Recent geopolitical shifts and changes in trade policy have triggered rising tariffs on a wide range of imported goods. While any concerns might seem reserved for large importers or global corporations, the impact is reaching much closer to home. The increased costs ripple through the supply chain, driving up prices on medical supplies, pharmaceuticals, and equipment commonly used in veterinary care, eventually landing on the shoulders of veterinary hospitals.
Cost pressures can create operational challenges for practices operating amid tight profit margins and limited administrative resources. Their budgets may tighten, cash flow can become less predictable, and the risk of stockouts rises, especially when they don’t manage their inventories closely. As the economic pressures build, it’s more important than ever for veterinary practices to take a proactive stance.
Understanding Supply Chain Risk Management
So, how can veterinary practices protect themselves from rising costs and supply disruptions? It starts with understanding supply chain risk management. This framework offers a proactive approach to identifying vulnerabilities in the supply chain and developing strategies to mitigate them before they become costly problems.
In simpler terms, supply chain risk management is about understanding where your supplies come from, what could go wrong at each step and how to respond if disruptions occur. For veterinary practices, this means being ready for backorders, shipping delays, supplier changes and price hikes to protect patient care and operations.
The Rising Concern
A significant current risk is the impact of rising tariffs on medical supplies. A recent report from the Institute of Supply Management revealed that hospital executives are most concerned about how tariffs could drive up supply costs. While many fear rising expenses, others have raised concerns about health care providers’ ability to absorb cost increases and the potential impact on supply availability.
A Black Book Market Research poll of 200 health care executives found:
- 82% expect hospital and health system costs to rise by at least 15% within six months due to increased import expenses.
- 69% predict pharmaceutical costs will rise by at least 10%.
- 80% to 90% of surveyed supply chain professionals and medical equipment manufacturers anticipated long lead times on medical equipment, equipment supplies and other procurement disruptions.
While some categories of medical goods have been free of tariff increases, many everyday items, like masks, gloves and syringes, are not. Even products assembled in the United States aren’t immune to rising costs, as they are often composed of components such as active pharmaceutical ingredients, excipients, glass vials or device parts sourced from suppliers in China, India, the European Union, Mexico and Canada. As tariffs impact these upstream materials, the ripple effect drives up costs across the board.
How Can Veterinary Practices Prepare?
Since the full impact of these tariffs is unfolding, preparation is key. Much like managing a complex medical case, managing supply chain uncertainty takes strategy and flexibility. When faced with long-term unpredictability, clinics must stay adaptable and vigilant by detecting early warning signs and responding quickly.
Key categories where significant cost increases and potential shortages are likely include:
- Plastics: Expect notable price hikes on plastic-based items, especially syringes and needles. Routinely review your injection fees to ensure they align with rising supply costs.
- White goods and personal protective equipment: Monitor the usage of gowns, gloves, masks and other essential consumables and avoid overstocking.
- Surgical instruments: Costs and availability can fluctuate, so plan for routine replacements or additions.
- Medical equipment and accessories: Lead times and prices are expected to rise. Anticipate future needs early and take advantage of vendor programs, promotional financing and preferred pricing. Flexibility in timing can strengthen your negotiation power.
- Disposables: Keep a close eye on items like lead cables, water traps and filters. Work with supplier partners to secure manufacturer allocations based on accurate usage data, ensuring consistency of supply.
How to Respond to Symptoms
During a recent news conference, Cardinal Health CEO Jason Hollar noted: “Make no mistake, if there are widespread tariffs anywhere from 10% to 25%, I anticipate there will be corresponding price increases.” Other executives echoed concerns that providers may struggle to keep up with rising costs.
Your treatment plan consists of:
- Diagnose: Monitor your inventory costs regularly. Set up alerts or use reporting tools to flag significant changes in pricing so you can act before the impact snowballs.
- Treat: Respond to cost increases with targeted action. For example, swap brands when medically appropriate to maintain value without sacrificing care. Also, leverage supplier programs, discounts and loyalty incentives. Finally, adjust client pricing transparently and fairly when needed.
- Monitor: Avoid the temptation to panic-buy or overstock. Hoarding leads to higher inventory carrying costs, increased waste and limited cash flow. It can cause more harm to your practice than the initial price increase. Therefore, build resilience into your inventory system by identifying and reducing waste, shrinkage and redundancy, consolidating your stock, and streamlining your formulary. In addition, use tools that help automate reordering and provide insight into consumption patterns so that you stay in control even when the market isn’t.
Future Outlook
As manufacturers and suppliers pivot to lower-cost materials, the potential for continued supply chain disruptions remains high. Here’s how to stay ready:
- Maintain accurate minimum and maximum levels.
- Track inventory and usage patterns so you can act quickly when product allocations become available.
- Identify medically appropriate substitute products for critical items.
- Flag nonsubstitutable items in your inventory and adjust safety stock levels accordingly.
LEARN MORE
- Veterinary Inventory Management Group: bit.ly/3XBuxba
- Institute for Supply Management’s Report on Business: bit.ly/4l7y1fr
- American Hospital Association supply chain management resources: bit.ly/3ReIHLT
- S. Food and Drug Administration drug-shortage updates and extended-use guidance: bit.ly/41TKwE8