Supplier Diversification: The Secret to Cutting Cost and Increasing Access to Health Services
Advanced analytics to compare cost and risk, showing supplier diversification can reduce overall supply chain cost and improve health service access.
Sourcing from only one supplier is risky. If this supplier is unavailable, service disruptions ensue. Even if the interruption is only temporary, in pharmaceutical and biomedical device supply chains, the consequences can be severe, including death of patients. The intuitive solution is to procure from multiple sources. However, sourcing from multiple vendors typically results in higher purchasing cost as vendors lose economies of scale.
We developed a method and a tool relying on advanced analytics to compare the cost and the risks to disrupted health services, showing that supplier diversification can help a buyer reduce the overall cost in a supply chain and improve health service. We successfully implemented our method in multiple projects. For example, we presented sourcing strategies that balanced cost, lead time, and risk for a large procurer of biomedical devices and pharmaceuticals for low- and middle-income countries.