Insights

Choosing the Best Distribution Delivery Model for Your Healthcare Supply Chain

November 18, 2015

Most countries have a centralized model for managing healthcare supplies, but there is room for other options. The following decision tree can help you choose the best option for your national health care system. Note that all three models assume that contracts with vendors have been centrally negotiated to ensure bulk pricing.

Determine the best model for your health care supply chain with three questions.

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healthcare supply chain infographic

If your best option is a Vendor-Managed Inventory Model, vendors own and maintain the medical supply inventories at facilities around your country and are responsible for inventory fulfillment. Pricing is based on pre-negotiated bulk contracts. 

Key Benefits

  • You don’t have to manage transportation or storage of supplies.
  • Since inventories are stored in facilities around your country, your healthcare supply system may be more flexible in times of disaster.

Key Disadvantages

  • To ensure standardized levels of care across the country, this model requires clearly defined management processes and data systems.
  • Analysis is needed to know whether vendor delivery costs would be more and less than one managed by your administration.

If you choose the Vendor-Managed Delivery Model, vendors manage delivery of supplies around your country. Districts, counties, or facilities place direct orders with vendors, with pricing based on pre-negotiated bulk contracts. The pricing includes delivery costs.

Key Benefits

  • You don’t have to manage transportation of supplies.
  • In case of disaster, the flexibility of your healthcare supplies depends on the resilience of your vendor’s delivery systems.

Key Disadvantages

  • To ensure standardized levels of care across the country, this model requires clearly defined management processes and data systems.
  • Analysis is needed to know whether vendor delivery costs would be more and less than one managed by your administration.

If your best option is a Centralized Inventory Model, you hold all inventory in a central warehouse and ship to medical facilities as needed.

Key Benefits

  • With all supplies are in one location, you can easily track inventory, even if you have not been able to invest in sophisticated data systems.
  • You may be able to negotiate the least expensive warehouse costs, since you need only one facility.
  • There is lower risk of running out of one type of supply, since overall inventory is larger than when it is stored regionally.

Key Disadvantage

  • In times of disaster, having all supplies in one location could make your healthcare system vulnerable.

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