5 ways AI and automation are optimizing healthcare supply chains in 2021

March 23, 2021

2020 brought many new challenges to the healthcare supply chain – and highlighted weaknesses in the status quo of the current processes. PPE shortages and stockpiling, COVID-19 testing and vaccination supplies, a pause on surgeries and other procedures – all of these required creativity and agility from our supply chain departments. As supply chain needs became a top priority, leaders saw that the healthcare supply chain relied heavily on manual processes and individual knowledge, without the resources or technologies to find ways to streamline, cut costs or find insights.  As the pandemic starts to come under control, leaders are looking ahead to implications on the future of the healthcare supply chain. One thing that has been made clear: Supply chain AI is needed to increase supply chain automation and optimization. 

Artificial intelligence will transform the healthcare supply chain, making it more agile and efficient for the future. 


Supply chain is a prime area for artificial intelligence because of the sheer volume of products, invoices, contracts and physician preference cards that are tied to the supply chain. It’s no wonder humans have difficulty sorting through this volume to extract meaningful data and find opportunities for improvement. But AI does it seamlessly. AI can take advantage of the massive amounts of data in the supply chain to help cut costs, increase standardization, reduce complexity, improve management of supplies, react more quickly to unforeseen events, and make more informed supply chain decisions. Through a combination of automation and insight discovery, here are 5 ways that artificial intelligence will lead to a smarter healthcare supply chain: 


1. Medical supply spend analysis


Surgical, medical and drug spend add up to nearly 15% of operating expenses for a health system. Significant cost savings exist – if only health systems had the manpower to sort through the web of vendor matrices, tier-based pricing, rebates, etc. to identify those saving opportunities. Not to mention that pricing is often intentionally vague by vendors, making it nearly impossible for a human to optimize. Yet studies show that there is up to a 17% spend reduction available by streamlining procurement practices, which can be done most efficiently by artificial intelligence.  An AI solution can use purchase order history from an ERP to compare products based on cost and clinical outcomes and can then recommend optimal products based on cost and clinical quality. Plus, it can review vendor contracts for any limitations, and once product changes are approved, AI can update the ERP and any other punchout catalogs. 


2. Automated inventory management


Inventory management is a highly complicated process. Assessing stock levels, addressing backorders, managing recalls or expired products; it’s hard enough for our human employees to simply get the needed products to the patient and physicians, let alone optimize. AI algorithms can improve demand forecasts, optimize inventory levels based on purchase and usage history, and automate the management of expired and recalled products. Hospitals can reduce write-offs and save money by right-sizing their inventory and improving purchasing.


3. Preference card standardization


Health systems have thousands of physician preference cards outlining supply expectations for a specific physician and a given procedure. In these cards are hidden opportunities for standardization and scale. But it’s too time-consuming for a human to go through. AI can parse through all these cards, analyzing product mixes, to find standardization opportunities. After human review, it can even go back and update individual cards. Plus, AI can find all of the duplicate or out-of-date cards to clean up and streamline the records. 

4. Three-way matching


On the financial side of the supply chain, AI is able to automate the 3-way matching process. Currently, 3-way matching is highly manual, making it time consuming and error-prone. Artificial intelligence can automate the entire process, reconciling invoices, purchase orders and receiving reports, to ensure that payments are accurate. It helps hospitals optimize their cash management, reduce supply payment errors, and save valuable employee time. 

5. Integrated predictive analytics


Healthcare leaders need a way to harness the massive amounts of clinical and supply chain data to find insights that will improve care delivery and hospital financials. They need predictive analytics, powered by AI to combine data from all of these sources. As health systems continue to invest in AI throughout the enterprise, insights and opportunities hidden in the webs of data will start to arise, ultimately improving both patient care and purchasing decisions. For example, in addition to Olive’s other supply chain use cases, we’re working on a workflow that can assess a hospital’s current patient load to predict supply needs. 

Make your supply chain smarter with AI


The entire hospital has opportunities to optimize and automate with artificial intelligence, including the supply chain. AI can help you cut costs and meet the demands of the future with increased knowledge and agility. To learn more about our AI solutions in the supply chain and the rest of the hospital, check out our AI-Powered Hospital.