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Uncover Opportunities in Your Supply Chain Challenges

Uncertainty in the medical device supply chain is connected to various obstacles, such as increased regulations, product protection challenges, cost management, contingency planning and access to global markets.

This uncertainty is evidenced by results from UPS’s Seventh Annual Pain in the (Supply) Chain Survey, which asked 530 supply chain and logistics executives how they’re reacting to the rapidly-changing healthcare environment. The survey focused on the pharmaceutical, biotech and medical device industries in the U.S., Canada, Western Europe, Asia and Latin America. Just over 37 percent of respondents held positions in the medical device industry.

Survey respondents reported that the top trends impacting the supply chain are changing or increasing regulatory requirements, followed by supply chain cost management and product security.

How can you, as an orthopaedic device manufacturer, use this information to strengthen your supply chain? Here are three opportunities that can help you grow despite the aforementioned challenges.

Technology Investments

Investing in new technologies can improve efficiencies through product protection, visibility and easier patient access. IT investment was reported by 66 percent of the survey participants as a way to manage costs.

According to the survey results, the most common planned technology investments focused on front-end technology (order management and online ordering systems) and product protection. The survey gauged the respondents’ planned technology investments by type over the next three to five years. Respondents reported planned investment in:

  • 80 percent—Order management systems
  • 66 percent—Serialization and/or track-and-trace technologies
  • 62 percent—Online ordering systems
  • 53 percent—Cold chain/temperature-sensitive technologies
  • 50 percent—Security technologies for high-value and/or high-risk shipments

RobinHooker border_WEB“What will differentiate the firms in terms of technology investment around compliance will be how the data points gathered for compliance purposes can be leveraged for true business value,” says Robin Hooker, Director of Healthcare Sector Marketing at UPS. For instance, Hooker asks, “What can I gain from those data points, in terms of optimizing my inventory, or running a leaner, tighter, inventory model where I’m reducing field inventory and some of the sales person trunk stock?

“When you look at investments these firms are making, one of the considerations is capital conservation. It also goes back to IT resources and integrating systems. Firms that are leveraging this strategy have options in how they access technology. Models that involve outsourced distribution have a very efficient way of accessing some of the most recent and up-to-date technology platforms. But, they don’t require the same level of IT bandwidth if those were managed internally.”

Market Entry Strategies

A global strategy is crucial to remain competitive today. Essential to new market expansion is forming strategic partnerships that offer resources and expertise. The top markets for expansion reported from the survey are China, the U.S., Brazil and India. Respondents also indicated their most successful strategies for accessing global markets:

  • 70 percent built new infrastructure overseas
  • 65 percent used logistics and distribution partnerships
  • 60 percent built partnerships with local distributors abroad

“In the supply chain, there are nuances, subtleties and complexities that impede the ability to outsource and collaborate,” Hooker says. “Understanding the nuances that are necessary to run a successful supply chain in that environment is key. Almost every firm is going to seek more of a global strategy. We’re seeing a couple of things already in terms of M&A activity and inversion strategies, where firms acquire a company overseas and then change headquarter locations to generate tax savings.

“The other side is that international M&A activities can dry up capital for firms. They consume capital in a time when firms are also hoping to plug into new markets, and new markets require infrastructure. If you plan on going in alone and doing self-distribution, you want your own footprint, and there is inherent risk in that. Entering new markets is going to require a new partnership model, a new level of trust, and also a new level of capability with the third-party logistics (3PLs) that are willing and able to invest and understand the orthopaedic industry down to the level of a partner, or a collaborator.”

The costs of technology and implementation are factors that could drive further collaboration. Companies that embrace collaboration with strategic partners can focus more on their strengths, and spend time and resources on product development, marketing and sales. Of the survey respondents, 78 percent cited logistics and distribution partnerships as a strategy to manage supply chain costs.

“For a U.S. firm that is considering operating overseas, there’s a lot to weigh: regulatory compliance in the new marketplace, tribal knowledge and human resources,” Hooker says. “Some firms do boot strap that capability. But then you have to overlay that with the technology investment and the brick and mortar infrastructure. In a marketplace where you’re seeing this convergence of more M&A activity, in some cases there is a need to conserve dry powder for more R&D as well. The notion of utilizing a global market access strategy that is quite capital intensive may not be the best model for some firms. You build a warehouse, you have to build it to some point of arrival, and you have to have expansion plans that go on top of that.

“When you look at a firm that has to invest in its own infrastructure and human resources, versus a model that lets you go into a new market with an asset like profile, it’s more of an agile, nimble strategy. It conserves capital. It lets you use the pallet positions that are required, you plug into local compliant distribution expertise, but you don’t have those headcounts on payroll and you can enter the market with a lot less risk.”

Mr. Hooker will provide more solutions on this topic during his OMTEC 2015 presentation “Strategies to Overcome Supply Chain Pain Points.” Find the tentative OMTEC Education Schedule here.

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Preventative Actions

Risk mitigation and business continuity are critical factors for success, in addition to the common concerns of regulatory compliance, cost issues and product protection. If you prepare yourself for potentially disruptive events, you can continue operations as usual.

“There are two types of events that we’re seeing disrupt supply chain,” Hooker says. “There is what we call the LPHI and HPLI events. HPLI would be your high probability low impact event, the annoying supply chain disruptions that occur from time to time. Once in a while, there are low-probability-high-impact events like Super Storm Sandy. This caught the attention of the FDA, and they actually took a closer look into the impact on the healthcare supply chain.

“What I would recommend is tying business continuity to some form of supply chain optimization analysis and discussion with a 3PL. Leveraging 3PL, or alternate, or additional distribution infrastructure potentially optimizes your network or augments your own distribution network with 3PL capability and creates additional flexibility and resiliency. Distribution optimization and logistics optimization should go hand in hand with business continuity strategies, and I would make that recommendation for the healthcare supply chain, and particularly for the orthopaedic industry that values their client base so much.”

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   Optimize your supply chain with these other strategies:

Suppliers Speak to Economic and Regulatory Challenges in Global Expansion

FDA Expectations: Overcoming Supply Chain Weaknesses

Increase Lean Manufacturing Improvements through Business Plan Deployment