Tuesday, October 28, 2014

Forecasting in Healthcare Industry – Is it unique ?


Forecasting demand in the Supply chain for Retail, Manufacturing, Automobile and other industries has been successful and established. Furthermore, the processes are unique but the forecasting is based on similar base factors. However, forecasting in supply chain for Healthcare industry is unique as it considers various other external factors.

In other industries, customers are segmented into large groups but in healthcare, mostly every patient case is unique to certain extent. This consideration makes the forecasting in this industry a little complex. Additionally, the forecasting depends on the demand by Caregivers too. Thus, the supply chain is not dependent only on patients but on two major demand pillars – patients and caregivers.

Healthcare industry has developed its own set of principles for forecasting the supply chain. The set of principles draws upon the concepts of retail demand forecasting models, but fully accounts for the unique nature of health care industry, in which a failure to meet the demands of consumers (patients and clinicians) can have dire consequences.

Today, with the advancement in the Healthcare industry, three factors make the forecasting attainable:

·         The abundance of untapped information already available in the hospital setting

·         A methodology of demand forecasting developed in other industries, but which can be adapted to health care

·       The maturation of some information technologies that enable an unprecedented level of integration of data from diverse sources[1]

Although hospital administrators often feel a lack of predictability, their potential for success in determining what they will need to stock their supply shelves may be substantially greater than in almost any other industry, at least for certain subgroups of their total annual purchases. At hospitals and clinics, a manager can walk-in and look at the schedules that tells the number of customers and potential product demand with relative accuracy for each day.

SKU and location-specific forecasting technology are used to synchronize surgeon preference information, and predict demand based on the hospitals scheduling, patient demographics, and even seasonal demands.  This strategy provides benefits of reduced inventory levels (bypass the problem of expiry), lower costs for case preparation, and improved fill rates and service levels. In addition, hospitals experience increases in clinical satisfaction, productivity, and patient safety as well.

Because the risks associated with health care are severe and extreme as compared to other industries, the quality of demand for forecasting must be spotless. The process must:

·         Project demand by location and SKU, and address long-term and short-term
needs (considering expiration and advancement of drug)

·         Support the hospitals budgeting and planning process to account for introduction
and expansion of medical/surgical programs; 

·         Address the importance of the critical lead times that are inherent and
essential in the health care environment.[1]

Questions:

Why forecasting in Supply chain for healthcare industry unique and different from any other industry?
How can risks be mitigated in forecasting in the healthcare industry? Is it even possible? If not, what else can be done to minimize the risk?
What are some additional methods the healthcare industry could use to predict and forecast? Can it benchmark predictive models from any other industry? If yes, what industries can they be?



[1] http://mthink.com/article/effective-demand-forecasting-health-care-supply-chain/

http://www.mckinsey.com/insights/health_systems_and_services/strengthening_health_cares_supply_chain_a_five_step_plan

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