Michael Needham, principal of EFFICIO, a global supply chain procurement consultant; We sat together MobiHealthNews The proposed global disruption due to current tariffs will force procurement leaders to rethink their procurement strategies, to discuss ways to improve supply chain visibility and increase supplier resilience.
MobiHealthNews: How did tariffs affect healthcare technology?
Michael Needham: In the near future, it created a lot of uncertainty and indecisiveness in the business. So when the company is scared, it does a few things. At first, the approach is reactive. Essentially, it’s about determining whether we can survive the storm. The next step is to implement safety measures and strategies to mitigate potential risks.
Collaborative efforts have been observed across the healthcare and pharmaceutical sectors to strengthen their supply chains, with companies choosing to buy in the future. For example, as companies turned their attention to stockpiling, trade surged significantly in the first quarter from countries like Ireland, but fell sharply in the second quarter as initial purchases were made. This strategy is effective in some cases, but it does not always work as it assumes that sufficient inventory is available immediately in the supply chain.
In the short term, the potential and true impact of President Trump’s tariffs contributes to this buffering effect. In the medium term, companies have urged them to reevaluate their risk management strategies, especially in sectors like medical devices where the absence of critical products such as heart devices can result in life or death. As a result, companies are currently focusing on developing contingency plans to mitigate these risks.
MHN: Does global disruption force procurement leaders to rethink their procurement strategies, improve supply chain visibility, and enhance supplier resilience?
Needham: A procurement strategy is how you link it with an extended network. The supply chain is primarily factored into the company you purchase products, not just the company you purchase, but also the actual purchase.
For example, in the medical device sector, our clients specialize in diagnostic equipment (high value, high investment products) for retinal scans. These devices rely on components supplied from multiple countries, highlighting the complex global nature of the supply chain. China has nuts and bolts, Swiss high-end engineering, and the US has the final assembly, with a variety of elements.
The key is to know what you got and where you came from in terms of strategic sourcing and risk mitigation for your business, which you’d think is easy, but that’s not the case. Supply chain visibility is truly complicated, so remember the different countries with different customs mechanisms and ways of working.
For example, there is public information in the EU. Data on the products that appear can be mined, and products that come out of the US can reach the port.
But when you go to China, it’s a little more opaque. Understanding where the supply chain starts, what it comes in and how it leads is absolutely important in terms of understanding costs and creating visibility into potential risks going forward.
It links to this idea of ​​resilience.
The Trump administration’s tariffs on the US and Western Europe’s pharmaceutical sectors are not actually a new shock. They are new in terms of tariffs, but what we had was a playbook. Nearly five years ago, we were subjected to a massive global shock. Unprecedented. Without a doubt, it was on a much larger scale than the influence of the Trump administration.
MHN: What tactics do you recommend to manage tariff volatility? For example, it balances future purchases with fixed commitments, financial risk and operational agility.
Needham: What we are telling our clients is number one visibility. Know what you have and where it comes from.
Prospective stock purchases were a clear tactic in the short term. We’ve seen a lot across everything from consumer goods to nuts and bolts used in manufacturing facilities. It happened. At Filma, it is a little more difficult due to the complexity of approving quality standards before dispensing.
The problem with the company is cash flow in terms of managing it. To purchase in bulk in advance, you will need extra cash. It takes six to nine months to put a lot of money forward and get that money back.
What the business does elsewhere in terms of managing risk is not to take the knee jerk response, but to make a measured response and work with partners across the supply chain. A robust medical supply chain has their partnerships. They sell or buy, not a product-based product-based oil drops to 50. The oil has risen to 100 and we sell it.
Pharma Companies, Hospital Networks, must think about the patient’s lifecycle, not the profit.
Many suppliers work together in this area. They don’t necessarily think about short-term benefits, they’re thinking about what will happen next month and next year. Many of these contracts in these relationships are multi-year.
MHN: Is rising cost pressure accelerating the need for procurement conversion through automation, strategic sourcing and supplier integration?
Needham: yes. Organizations, particularly health systems, are large and complex organizations, which tend to grow organically over time and grow through acquisitions.
So, if there is an acquisition, there is a tendency to call the old ones to new suppliers, and there is too much of the same, and there is some integration, simplification.
So we have many clients throughout the private equity sector, buying clinics in, for example, the women’s health sector.
And what we found was that we needed to simplify our business by integrating our suppliers and using that volume to get better pricing for the overall new entity. That’s where strategic procurement works come into play. Once integrated, you can simplify and leverage that volume to get better pricing.
