Digital Health

January 22, 2025

Supporting Clinical and Operational Goals With a Digitally Enhanced Supply Chain

Since the introduction of ChatGPT in late 2022, we’ve been busy discussing with health care stakeholders how to best plan for and use AI across their organizations, from supporting clinical decision-making to reducing administrative burdens.

What I didn’t plan for was having nearly half of these discussions focus on supply chain. But perhaps this shouldn’t be a surprise—while other applications are given a bigger spotlight across published studies and news headlines, we know that an adaptable and reliable supply chain is crucial for supporting both clinical care and other aspects of hospital operations. The past few years have pushed more stakeholders to evaluate the state of their supply chain, especially considering the COVID-19 pandemic experience, the increased pace and intensity of natural disasters, inflation, and the debilitating effects of cyberattacks. Health care leaders are now thinking about how to appropriately leverage AI to respond to these threats and to support future strategic growth.

But this digitization of health care’s supply chain goes well beyond AI. If we think through a simplified framework of a supply chain, there are various ways that technology can influence tasks from procurement through risk management:

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The supply chain of the future is already starting to take shape and will be supported by a growing and powerful set of digital capabilities, such as:

  • A vast sensor network that continuously gathers volumes of data related to inventory, supply utilization, equipment life cycles and more.
  • Predictive analytics for deriving intelligence from real-time data, further enhanced by dashboards or digital twin modeling for visualizing trends and driving decision-making for stakeholders.
  • Blockchain technology that will help bolster cybersecurity by improving the transparency and traceability of transactions across the supply chain.
  • Integrated and interoperable core systems of record that improve data exchange across partners and sites of care, including the patient’s home.
  • Other emerging technologies that will support rapid and flexible operations, including 3D printing for on-demand manufacturing of supplies and drone delivery that opens new opportunities for delivering supplies, medications and lab samples.
Current supply chain AI adoption is low, highlighting future potential

Many supply chain AI use cases today still focus on leveraging robotic process automation, which is well suited for many supply chain tasks, though a more rudimentary form of AI. That said, stakeholders have also started to explore more advanced AI applications to see how machine learning, computer vision or generative AI could improve efficiency, reduce costs and support better care outcomes. AI can influence supply chains in several ways:

  • Demand forecasting—AI algorithms can analyze all historical operations data to better predict future supply needs. This is particularly useful in health care, where demand can fluctuate based on factors like seasonal illnesses, shifting patient demographics or natural disasters. Models can also incorporate real-time external data from news reports, weather forecasts or social media to improve the accuracy of predicting disruptions or demand spikes.
  • Inventory management—AI can better optimize inventory levels, ensuring that hospitals have the necessary supplies without overstocking (which can lead to waste if products expire) or understocking (which can lead to shortages). AI can also suggest alternative supplies when certain items are unavailable, helping to prevent supply stockouts.
  • Supplier relationship management—AI can help more effectively manage relationships with suppliers. For example, it can analyze supplier performance data and generate reports for staff to identify which suppliers are most reliable or offer the best value. Generative AI tools can also facilitate communication with suppliers related to requests for proposal or contract development.
  • Risk management—AI’s consistent, real-time monitoring can support staff in better identifying potential fraud or waste while also providing staff with prescriptive guidance on how to mitigate or respond to a crisis. Generative AI could also be used to create training simulations to help staff prepare for a variety of future risk scenarios.

As in many other areas of health care, the use cases for incorporating AI into supply chain are still evolving. A 2024 survey of 342 executives by the College of Healthcare Information Management Executives and KLAS Research showed that AI adoption across supply chain processes still has room to grow:

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We can expect to see more pilots and deployments as more health systems expand AI functionality within core IT (eg, ERP systems), continue to standardize workflows that will enable higher performance optimization from AI or start to adopt new commercial solutions.

Examples from the field show the positive impact of digital investments

Several health systems are already years into the process of digitizing their supply chain, but we also continue to see a growing set of pilot programs that are producing promising results across different tasks.

  • The University of Utah Health’s supply chain department has several workstreams in place to digitize its supply chain, including an automated inventory management system that oversees 192 stocking locations across five hospitals and several academic partners. As part of this system, the team created a program that uses an algorithm and predefined parameters to monitor inventory use and trigger replenishment orders. These efforts have reduced inventory stockouts by 88%.
  • Mary Washington Healthcare, based in Virginia, used advanced analytics to identify cost-saving opportunities across its supply chain post-pandemic. The health system analyzed internal data on purchase history and scored products based on their operational and clinical impact while also using external market pricing data as benchmarks. By doing this, the health system had a stronger negotiation position with vendors, including reducing the cost of coronary stents by over 40% and realizing a nearly seven-figure savings across its coronary portfolio.
  • Baptist Health South Florida sought to reduce the volume of invoice match exceptions and the manual work in its procure-to-pay process that comes with addressing overpayments, late payments and duplicate payments. By automating more match exception processes, Baptist Health saw a 90% reduction in time to resolution, had a 50% reduction in manual processes and identified over $2.9 million of invoices at risk of overpayment.
  • Shannon Health in Texas has deployed several “Moxi” robots to support nurses and other staff with delivering labs, medications and other items from central supply that typically require human transport. Between December 2021 and April 2023, the Moxi robots made over 27,500 deliveries, saving staff nearly 13,000 hours in transport time, with 50% of those deliveries coming from the pharmacy.
Positioning supply chains for future success

Supply chain leaders will continue to have their hands full responding to business-related needs while trying to survey the expanding market of digital technologies. Based on conversations with our members, here are some strategic considerations for the near term:

  • Supply chain operations must be elevated to a system-level priority. In a recent meeting I attended, a supply chain leader said, "Everything in supply chain is a micro event, but everything the C-suite focuses on is a macro event." It’s clear that this disconnect is hurting strategic alignment across health systems. Keeping focused on supply chain’s direct impact to a system’s clinical and operational outcomes will pay dividends.
  • Supply chain leaders should have a say in digital investment. It seems all stakeholders are struggling to filter through the noise coming from external vendors, including how to assess the value of an ever-growing technology stack. Supply chain leaders will have crucial insights for formulating and supporting a robust digital strategy and should be represented within a cross-functional group that governs technology spending.
  • The supply chain can be a proving ground for a tech-enabled collaboration platform. Whether establishing foundational IT architecture or novel generative AI tools, the long-term focus for health systems should be developing an enterprise-wide digital platform. Given its central role for supporting the business, a digitized supply chain can enable unified communication and seamless collaboration between the health system and the external ecosystem of manufacturers, distributors and other partners.

Sources: Landi H. Mayo Clinic taps Zipline for drone delivery of meds, supplies to hospital-at-home patients. Fierce Healthcare. May 22, 2024; Paxman E. Digital Health Most Wired: National Trends 2024. KLAS Research. November 2024; Wider J. 2024 Supply chain department of the year: University of Utah Health. Healthcare Purchasing News. August 27, 2024; GHX. Mary Washington Healthcare Saves Nearly Seven Figures With Category Optimization. 2024; Casciato D. Revolutionizing healthcare supply chain management: Baptist Health South Florida’s partnership with Salesforce and the HealthChain application. South Florida Hospital News. September 1, 2024; Diligent Robotics. Moxi Case Study: Shannon Health. 2023; Sg2 Analysis, 2025.

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Senior Director
As a senior director on the Intelligence team, Andrew leads thought leadership and content creation for Sg2’s digital health research. In this role, Andrew keeps members up to date on the latest technology trends and how to plan for new, disruptive forces and innovation entering the health care industry. Particular areas of interest include artificial intelligence, consumer medical technology, psychosocial IT and emerging technologies on the “digital frontier.”