Supply chain constraints is a topic that has rarely been a point of focus for healthcare. Historically, unless a manufacturing glitch reared its ugly head, the industry seldom faced challenges of supply limitations or backorders. However, it’s now become the number one topic of conversation in today’s environment. It centers on the struggle to get raw materials, products manufactured, and freight and shipping challenges. Alexander Group research shows that backorders are as high as 30% where traditionally, that number has been in single digits. 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.
“My sales reps – what do I do about their compensation? About their quotas?” Sellers within the healthcare space are being challenged with meeting their revenue goals. How can they sell products that aren’t available? How can they sell products that can’t be delivered? To no fault of their own, sellers are unable to meet their quotas; however, research shows that the industry is not providing quota relief or guarantees. Supply chain constraints are putting pressure on traditional sales management practices. Just as we were throughout the pandemic, healthcare leaders need to be flexible and dynamic.
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. From CMS mandates to the burnout factor, the lack of employees is constraining hospital operations. This compounds the problem with sellers, leading to more and more uncertainty around how they can generate revenue.
Pre-COVID, planning could be built on an annual basis. But today’s reality gives way to shorter planning cycles and higher pricing. Average price increases are materializing to be about 4.3% as companies need to be more aggressive due to inflation. Healthcare leaders are getting more proactive around the renegotiation of contracts and starting the review process earlier. As with supply chain challenges, pricing issues will be another source of concern for sellers to meet revenue goals.
In the following video, Jeff Danes, consultant, 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.
For more information on healthcare’s commercial priorities for 2022, please contact a healthcare practice leader.