When Force Majeure Becomes the Forecast: Lessons from Costco on Managing Hospital Supply Chains

There is a phrase that appears with increasing frequency in the contracts, emails, and conversations of hospital supply chain managers. It arrives like a familiar guest who has long overstayed their welcome. Force Majeure is a French term meaning “superior force.” In contract law, it frees parties from liability when an extraordinary and unforeseeable event occurs: a war, a natural disaster, a pandemic. It was designed as a rare offramp. A safety valve for genuinely exceptional circumstances.  It allows suppliers and distributors to annoyingly say:

“We are out of stock.”

“Sorry, global supply chain problems.”

“We have to increase pricing.”

“There is a special charge for that right now.”

The pandemic. Tariffs. And now, for the past three months, the conflict in Iran. Freight corridors are strained, fuel costs have spiked, and once again the medical products that hospitals depend on every day are under pressure. For hospital administrators and supply chain managers, the pattern is becoming numbingly routine.

When the Exception Becomes the Rule

What happens when Force Majeure becomes the forecast?

Consider the timeline. In 2020, the pandemic upended global manufacturing and logistics overnight. By 2025, sweeping tariffs sent prices on some healthcare products surging by as much as 145%. Now, in early 2026, the conflict in Iran has disrupted key maritime routes. Shutdowns at the Strait of Hormuz are affecting roughly 20% of global freight. That is six consecutive years in which some form of systemic disruption has rewritten the rules of hospital procurement.

Supply chains function best as fluid, self-correcting systems. For six years, they have been unable to find their footing. In retail and consumer goods, the consequences of this instability are largely an inconvenience. In healthcare, they are measured differently. A delayed shipment of surgical probe covers or sterile kits is not a minor annoyance. It is a procedural delay, a patient risk, and sometimes worse.

When disruption is the exception, the system can absorb it. When disruption is the pattern, the system itself has to change.

 

The Problem with Convenience-First Supply Chains

For years, large healthcare manufacturers and distributors have sold hospitals on the virtue of consolidation. One relationship. One invoice. Seamless technology that fits neatly into a department’s workflow. The pitch is compelling, and in stable markets, the convenience is real.

The problem with that model is structural. It has a single point of failure that only becomes visible when you can least afford it. When a consolidated supply chain breaks down, a hospital has no leverage, no alternative, and no runway. The past six years have demonstrated this pattern repeatedly. The convenience that made the relationship attractive is the same dependency that leaves the hospital exposed when things go wrong.

There is also a less visible dynamic worth understanding. Many large manufacturers and distributors subcontract production to smaller, specialized suppliers and then place their own label on the finished product. Hospitals frequently pay a premium for a product that originated elsewhere, simply because of whose name is on the box. When those same large players claim that bundled contracts keep costs low, it is worth asking who controls the pricing lever and whether competition has been quietly removed from the equation.

More hospitals are recognizing the value of a multi-source strategy. It requires more management upfront, but it creates something that consolidated supply chains rarely offer: genuine choice. With multiple suppliers competing for a hospital’s business, pricing stays honest and quality stays accountable. When one source is disrupted, another can step in. Group Purchasing Organizations (GPOs) have been an effective vehicle for this approach, contracting with alternate suppliers who often bring greater agility and better value than their larger counterparts.

Disruption Does Not Have to Mean Higher Prices

This is the point that often gets lost in the noise of supply chain crises. Disruption and price increases are not the same thing. They travel together so frequently that hospitals have begun to accept them as inseparable. They are not.

The clearest illustration of this principle comes not from healthcare, but from retail. Costco is operating under the same inflationary and tariff pressures that are squeezing suppliers across every industry. Rather than passing those pressures to customers, the company has done the opposite. CEO Ron Vachris recently told investors: “We will never succumb to not being the best price and driving prices down for our members. That’s what Costco is known for. That will always be our leading mantra.”

Costco can make that commitment because of structural discipline, not favorable market conditions. The company caps margins on its products and builds profitability through membership fees rather than per-unit markups. That model keeps pricing honest when the temptation to raise prices is highest. The result is a company that moves toward its customers during a crisis rather than away from them.

The parallel to healthcare is direct. Suppliers who own their manufacturing, maintain diversified sourcing, and have made structural investments to absorb cost shocks do not need to pass those shocks on to hospitals. The ones who do pass them along are often reflecting the fragility of a model built for efficiency in calm conditions rather than resilience in unstable ones.

What Hospitals Should Demand Right Now

In atypical markets, typical purchasing behavior is a liability. Hospitals locked into single-source relationships with suppliers who treat Force Majeure as a routine billing mechanism need to ask a harder question – is this partner structured to protect us, or structured to protect themselves?

At Vital Care Industries, we built our business around a different answer to that question. We own our manufacturing. We manage diversified supplier networks. When the conflict in Iran disrupted freight corridors, we were not scrambling to explain a force majeure clause. We were adjusting sourcing, managing inventory, and holding our pricing commitments. That is not a reaction. It is the result of investments made years in advance, specifically because we expected the unexpected.

More than 40 years ago, VCI was founded as a family business in Chicago with a straightforward principle: give hospitals a reliable partner they can count on. That principle has not changed. What has changed is the urgency of it.

When Force Majeure is no longer the exception, accepting it as an excuse is not a strategy. The answer is to build supply chains and choose supply partners that were never dependent on everything going right in the first place.