Healthcare Supply Chain Management Market

Market Overview

The global healthcare supply chain management market size was valued at USD 2.45 billion in 2022. It is estimated to reach USD 4.94 billion by 2031, growing at a CAGR of 8.12% during the forecast period (2023–2031). The increasing demand to decrease expenses within the healthcare sector is anticipated to facilitate the market expansion.

Supply chain management (SCM) is a fundamental aspect of the healthcare sector that necessitates strategic material management and distribution systems to reduce costs and increase efficacy to provide quality patient care. In the healthcare sector, supply chain systems ensure the timely dispatch of drugs, surgical kits, and medical devices to precise locations.

In a well-managed value chain, the distribution of medical products results in high-quality patient care. The rising cost of healthcare has prompted healthcare providers and manufacturers to make medical services accessible to all. However, disconnected manual processes, medicine counterfeiting, a lack of supply chain visibility, and hidden costs are driving up the intrinsic costs of healthcare supply chains. Healthcare supply chain management enables hospitals and medical practices to comply with regulations and deliver value-based care.

Market Dynamics

Global Healthcare Supply Chain Management Market Drivers:

Emergence of Cloud-based Solutions

Cloud-based applications have emerged as the new standard that is being adopted by every industry. Many healthcare companies are now adopting cloud-based solutions to streamline their supply chain process. For instance, the largest integrated pharmaceutical group in Malaysia, Pharmaniaga, adopted Oracle Fusion Cloud Supply Chain & Manufacturing (SCM) in January 2021 to improve logistics processes in preparation for COVID-19 vaccine distribution in Malaysia. The company needed a cloud-based logistics platform to automate manual processes and enhance the traceability and security of its cold chain services. The adoption of cloud-based information systems in hospital supply chains also provides flexibility to manage and acquire the available data from supply chain partners over the web and worldwide. All these factors are anticipated to spur market growth over the forecast period.

Growing Pressure to Reduce Costs in Healthcare Industry

Supply chains account for an astonishing 30% of a hospital's outgoing cash flow, along with staffing costs. The procurement of medicines constitutes the most significant expenditure within the hospital supply chain, representing approximately one-third of the total supply chain costs. According to a report by Navigant Consulting, increasing supply chain control and identifying waste can reduce hospital expenses by an average of 17.4%, or USD 12.1 million annually.

Many healthcare providers and manufacturers are adopting various supply chain management tools for cost reduction, including smart cabinets, point-of-care technologies, smart wands, radio-frequency identification (RFID), and barcode systems to automate supply usage and improve productivity. Such tools save the time of healthcare personnel who can be redeployed to patient care activities and reduce errors and waste due to expired or recalled products. Thus, the growing pressure to reduce costs in the healthcare industry is expected to foster market growth.

Global Healthcare Supply Chain Management Market Restraint:

High Implementation and Monitoring Costs

The Internet of Things (IoT)-driven supply chains are complicated and complexly interconnected. As a result, the decrease in costs in a specific operational area can directly lead to an increase or alteration in costs in another area. Thus, manufacturers must understand the interrelationship between various processes in their supply chain and the overall impact of cost-reducing measures on the rest of the value chain.

Healthcare businesses frequently lack access to supply chain data to create practical strategies for boosting productivity. The absence of health IT solutions to collect and analyze supply chain data can result in billions of dollars in unnecessary expenditure. Implementing SCM solutions is the second-highest expense after labor costs in the healthcare sector, thereby restricting market expansion.

Global Healthcare Supply Chain Management Market Opportunities:

Development of Clinically Integrated Supply Chain 

A successful clinical trial depends on several factors, including the planning and managing the supply chain for clinical trial materials. A clinically integrated supply chain is characterized by greater quality, less waste, lower costs, and fewer silos, all contributing to improved patient outcomes. Utilizing clinical evidence enables clinicians and supply chain stakeholders to determine the best products that provide the best care at the most cost-effective price.

For instance, the HIMSS Clinically Integrated Supply Outcomes Model (CISOM) evaluates the supply chain maturity of global health systems. At the point of service, CISOM is an advanced and automated supply chain infrastructure in health systems. It can proactively identify adverse event risks to improve patient safety and quality of care. Hospitals and health systems can standardize specific products and market players with this data, enabling better contract pricing. Thus, all these factors are expected to create opportunities for market growth during the forecast period.

Regional Analysis

Based on region, the global healthcare supply chain management market is bifurcated into North America, Europe, Asia-Pacific, Latin America, and the Middle East and Africa.

North America Dominates the Global Market

North America is the most significant global healthcare supply chain management market shareholder and is estimated to grow at a CAGR of 7.86% over the forecast period. North American countries have been demonstrating considerably high growth rates in recent years. This is primarily attributable to the rapid adoption of new technologies entering the market and the participation of major players in the nation. Similarly, the US is the leading market for healthcare technologies, as several companies offer healthcare technology services, and the US has the most significant market share studied due to the well-established healthcare system. According to a WTO report published in 2017, the US is the second-largest supplier of medical goods worldwide, with reported exports of USD 116 billion.

In addition, healthcare facilities are embracing and creating a wide range of new and innovative healthcare supply chain technologies due to the high level of acceptance and openness in North America. For instance, in 2018, FedEx became the first big shipping giant to implement blockchain technology into its supply chain management. All these factors drive regional market growth.

Europe is anticipated to exhibit a CAGR of 8.02% over the forecast period. As the adoption rate of technology is relatively higher in the region, there has been a steady penetration of various supply chain management software and hardware solutions in the healthcare sector. The combined expenditure of the UK, Spain, France, and Germany is over USD 6 billion on healthcare IT (HCIT), and the regional HCIT adoption stands at almost 80%. Moreover, the region's investment in cloud-based supply chain management software is high. For instance, Jump Technologies created a cloud-based software solution called JumpStock that integrates with EMR, ERP, or scheduling systems, enabling hospitals to cut costs associated with medication hoarding, physician preference variances, and stock-outs. These solutions enhance order management and production planning at all warehouse sites. Therefore, the growing adoption of technology, increased investments in the healthcare supply chain, and the growing supply of medical products are propelling the market's growth.

Asia-Pacific's healthcare system is driven by technological innovations, changing demographics, emerging consumer expectations, and inadequate legacy health infrastructure. These factors are enabling consumers, governments, payers, and providers to reimagine their delivery and management of healthcare. China, along with India, is a key link in the world's pharmaceutical supply chain, particularly for generic drugs that account for most prescriptions in the US. This has raised the demand for logistics providers to move medical devices and pharmaceuticals within and outside the borders. Hence, this leads to the requirement for robust supply chain management in the region for smooth foreign and domestic trade.

In Latin America, major factors driving the market growth are the aging population, increased foreign investment, regulatory framework reform, and the number of trade agreements with other nations, including the US, Canada, and several European nations. In a regional market context, Brazil is and will be the most attractive market in the region in the coming years. Obtaining a quality distributor in Latin American countries is one of the greatest tasks when selling the device in this region. In addition, the medical device distribution industry is extremely fragmented, with hundreds of small companies. International device companies often rely on distributors to play a more strategic role and provide a commercial infrastructure. Therefore, the domestic and international trade of medical products is escalating the demand for healthcare supply chain management solutions in the region.

Segmental Analysis

The global healthcare supply chain management market is bifurcated into component, deployment, and end-user.

Based on components, the global healthcare supply chain management market is segmented into software and services and hardware. 

The software and services segment is the highest contributor to the market and is projected to exhibit a CAGR of 8.70% over the forecast period. Companies must track and manage their process chain from start to finish with the help of supply chain software. The software is also designed to manage crucial information, such as forwarding material through different channels until it is ready to be delivered to the final destination. Supply chain software streamlines and automates repetitive manual tasks that are performed within healthcare organizations to ensure cost-effective supply chain processes.

In addition, automated software applications simplify inventory, minimize waste, ensure timely deliveries, and enable data-based decision-making processes. Other benefits of adopting automated software applications include lowering supply, labor, and operational costs. The software and services segment is further segmented into planning, procurement, inventory, and warehousing.

In the hardware market, suppliers provide a wide selection of tools for efficient supply chain management at logistics companies. These devices are widely used to streamline supply chain processes and minimize the time spent on packaging and transporting through proper labeling and assigning dedicated barcode numbers to shipments. The rapid pace of globalization has heightened product complications and intensified customer demands, which has made it imperative for vendors to adopt innovative technologies to shift their supply chain from a pure operations hub into an epicenter of business innovation.

Based on deployment, the global healthcare supply chain management market is divided into on-premise and cloud-based deployments. 

The on-premise segment is the largest contributor to the market and is projected to exhibit a CAGR of 6.74% over the forecast period. On-premises is the dominant software delivery model for manufacturing management. However, there are alternative delivery models for software supporting environmental, health, and safety activities, quality management, and business intelligence. On-premise deployment involves hosting the EHR software on in-house servers maintained and implemented by an organization's IT team. With on-premises security, data and servers are physically positioned in the office, and the user utilizes disaster and backup recovery software to extract the data when required during a network failure.

Cloud-based platforms and applications are currently transforming the supply chain management processes, scaling the operations of small businesses and complex enterprises. Cloud-based supply chain software solutions have witnessed a substantial rise in implementation. In recent years, there has been a considerable surge in the growth of healthcare manufacturers. Most manufacturers expect an average or slow demand, but new and existing customers rapidly increase the number of orders and purchasing activity. Cloud platforms and applications are growth catalysts that enhance the supply chain's performance while operating and catalyzing global manufacturing growth.

Based on end-users, the global healthcare supply chain management market is bifurcated into healthcare manufacturers, healthcare providers, distributors and retailers, and logistics companies. 

The healthcare manufacturers segment dominates the global market and is predicted to exhibit a CAGR of 8.38% during the forecast period. The healthcare supply chain begins at the medical product manufacturer, where items are manufactured and sent to a distribution center. Based on the product type, hospitals can purchase inventory directly from the distributor or manufacturer or through a group purchasing organization, which negotiates a purchasing contract with the manufacturer on the hospital's behalf. In addition, manufacturers must accommodate the rising demand for products from their end-users. Manufacturers seek supply chain management solutions for transportation and warehouse management to ensure faster, more precise, and more efficient operations.

The distributors are the ones who are in contact with the manufacturers in the supply chain. The part of the distributor is that of a mediator entity between the manufacturer of a product and another party in the supply chain, such as a retailer, a value-added reseller, or a distribution channel. Healthcare distributors provide unmatched logistics expertise, technology solutions, and support to providers treating patients on the front and those innovating to discover the treatments and cures of tomorrow.

Recent Developments

• March 2023- Advantus Health Partners, a healthcare solutions business delivering more effective and efficient supply chain models to healthcare organizations, and GE HealthCare (Nasdaq: GEHC), one of the world's largest providers of medical equipment maintenance services, announced an agreement to provide GE HealthCare's Healthcare Technology Management (HTM) services to Advantus Health Partners' clients for up to USD 760 million over ten years.

• August 2023- Terso Solutions announced a collaboration with PAR Excellence Systems, Inc. (PAR). This partnership exemplifies both companies' commitment to delivering innovative inventory management solutions to the healthcare industry.