Supply chain constraints is a topic that has rarely been a point of focus for healthcare. However, it’s now become the number one topic of conversation in today’s environment. Alexander Group research shows that backorders are as high as 30% where traditionally, that number has been in single digits. Average price increases are materializing to be about 4.3% as companies need to be more aggressive due to inflation. As with supply chain challenges, pricing issues will be another source of concern for sellers to meet revenue goals.
With today’s supply limitations, healthcare leaders are struck with how to manage the impact on one of their organization’s core assets – their sales team. While nurses have traditionally been in short supply, the impact from the pandemic has resulted in even less headcount. Omicron has slowed down elective procedures, but the lack of nursing staff has impacted the level of elective procedures that can actually be performed.
In the video, Jeff Danes, consultant at Alexander Group, and Craig Ackerman, principal and healthcare practice lead, provide insights on supply constraints, staffing shortages, pricing and inflation and how they are impacting sales productivity.
Research findings from the Alexander Group COVID impact survey, specifically looking at Omicron’s impact on business performance.
Jeff Danes: Welcome everyone. Today, we’re discussing the findings from our COVID impact survey, specifically looking at supply chain issues and staffing challenges. We have Craig Ackerman, a leader and a principal here at Alexander Group. So Craig, how concerned are health care sales leaders with supply chain issues and hospital staffing challenges?
Craig Ackerman: Yeah. So my in my years working within healthcare, my 16, 17 years of being the Alexander Group, I don’t think anyone has ever mentioned supply chain. With that said, supply chain is probably topic number one right now in conversations. And the topic is around how we’re struggling to get, in some cases, raw materials, chips can still be a challenge. Getting the product made can be a challenge. Freight and shipping can be a challenge. So all these supply chain challenges. And we’ve heard clients say their backorders are as high as 30% where historically backorders were single digits. Nothing had to worry about unless you had some type of manufacturing glitch. But generally, most in this industry didn’t have to worry about backorders really. It was almost nonexistent. So we’re getting calls now around, “My reps. What do I do about their comp? What do I do about their quotas?” So I put them on guarantees to give them quota relief because coming into the year, they have product they can’t sell. Or they sell it, but we can’t deliver it. So it’s not their fault. So these are all challenges organizations are dealing with right now. The industry is not really giving quota relief or guarantees. We’ll see how that shapes up with these supply chain challenges. It’s putting a lot of pressure on traditional we’ll call sales management practices, where supply chain is having an impact on salespeople and how we manage our salespeople. So just like throughout the pandemic, we’ve had to be flexible and dynamic. I think we’re going to have to continue to do so, continue to rethink how we manage our salespeople. And then you look at the staffing shortages on the nursing side, and that only compounds the problem with the salespeople. And a lot of people say, well, why? Well, we not only have an omicron that’s slowing down elective procedures, we actually don’t have enough staff to actually achieve the elective procedure levels we want. Nurses have always been in short supply. But because of the pandemic, nurses are even more in short supply, and also there’s a burnout factor. There’s also the CMS mandate where people are just choosing to leave. And it’s a big enough population that’s actually constraining hospital operations. There are some regional, some regionals in the country are really, really struggling more with the vaccine mandate than other regions of the country. So all these factors are leading to more and more uncertainty around how our sellers generate revenue. And so the planning cycles have to be shorter because we have all this uncertainty. It’s not like we had pre-COVID where we could pretty much build a plan for the year and be pretty certain what’s going to happen. Actually, you know, in some cases, could build multiyear plans. Supply chain challenges are probably going to be with us at least this year. Who knows, maybe into next year as well.
Jeff Danes: That’s great insight. Certainly some challenges we need to consider in the current environment. So what kind of pricing increases can we expect to see during 2022?
Craig Ackerman: So as far as pricing increases, average price increases about 4.3%, giving a more exact number. Companies are getting more aggressive. You have to. The costs are going up. I think the headline inflation numbers over the economy are the highest level they’ve been in a long, long time. Early on, the conversation was around, especially in the fall, well what do we do with a contract. Getting more proactive in the renegotiation of contracts. So basically looking at what contracts are up this year, what contracts are up next year, what contracts are up the following year. And starting to have those conversations earlier. We had actually one quote on a recent roundtable of our clients that says, “If you can the conversation now, how are you going to have the conversation in two years.” Just like supply chain challenges aren’t going away anytime soon, neither will these pricing challenges.
Jeff Danes: That’s great insight. That’s all the time we have for today. Thanks for tuning in.