing supplies
45% implemented standing orders for crucial supplies
24% switched to reusable types of PPE
20% revamped their product evaluation process

Due to insufficient supply levels, lab directors mentioned paying extreme prices to secure products, having to use multiple suppliers, resorting to doing daily inventory updates system-wide, and using additional areas to store supplies to prevent running out when they could procure additional inventory.

Another strategy included using a bartering system, which has seen an upsurgence during the pandemic, as labs have traded supplies with each other during shortages, pooling resources. Pooling physical inventory includes sharing supply resources, and not having accurate information will only make a shortage worse, especially when some facilities overbought “just in case.” Facilities attempting to out-stock their rivals can lead to time-sensitive supplies expiring, being wasted and having to be destroyed.

Good forecasting of needed supplies is critical for managing supply bottlenecks and shortages. Try to pinpoint potential bottlenecks and address them, before they become an issue, being proactive, instead of reactive, looking at the entire supply chain, supplier capacity, demands and rates of consumption. While urgent shortages need to be addressed, be aware of lurking shortages of other supplies in the future, as the sooner they are identified, the better to address it, before the need becomes acute.⁴

These worldwide shortages have inspired many scams and substandard equipment, creating a buyer beware environment. Valerie Ng, MD, PhD, of Almeda Health System shared her worry of purchasing at the MLO Forum on COVID-19, after hearing a story of a lab ordering nasal swabs, only to receive makeup applicators.⁵ March: MLO FORUM (swoogo.com).

Creative solutions to supply shortages

With the U.S. International Trade Commission reporting an increase in imports of filter plastic pipettes and a double-digit percentage increase in the imports of surgical gloves from Malaysia and other places, it still was not enough to quench the need of laboratories and healthcare professionals. Recycling has come back to the forefront of lab professionals’ minds, scrubbing cellular swab tubes to be used for a buffer, as well as reusing gloves for non-sterile work.

With personal protective equipment in high demand, places like Michigan Technological University have joined in on the 3D printing trend, recycling plastic into new creations to try to help fill the void.

After surveying the community to find what PPE were in short supply, Michigan Technological University’s Open Sustainability Technology (MOST) Lab designed and developed three new tools to help: a high-temperature 3D printer, a firefighter mask and a printable, emergency-use ventilator. Nicki Gallup, a Biomedical and Mechanical Engineering student, worked alongside Joshua Pearce, PhD, a Richard Witte Endowed Professor of Materials Science and Engineering, helping with the 3-D printing of COVID-19 face shields, testing swabs, ventilators, and air filtration parts.

With the ingenuity of David Holden, Manager of Technology and Innovation and Michigan Tech, and John Schneiderhan, Michigan Tech’s Library Technology Specialist, a mini manufacturing center was set up in Michigan Tech’s library to produce needed PPE during the spring and summer months of 2020 to help distribute in the rural areas of the Upper Peninsula.

The pandemic inspired some creative thinking to solve real world problems, while bringing to the forefront the future needs of labs via forecasting. Amidst the chaos, it’s easy to forget the supply chain of command, where one seemingly insignificant detail hinges on another, and something as silly as a boat stuck in a sandstorm can impact labs on the other side of the globe.