Michael Needham, principal at Efficio, a global supply chain procurement consultancy, sat down with MobiHealthNews to discuss how global disruptions due to the proposed and current tariffs are forcing procurement leaders to rethink sourcing strategies, improve supply chain visibility and boost supplier resilience.
MobiHealthNews: How have tariffs impacted healthcare technology?
Michael Needham: In the near term, it created a lot of uncertainty and indecision for business. So, when businesses are scared, it does a couple of things: initially, the approach is reactive. Essentially, it is about determining whether we can weather the storm. The next step is to implement safety measures and strategies to mitigate potential risks.
Across the healthcare and pharmaceutical sectors, we have observed a concerted effort to fortify supply chains, with companies opting for forward purchasing. For instance, trade flows out of countries like Ireland surged significantly in the first quarter as businesses looked to stockpile, only to fall sharply in the second quarter as those initial purchases were made. While this strategy can be effective in some cases, it does not always work as it assumes the supply chain has sufficient inventory available for immediate use.
In the short term, the potential and real impact of President Trump’s tariffs has contributed to this buffering effect. In the medium term, it has prompted companies to reassess their risk management strategies, particularly in sectors like medical devices, where the absence of critical products—such as heart devices—can have life-or-death consequences. As a result, businesses are now focused on developing contingency plans to mitigate such risks.
MHN: How are global disruptions forcing procurement leaders to rethink sourcing strategies, improve supply chain visibility and strengthen supplier resilience?
Needham: A sourcing strategy is how you link up with your extended network. The supply chain is not just primarily the company you buy the item from, it is what is factored into that actual buy.
For example, in the medical device sector, a client of ours specializes in diagnostic equipment for retinal scanning—high-value, high-investment products. These devices rely on components sourced from multiple countries, highlighting the complex global nature of the supply chain. You have nuts and bolts in China, high-end engineering from Switzerland and you have the final assembly in the U.S. There are lots of different elements.
The key thing, in terms of strategic procurement and risk mitigation for business, is knowing what you got and where it is coming from, and you would think that would be an easy thing, but it is not so. Supply chain visibility is a really complex thing, so think back to different countries having different customs mechanisms and ways of working.
For example, the EU has publicly available information–you can mine data for goods coming in and goods going out from the U.S. You have similar transparency getting it to the ports.
But when you go to China, it is a bit more opaque. Understanding where your supply chain starts, what comes into it and how it connects together is absolutely crucial in terms of understanding your costs and creating visibility of potential risks going forward.
That links into this idea of resiliency.
The Trump administration’s tariffs for the pharma sectors in the U.S. and Western Europe are not really a new shock. They are new in terms of tariffs, but what we had was a playbook. It was nearly five years ago now with the pandemic whereby we had a massive global shock. Unprecedented. Arguably, it was a far bigger scale than the Trump administration’s impact.
MHN: What tactics are you recommending to manage tariff volatility? For example, forward buying and fixed-volume commitments, balancing financial risk and operational agility.
Needham: What we are saying to clients is number one visibility. Know what you have and where it is coming from.
Forward buying of inventory has been a clear tactic in the near term. We have seen a lot of that across everything from consumer goods, to the nuts and bolts used in manufacturing facilities. That has happened. It is a little bit more difficult in pharma due to the complexity of producing and then approving the quality standards before distributing.
The issue there for businesses is cash flow in terms of managing it. Bulk buying in advance requires spare cash to do so. Putting a lot of money up front and it takes six to nine months to get that money back in.
The other thing businesses are doing in terms of managing risk is not to take a knee jerk reaction but take a measured reaction and work with a partner across the supply chain. Robust medical supply chains have partnerships across them. They are not commodity-based whereby oil drops to 50, we sell or we buy; oil goes up to 100 and we are selling.
Pharma companies, hospital networks, not for profits, have to think about the patient’s life cycle.
A lot of the suppliers are collaborative in this space, they do not necessarily think short-term profit but what happens next month and next year. A lot of these contracts in these relationships are multi-year.
MHN: Are rising cost pressures accelerating the need for procurement transformation through automation, strategic sourcing and supplier consolidation?
Needham: Yes. Organizations, especially healthcare systems, tend to be big complex organizations, growing organically over time and also by acquisition.
So, when you have acquisitions, you call in new suppliers with the old and there tends to be too much of the same and there is a consolidation, simplification piece.
So, we have a lot of clients across the private equity sector and they buy up medical clinics, for example, in the women’s health sector.
And what we found was there was a need to simplify the business by consolidating suppliers and using that volume to get better pricing for the overall new entity. That is where the strategic sourcing piece comes in. Once consolidated, simplify and then leverage that volume to get better pricing.
