Platelet components present the biggest challenge around inventory management in the complex supply chain for blood components in the US. Here we will explore the pros and cons of single or sole-sourced supply (when only one vendor is used on a contracted, long-term basis) as it relates to platelets.
An organization’s supply chain can be defined as resilient if it is alert and can quickly adapt to changes brought about by a supply chain disruption. This can be achieved by aligning strategy and operations such that an entity can adapt to risks that affect its capacity. However, success must be defined by more than simply responding to a one-time disruption; organizational resilience results from an ability to continuously anticipate and adjust to supply disruptions that can ultimately cause service issues. From a hospital transfusion medicine perspective, service issues equate to canceling or postponing surgeries and procedures which has a direct effect on health care providers as well as patients.
For some entities, the use of multiple suppliers can assist in building that resilience. That said, there are some advantages when it comes to working with a single source. First, it is far easier to manage a single vendor relationship, which can also lead to a potential reduction in administrative costs. Other advantages include better integration so that systems are streamlined for that one supplier and better pricing, provided the organization can leverage volume. However, having all your proverbial eggs in one basket can be risky.
One of the biggest challenges with a single supplier is the fact that any significant setback could lead to disruption in services, meaning any general shortage will become a much bigger problem as organizations have to scramble to find adequate supply. Service disruptions are no surprise in the blood industry; collection facilities face an aging blood donor population while steady demand for certain blood components and unexpected external events further stress the system. Therefore, physicians who have had to sacrifice their level of care due to blood availability may have concerns with the use of only one supplier.
Another disadvantage of single sourcing is that eventually, the balance of dependence may 
become lopsided. The supplier may grow, taking on additional, larger clients (e.g., hospital systems), thus reducing the supplier’s need for any one customer relationship which ultimately leads to a reduction in service standards and further shortages. Smaller hospitals are more likely to feel this imbalance than their larger counterparts, given the consolidation trend in the hospital and blood collection industries. Further, markets in which only one meaningful blood supplier exists (which is often the case) have baseline quality issues due to a lack of an alternative. With no pressure due to competitive threats, an incumbent supplier has little incentive to offer anything but a baseline level of customer service. Further, there is the potential a single supplier may increase blood component prices with the hospital customer’s ability to source elsewhere at lower prices inherently constrained.
While sole-sourced supply chains have inherent risks, multiple sourced supply frameworks can have drawbacks. In a multiple supplier scenario, customer service and overall responsiveness may wane over time and information sharing may not be as forthcoming as in the single supplier scenario.
Despite these known disadvantages of a multi-supplier system, the administrative cost-benefit of a sole-sourced blood supply is likely not worth the risk for most hospital transfusion services. While there may be a benefit in having a single supplier with regards to pricing, it seems that many industries prefer the flexibility multiple suppliers offer. Some organizations have put forth processes to document and justify the use of a single source. For example, the University of California, Davis supply chain management website outlines their process for obtaining approval for a single-source supplier. The necessary documentation is extensive and requires an explanation for why other products’ suppliers were rejected as ancillary providers. It is clear that UC Davis has taken considerable measures to discourage the use of a single supplier, stating that a single source is justified only when there is only one supplier that can provide the necessary product or service.
When considering single versus multiple blood providers, it is worth noting the trend of blood center consolidation. Merged blood centers will realize savings in certain cost centers, but in a truly consolidated blood center market hospitals will be faced with the difficulty maintaining multiple suppliers as there will be fewer blood centers from which to choose. The lack of choice in suppliers puts hospitals at risk of being less resilient when there are unexpected supply disruptions. This becomes even more apparent for smaller institutions. As seen in industries outside of healthcare, smaller businesses have less flexibility than their larger counterparts when it comes to choosing and negotiating with suppliers. For small hospitals to be resilient and reduce impact when shortages occur, a multi-source supplier is critical. This is further complicated with the platelet supply and eventual compliance with FDA’s Bacterial Risk Control Strategies for Blood Collection. The need for platelets at smaller institutions is just as vital. Perhaps now is a good time for these facilities to begin exploring a multi-supplier model.
The mission at Secure Transfusion Services (STS) is to improve health outcomes by increasing the quality and availability of transfusable blood products. By leveraging the success of the compensated-donor model used by the source plasma industry, STS is in the unique position to provide a predictable and steady supply of pathogen reduced platelets regardless of institution size. As transfusion services across the country begin to address how they will satisfy the aforementioned FDA guidance, it is important to consider all the potential platelet suppliers and how hospitals can attain 100% compliance with the FDA’s guidance without service interruption. STS can be part of the solution to augment platelet inventories and fundamentally de-risk hospital customer supply chains.
References
An organization’s supply chain can be defined as resilient if it is alert and can quickly adapt to changes brought about by a supply chain disruption. This can be achieved by aligning strategy and operations such that an entity can adapt to risks that affect its capacity. However, success must be defined by more than simply responding to a one-time disruption; organizational resilience results from an ability to continuously anticipate and adjust to supply disruptions that can ultimately cause service issues. From a hospital transfusion medicine perspective, service issues equate to canceling or postponing surgeries and procedures which has a direct effect on health care providers as well as patients.
For some entities, the use of multiple suppliers can assist in building that resilience. That said, there are some advantages when it comes to working with a single source. First, it is far easier to manage a single vendor relationship, which can also lead to a potential reduction in administrative costs. Other advantages include better integration so that systems are streamlined for that one supplier and better pricing, provided the organization can leverage volume. However, having all your proverbial eggs in one basket can be risky.
One of the biggest challenges with a single supplier is the fact that any significant setback could lead to disruption in services, meaning any general shortage will become a much bigger problem as organizations have to scramble to find adequate supply. Service disruptions are no surprise in the blood industry; collection facilities face an aging blood donor population while steady demand for certain blood components and unexpected external events further stress the system. Therefore, physicians who have had to sacrifice their level of care due to blood availability may have concerns with the use of only one supplier.
Another disadvantage of single sourcing is that eventually, the balance of dependence may become lopsided. The supplier may grow, taking on additional, larger clients (e.g., hospital systems), thus reducing the supplier’s need for any one customer relationship which ultimately leads to a reduction in service standards and further shortages. Smaller hospitals are more likely to feel this imbalance than their larger counterparts, given the consolidation trend in the hospital and blood collection industries. Further, markets in which only one meaningful blood supplier exists (which is often the case) have baseline quality issues due to a lack of an alternative. With no pressure due to competitive threats, an incumbent supplier has little incentive to offer anything but a baseline level of customer service. Further, there is the potential a single supplier may increase blood component prices with the hospital customer’s ability to source elsewhere at lower prices inherently constrained.
While sole-sourced supply chains have inherent risks, multiple sourced supply frameworks can have drawbacks. In a multiple supplier scenario, customer service and overall responsiveness may wane over time and information sharing may not be as forthcoming as in the single supplier scenario.
Despite these known disadvantages of a multi-supplier system, the administrative cost-benefit of a sole-sourced blood supply is likely not worth the risk for most hospital transfusion services. While there may be a benefit in having a single supplier with regards to pricing, it seems that many industries prefer the flexibility multiple suppliers offer. Some organizations have put forth processes to document and justify the use of a single source. For example, the University of California, Davis supply chain management website outlines their process for obtaining approval for a single-source supplier. The necessary documentation is extensive and requires an explanation for why other products’ suppliers were rejected as ancillary providers. It is clear that UC Davis has taken considerable measures to discourage the use of a single supplier, stating that a single source is justified only when there is only one supplier that can provide the necessary product or service.
When considering single versus multiple blood providers, it is worth noting the trend of blood center consolidation. Merged blood centers will realize savings in certain cost centers, but in a truly consolidated blood center market hospitals will be faced with the difficulty maintaining multiple suppliers as there will be fewer blood centers from which to choose. The lack of choice in suppliers puts hospitals at risk of being less resilient when there are unexpected supply disruptions. This becomes even more apparent for smaller institutions. As seen in industries outside of healthcare, smaller businesses have less flexibility than their larger counterparts when it comes to choosing and negotiating with suppliers. For small hospitals to be resilient and reduce impact when shortages occur, a multi-source supplier is critical. This is further complicated with the platelet supply and eventual compliance with FDA’s Bacterial Risk Control Strategies for Blood Collection. The need for platelets at smaller institutions is just as vital. Perhaps now is a good time for these facilities to begin exploring a multi-supplier model.
The mission at Secure Transfusion Services (STS) is to improve health outcomes by increasing the quality and availability of transfusable blood products. By leveraging the success of the compensated-donor model used by the source plasma industry, STS is in the unique position to provide a predictable and steady supply of pathogen reduced platelets regardless of institution size. As transfusion services across the country begin to address how they will satisfy the aforementioned FDA guidance, it is important to consider all the potential platelet suppliers and how hospitals can attain 100% compliance with the FDA’s guidance without service interruption. STS can be part of the solution to augment platelet inventories and fundamentally de-risk hospital customer supply chains.
References
