Medical Distribution Company Logistic Cost Control

Abstract

The Chinese healthcare sector strives to achieve quality healthcare at a minimal and cost-effective manner. The paper highlights the challenges that have impaired such move in the past. Supply chain system is a contributing factor towards the final cost of drugs and other medical devices. Therefore, it is imperative for the stakeholders in the industry to identify the existing gaps and offer substantial solutions towards achieving a cost-effective operational framework. The paper will delve into the analysis of some of the efforts the government and other stakeholders are putting forth to achieve a lean and effective supply chain system.  The paper also offers recommendations towards achieving an agile supply chain in the healthcare sector. It is worth noting how cost management in the supply chain has shifted from managing procurement to managing collaborations and partnerships that go a long way on cutting cost. The analysis of health care system supply chain acknowledges the changes that have taken place in the past few years. However, the healthcare distribution network is not yet there and as such, more need to be done to achieve the desired end, that is, reduced cost. In any case, the paper points out that the sector needs to advance its supply chain relationships through modern management systems achieve results.

Introduction

Logistic activities in any business affect bottom line and medical distribution are no exception. Medical costs are on increase year in year out and as such it remains imperative for players in healthcare to come up with initiatives that reduce such costs while at the same time increasing efficiency. Controlling supply chain costs will come in handy to help reduce healthcare costs. Therefore, the aspect of reducing supply chain costs will facilitate affordable healthcare to consumers while at the same time improving on revenue returns in the medical sector. The efficiency of medical distribution in China is marred by factors such as multi-channel in the supply sector, the existence of different players who are involved in decision making, and multi-agency regulations. There is need to address these issues among others towards achieving increased efficiency. The Chinese medical distribution cannot afford to apply meager methodologies in the market if at it will have to meet the needs and expectation of over 1.3 people majority of whom live in rural areas. Identifying the challenges that increase the cost of distribution and necessary solutions will go a long way in facilitating secure, efficient and affordable medical care services.  The medical distribution networks should take shape through patient-centered supply chain which works to ensure patients get their suppliers real-time. The supply chain is a cost for any hospital and other healthcare players. The aspect of medical supply chain involves transport of drugs, medical devices, food, blood products and medical wastes just to name but a few.

Background

The Chinese medical supply chain is highly fragmented with over 13000 distributors. The three main distributors are Shanghai Pharmaceuticals, Sinopharm and China resources who account for 20 percent of the market share. The aspect of distribution fragmentation has seen different distributors handle the drug flow process before they get to the final destination. For instance, the national distributor in collaboration with other local distributors facilitate the flow of prescription and over the counter drugs through every province, city, and town. Also, vaccines distribution to public hospitals takes shape through the initial delivery to provincial hospitals and then later to municipal and county level healthcare facilities. The approach applies to type I vaccines. On the other hand, Type II vaccines which are accessible to consumers through market prices follow the same channel of distribution as prescription and over the counter drugs. It is worth noting that this kind of arrangement leads to increased distribution costs in the Chinese medical sector. Therefore, it remains imperative to acknowledge the gaps that exist in the medical supply chain and come up with better ways that take charge of the increasing costs. It is instructing to note that lack of well- coordinated and flexible supply chain channels leads to increased costs of medical care. This gap will offer an opportunity to manufactures of counterfeit drugs flood the market. If the supply chain system is not up to date in terms of efficiency the cost of drugs will keep on rising and the Chinese population may result in purchasing cheaper counterfeit goods.

Research statement

China is a country facing a myriad of challenges in the medical distribution network. Secondary research material cite the issue of fragmentation as the main reason behind increasing cost of medical supply chain. The existing literature puts in context how variables such as poor policies, lack of data integration and lack of a centralised warehousing as the main cost of the increasing cost. However, no research has captured how lack of sound technology has impacted on raising costs in healthcare supply chain.

Significance of the study

The research results will go a long way in helping the government and other stakeholders identify the gaps that exist in the medical supply chain and in the event take the necessary action. If the research finds a significant statistical correlation between technology and the cost of healthcare supply chain the government and other players in the industry can use such results to manage cost efficacy.

Research question

The study aims to establish the correlations between technology and the final cost of goods as impacted by the cost of medical supply chain and as such the following research question comes to play:

• Does technological advancement increase cost efficacy in medical distribution network?
• How can integration of supply chain data and that of medical system help reduce increasing healthcare costs?

Research question 1

• Does technological advancement increase cost efficacy in medical distribution network? The study will engage regression model to establish whether technology as a variable has any statistical significance on the costs of medical supply chain

Research Question 2

• How can integration of supply chain data and that of medical system help reduce increasing healthcare costs? If the test results indicate a positive correlation between the integration of data between the two variables, that is, the medical supply chain and the health care sector, then the government and other stakeholders should use the model to offer integration platform.

Hypothesis

Technology plays a critical role in enhancing integration and in the event reducing cost of healthcare supply chain.

Literature review

Reasons for high supply chain costs

Pharmaceutical companies face challenges in their effort to create supply chain visibility. As much as these firms create end-to-end inventory visibility, missing track of the same once the hand over the mandate of supply to distributors. It is instructing to understand that since there are different layers of distribution, this causes fragmentation, and in the event, make it difficult to build on the required visibility. Further, most of the distributors do not have an integrated technological framework that can seamlessly coordinate all the activities revolving around procurement, sales, and logistics. Also, their level of collaboration between hospitals and the distributors is lacking in the sense that there is no open sharing of data that can facilitate information integration (Goh & Gan, 2012).  Lack of such integration makes it difficult to get information pertaining the quantities of supply and to which destination at any one point. The kind of arrangement is cited to cause gaps in the aspect of monitoring flow from the factory to distributors and to the market. The poor coordination is a hurdle to the adequate management of sales, planning, and control of inventory. In an effort to overcome this challenges Pharmaceuticals have resulted in the acquisition of third-party data services agencies to collect such data on their behalf. The approach increases the cost of the drugs further since such firms charge 1 percent of the drug cost.

The Chinese healthcare supply chain has not been tied to outcomes. Most of the healthcare facilities lack efficient and adequate tools to link their operations to the supply chain to tailor raising costs. A patient-centered supply chain goes a long way in cultivating a framework that allows service delivery around quality, safety and cost dimensions. If health care systems in China devised mechanisms that take shape through the patient centered supply chain, then the move will facilitate selection, transportation, and delivery of medical care products in a cost-effective way. Patient-centered supply chain comes to play through automated orders that ensure no waste or overstocking. Further, the healthcare sector gains greater visibility in the entire chain and in the event, take charge of management and distribution of inventory since they use automated platforms to order and track inventory real time.

The healthcare supply chain has been cited to face complexities owing to the rising urban population that comes with new set of demands and expectations. Further, the increasing demand of medical care in rural areas located in remote locations and in the need of diverse and customized medical products cannot be ignored (Eloot, Huang, & Lehnich, 2013). The introduction of e-commerce increases supply complexity as the customers who use such serviced often order same product from different suppliers only to refuse the orders but to go with the first firm to deliver the order

The percentage per drug cost is an expensive approach and as such the Chinese firms should use new and emerging trends which are cost effective. For example, the fee-for-service will come in handy to reduce such costs. Further, pharmaceutical firms should make use of direct-to- hospital or direct-to pharmaceutical frameworks which facilitates a direct sale to the hospitals and pharmacies (Chakraborty, Bhattacharya, & DobrzyKowski, 2014). The approach will significantly reduce the many in-between distributors and in the event, achieve visibility at the point of sale.    The multilayered distribution network in healthcare has been cited to harbor effective distribution of over counter drugs, prescription drugs along with other medical suppliers from manufacturers to suppliers, public and private hospitals, wholesalers and other drug outlets (Roberson, 2017). The need to strip these layers goes unsaid and the government seems to have taken the bull by its horns and in the event, introduced new measures towards achieving an efficient supply chain. The approach will go a long way in offering the necessary platform towards achieving both domestic and international needs. China stands out as the second largest supplier of pharmaceutical supplies and as such the government moves to streamline supply chain in healthcare is a move in the right direction.

The Chinese healthcare is growing at an unprecedented rate and this has brought challenges due to the increased demand of the same amidst the backdrop of limited distribution channels. The Chinese government has come up with new intervention measures that aim at achieving supply chain technologies coupled with “intelligent” distribution networks (China Briefing, 2017). The guideline has gone a long way in integrating global methodologies within the Chinese model.

In any case, the players seem to have identified this gap, and in the event, has introduced the “two invoice systems” in some provinces where hospitals are required to source and pay drugs directly from manufacturers while the manufactures make direct payments to logistics firms. The approach will be instrumental in facilitating cost saving in hospitals through avoiding the extra cost that comes with fragmented distribution networks. The two-invoice system will eliminate small players in the market as the large logistic companies will acquire them and help streamline the supply chain. The system will allow hospitals to use the invoice supplied by the manufacturer and verify whether the medical products received are the same to those issued at the point of departure.

The largest players in the market are coming up with interventions that aim at enhancing supply chain capabilities. For instance, Sinopharm has undertaken a state-of-the -art facility that will offer to warehouse along the distribution channel. The warehouse is fitted with the most current state of the art technology to facilitate storage and retrieval automated operations. Further, it has put in place information management system towards optimizing processes such as order picking, identification of system flows and performance measurements. The approach is key in ensuring all operation in the warehouse flow seamlessly.

Another case in point where interventions have come to play to enhance supply chain capabilities is the China Resource which has come up with the warehouse to the hospital- pharmacy. The move has seen Beijing hospital embrace new working methodologies that have seen improvement in cost savings.

The healthcare companies can take advantage of Blockchain technologies to advance supply chain transactions. The Blockchain digital model goes a long way to secure transparency, security, and reliability in the healthcare sector. Often, lack of the above three cited elements has been seen as the biggest impairment to achieving cost reduction. Logistic firm took advantage of such loopholes to hike the cost of their services. The use of this platform will be instrumental in eliminating chances of counterfeit drugs and facilitating drug supply chain cost-cutting measures. This technology will allow for improving supply chain in healthcare by enhancing security through sensor traceability. The Chinese market is experiencing rapid growth that is coupled with complexities in the supply chain. However, the sector has been lagging behind in utilization of most current technologies. The lack of efficient technologies has led to limited visibility in the process of healthcare devices and products changing ownership. The healthcare players can trace the location of their products real-time and even confirm the authenticity of the drugs every time they change hands through use scanning of bar codes which validate the authenticity of the drugs from origin to the final destination.

China can use this platform to overcome the fragmented supply chain system. For instance, small operators can use the technology to prove their ability to manage the much-required visibility in supply chain. The approach has is working for some companies such as Easy sight supply chain company which has joined hands with IBM to put forth Yijian Blockchain Technology platform (Lo, 2017).  The framework will afford a system through which medical suppliers and hospitals can utilize to track supply chain operations through the concept of encryption.

The concept of mergers and acquisitions has seen China overcome the fragmentation challenge. The move was necessary as a response to the needs of the healthcare sector, that is, cost reductions in the supply chain. This is crucial since it affects the healthcare bottom line. Reducing cost of medical wastage is an important aspect of the healthcare supply chain operations. Therefore, moving away from small and fragmented supply chain has seen large firms offer services such as temperature-sensitive logistics during transportation and storage. The approach ensures medical devices and pharmaceuticals which require unique transport and storage conditions do not get spoiled along the way. The logistics companies fit their tracks with a sensor to monitor movement and in the event, ensure such products are delivered fast and in a cost-efficient way.

The use of technology works towards offering a platform from which the healthcare facility can collaborate with supply chain firms in the process of transportation and inventory management. The approach will ensure real-time delivery and avoid unnecessary delays which may result in increased costs on drugs and other medical devices. The use of Internet of Things has given the healthcare and logistics firms an opportunity to monitor several medical activities (Brown, 2014). For instance, a logistics company that has been outsourced to offer patient logistic services will collaborate with a physician through sensors and smartphone to monitor cholesterol, blood sugar and heart rate just to name but a few.

The aspect of digitization of supply chain in the health sector is crucial for it offers hospitals an opportunity to offer affordable and safer medical care. The platforms offer systems through which player can apply cost-cutting measures. It is worth noting how the cost of supply chain services in the Chinese medical sector skyrockets due to inefficiencies due to lack of interoperability and corrupt reimbursement systems. In any case, hospitals are turning to distributors to identify avenues that can come to play to reduce cost from their end. There are third-party logistics companies that are specialized in offering tailor made logistic solutions to hospitals such as ambulatory care, surgery centers, and home-based patient services just to name but a few. Giving such supply chain companies an opportunity to manage healthcare facility operations delineates them from any inconveniences on the way that may increase the cost of drugs in transit. For instance, theft of drugs in transit is a common phenomenon that may lead to enormous losses (Wu & Mao, 2017).   Accidents on the way may result in delayed delivery. The health care avoids such scenarios through subcontracting with third-party logistics companies. The third-party players have digitalized operations which ensures just-in-time deliveries. The approach ensures suppliers are never late and help the hospital staff to meet the needs of patients. The system offers hospital management with a platform that avails real-time data, allowing managers to make decisions pertaining supply chain on time. Further, such technologies facilitate transparency as the third-party players provide a framework from which the two parties can engage at any time. The hospitals can afford efficient ordering systems. Further, the hospital management or other players in the medical sector using such platforms can evaluate the supply chain they have been using and compare with market rates and in the event, decide on whether to renew their contract or not (Tom, 2017). The approach serves the healthcare sector well in the long run since the system sets the bar high going forward.

Research methodology

The research will make use of quantitative methodology to establish the relationship between technology in the medical supply chain and data integration with suppliers, integration with retail outlets, integration with patients and internal environment integration. The research will engage exiting literature to determine the current trends in medical supply chain and the existing gaps that has led to cost increases. Previous research as captured in the literature review indicate Chinese healthcare supply chain has yet to integrate technology in its operations with the entire medical systems. Therefore, they have not been taking advantage of technology to increase efficiency. Such studies have made use of statistical methods to determine the correlation between lack of technology and high cost of operations in medical supply chain. The study will employ mean, standard deviation and correlation to establish the relationship between dependent and independent variables. Further, multiple regression came to play to test the reliability and validity aspects.

Method selection and Justification

The research as indicated earlier will engage quantitative approach and use statistical data analysis to establish the effect of technology on data integration with suppliers, integration with retail outlets, integration with patients and internal environment integration.  The current research will leverage on secondary data sources for quantitative data. Further, the analysis of data will come to play through quantitative approach. Statistics Netherlands cites that the data provided in secondary sources is critical and is utilized as input for statistical purposes (Daa & Toth, 2012). Netherlands has made use of secondary data in its historical review duped “A Century of statistics”.

It is evident from the literature review that, firms that have embraced technology in the healthcare supply chain whether domestically or globally, have achieved substantive success in reducing cost of operations. For instance, one of the literature review source establishes the positive correlation between Internet of things and success of coordination of different medical activities associated with supply chain (Brown, 2014). Therefore, technology is vital for cost cutting measure in medical supply chain.

Data source

The study will engage data from two main sources, namely, (i) data from private and public hospitals, pharmacies and (ii) data from all medical supply chain, both large and small. All the data in this research has been sourced authentically from officials of the concerned institutions and in any case where such information is sourced from either of the company’s website, a follow up call to verify the authenticity of such data. The approach is crucial to ensure the accuracy of all information and avoid assumptions that may lead to wrong conclusion (Daa & Toth, 2012). Statistic Netherlands alludes to it that systematic review which is also referred to as meta-analysis captures the output of other studies to investigate and establish cause-effect of similar research issues.

Data collection

The research will make use of the operational data base for hospitals using technology to integrate its operations and the effect of such a move to the medical supply chain companies. The research will delve into analysis of secondary research to gain knowledge of how technology has influenced the aspect of cost reduction in the healthcare supply chain.   The research will locate articles with the relevant information and get all the data touching on the cited variables and strive to trace how they work hand on hand to bring cost reduction in the supply chain. The reliability of such data will be facilitated through a follow up call with the administration of the companies whose data has been traced for research purposes. The secondary data used in the research would involve materials that offer extensive coverage of the parties under investigation towards boosting the reliability of such data.

Data Analysis

The research made use of regression analysis to establish the correlation co-efficient between both the dependent and independent variables. The variables needed to come up with a working regression model are:

• Technological use in medical distribution firms
• The use of technology in healthcare to facilitate data integration with suppliers, integration with retail outlets, integration with patients and internal environment integration

The analysis will consider all hospitals belonging to 1^st,2^nd and 3^rd tiers that have employed technology in their operations and also the medical care supply chain firms operating as partners to the hospital and with technology systems.

SOFA software will be used in the analysis all statistical elements of the data.

Correlation analysis

There was a positive correlation between the independent and dependent variables. The integration with medical suppliers, integration with retail outlets, integration with patients and internal environment integration as independent variables was positive. The aspect of dependent variables on the other hand was also on the positive.

Regression analysis

The research used multivariate regression to conduct the analysis of all the parameters in the model. The reliability (P-value stood at F<0.01) where the R-square was recorded at 0.32. The above results were for model 1 which was testing the agility of the supply chain. The reliability of model 2 was over board since P-value for F<0.01 and the aspect of R-square was at 0.25. The model 2 and 3 were meant to test the dependent variable. Model 3 was also reliable.

Multiple regression analysis

The MMR came in handy to test all integrated variables and this was meant to establish the relationship between health care practices and supply chain. The analysis indicates that R2 0.42 and P-value<0,01 after moderating the relationship between the integrated variables. The result was a confirmation of the hypothesis

Results

The research through correlation analysis has revealed that healthcare practices that revolve around integration with retail outlets, integration with patients and internal environment integration are related to cost of medical distribution networks. If anything, the use of technology will accelerate efficiency in integration aspects. The research results confirmed the hypotheses that technology plays a critical role in enhancing integration and in the event reducing cost of healthcare supply chain.

Discussion

The research was inclined into understanding the relationship between technology and the cost of supply chain. The study offers a platform through which the correlations between technologies in integrated medical practices would culminate to reduce cost of healthcare supply chain. This support the fact that, without proper integration and use of technology to support medical supply chain would lead to a reduced cost in medical supply chain.

Limitation of the study

It should be noted that the sample size used in the study was only limited to the medical fraternity and medical supply chain and still it was small. This would affect the generalization of the results to other sectors.

Conclusion of methodology

The research came to play establish how the technological aspect of healthcare is linked to the cost reduction in medical care distribution. The study has identified that, hospitals and other medical firms using technology to collaborate with healthcare supply chain have achieved a substantial reduction of cost in its operations. The move has seen the medical facilities offer quality and affordable care to patients. It is imperative to acknowledge the fact that the firms on either side of the divide using the most advanced technology made the most cost savings and as such, technology would not just come to play for the sake, but rather should accommodate efficiency and efficacy

Recommendations to reduce the cost of the supply chain in medical care

The Chinese medical care sector understands very well that, they are serving markets far beyond their borders and a such the efficiency of their distribution network will go a long in achieving set targets. The move will not only help to enhance the effectiveness of the elimination of multilayered distributors but also facilitate the growth of Chinese Pharmaceutical products and medical tools in international markets. The approach has been advanced by a joint venture between DHL and Shanghai Pharma. DHL is a global logistics company and as such it will help the Chinese company to get a global backing. The Shanghai Pharma will overcome the internal challenges in the Chinese distribution network that is highly fragmented and take advantage of the DHLs distribution network (Hartmann, 2017). The partnership is critical in giving Shanghai Pharma an opportunity to make use of an agile and efficient supply chain across the domestic market and beyond.

The centralized warehousing facilities allow healthcare facilities to house pharmacy products and ensure suppliers are continuous. A single stocking location is cost saving since it eliminates the need for hold inventory which is costly.

Segmentation

It is imperative to acknowledge the increasing demand for medical suppliers and as such, come up with methodologies to serve different market segments efficiently. The medical device and pharmaceutical companies cannot afford to rely on a single supply chain to carry out all its distribution needs. Use of a single supply chain would lead to inefficiencies in the sense that it would lead to accumulation of inventories of some products while creating shortages in others. This calls for the need of the medical players to segment the market they serve and align each market to a particular supply chain for effective and cost-efficient services. Segmentation of the market is a key approach towards ensuring the supply chain systems do not miss the priorities of their target market. Every segment has its own standards and such proper alignment would go a long way to avoid a mismatch (Welssman, 2017). The Chinese medical distribution network should borrow a leaf from other companies in other countries that have managed to segment their markets effectively.

Agility

The concept of agility should also come to play by not only facilitating fast delivery of medical care products but also building an operational framework that is responsive to ever-changing customer demands and expectations. The approach should aim at reducing cost. Therefore, medical companies should align production cycles with the market demand towards ensuring they do not have to incur storage costs in the warehouses

An agile supply chain frame should take shape through stable production, replenishment, and visibility. The Chinese healthcare companies should use competent third part supply chain companies on a contractual basis. The approach would allow the medical care firms to deal with distributors who have the best prices in the market and are efficient in-service delivery. This can only be achieved if the companies collaborate with the supply chain third parties in an effort to forecast demand and supply in the market, come up with effective communication between the two parties and ensure transparency.

Chinese healthcare companies should increase data integration and share in all operations revolving around inventory, warehousing, logistics and manufacturing among others. The approach will offer stakeholders with a platform to devise means and operational frameworks towards cutting cost and optimizing route to market approaches (Fenske, 2015). The move will also allow the sector to come up with a more responsive and stable supply chain system through benchmarking processes where firms can compare data among different players in the sector and identify opportunities that would help in cost-cutting measures.

Alignment

The healthcare sector in China can benefit a great deal through process alignment where they would use point of sale information towards build-up to production plans. The country should align supply chain framework through the establishment of a data interchange platform that will cultivate cost-effective processes and capabilities. The approach would reduce instances of counterfeits, medication errors and improve on the aspect of the recall process. An efficient supply chain is in such a way that every single activity falls into place without mishaps. A well-streamlined process will reduce cost since there will be no repeat activities that would warrant double financing. Tracing the movement of medical supplies through the entire movement route by use of sensors is the most current technology logistic firms cannot operate without and as such it should a minimum requirement for all medical logistics firms towards eliminating losses of medical supplies to crafty means such as theft and route diversion.

Outsourcing

Allowing participation of foreign supply chain firms would introduce new ways of doing business. The Chinese firms will benefit a lot since they will borrow a leaf from the new way of doing things. In any event, such firms can collaborate with local firms towards achieving cost-efficient methodologies. The partnership between Alliance Boots of UK and a Chinese state-owned Guangzhou Pharmaceutical is a case in point. The Chinese government through the Ministry of Commerce is cited to welcome foreign investors in the countries Pharmaceutical distribution network. The move will shape distribution industry in Chinese health care sector and in the event, facilitate cost efficiency. There are many international logistics companies who carry out efficient transport networks in a cost-effective manner. It is the role of the government to protect local firms from foreign competition. However, if the local firms do not have the muscles to offer international standards in meeting the medical supply chain demands then it is imperative for them to partner with international firms and utilizes their platforms to grow. The move will allow the local firms to learn along the way and incorporate new methodologies before becoming fully independent.

Use of strong analytics

The Chinese healthcare sector should use a framework that brings together financial and supplies chain functions. The aspect of strong analytics will help healthcare suppliers to identify the most competent supply chain firms with the best prices in the market. String analytics allows for a better system to capture changes in costs, it will enable the firm to predict expenditure in an efficient way and gives a platform from where the healthcare firms can negotiate contracts towards securing the best prices possible. Further, it allows the firm to avoid unnecessary cost variations while at the same time improving quality of care (Weber, 2014).    If hospitals use patient-centered supply chain the healthcare personnel can quote the items they need in advance and avoid calling for emergency deliveries which increase costs in the supply chain.

The Chinese healthcare sector should stay in touch with the current market trends. For instance, most patients who do not need hospital bed admission but have ailments which need constant medical attention, are offered telehealthcare services. The approach has a rise in white-glove last-mile delivery services. The healthcare should collaborate with supply chain firms to offer cost-effective delivery services (Yanjie, 2016). For instance, if a patient is in need of medical devices such as oxygen supplier machine, it will only make sense if the hospital giving such services collaborates with logistic companies that offer competitive prices.

The players in the medical sector should come out of the comfort zone and invest in R &D and identify all the gaps that exist in the supply chain system. The results of the research should gain impetus through the need to find the most cost-effective ways of managing the entire system. Further, a benchmarking process should come to play to identify what other nations are doing to afford a cost-effective system. The government as the largest stakeholder in the health of the masses should take the lead role and make the process work. It should provide the resources required in the benchmarking process in terms of finances and personnel if at this move is be successful. Working with other global players should not be an option but rather a priority. The Chinese Ministry of Health should be keen to identify like-minded players in the global spheres to build and develop a platform that incorporates global supply chain standards.

The Chinese government is keen to revolutionize health care in the country through an ambitious plan to increase access and affordability of healthcare. The move cannot come to fruition without putting efficient measures in place to reduce the cost of healthcare supply chain. The approach should be incorporated into the “big health” plan that aims to offer a full suite of medical services. The government should ensure that segmentation of supply chain takes shape through all the multi-tiered medical system. The use of big data will be helpful in affording system overhaul in the medical supply chain. The shift should be geared towards enhancing integration of the public healthcare sector and a robust network of the medical supply chain. A shared platform between the two players will allow the government to save on the public funds and offer even better services to the population (Ho, 2017). The many obstacles brought about by reimbursement model, financial incentives and regulatory framework notwithstanding, the Chinese government has shown commitment to facilitate this shift.

Conclusion

The Chinese medical supply chain cost control is a must if at all the industry is to realize healthcare objectives. Therefore, the healthcare sector and the distribution network cannot exist in isolation and as such, there is a need for collaboration between the two players. The approach will ensure cost is kept to a minimum while at the same time affording quality care for all patients. The move will not come to play automatically but it needs consistent interrogation by all stakeholder both in government and the private sector. The use of technology to facilitate cost reduction and improvement of efficiency cannot be wished away and as such, the all players should make use of this platform to enhance operations. The management of transport from point of departure to final destination through technology works to eliminate chances of unnecessary delays and cases of counterfeiting which increases the cost of drugs and other medical devices. The overreliance on the traditional logistics channels has left China with an ineffective healthcare supply chain.   The Chinese government is doing a lot to afford a platform that facilitates the movement of medical inventory through streamlining the operations of logistics companies. The approach should keep on changing as the medical industry evolves to accommodate any new developments.   The government should identify the critical role technology plays in enhancing seamless medical supply chain platforms. The two-invoice system is an improvement in the right direction however, there is much that needs to be done to take advantage of the opportunities that other players across the globe have been able to identify.  Success is not a one-day affair but with the right focus and resources, sooner or later Chinese medical care supply chain would position itself in such a way that cost efficacy in the system is overboard.

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