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New Supply Chain Models Shift Resources from Device Makers to 3PLs

Ouellette: Small- to mid-sized manufacturers, instead of hiring and training new employees, can leverage staff that is already employed. Very quickly, our staff can come up to speed on the specifics of the client’s product. A lot of the time our operations staff will have up to 30 years of experience in spine or orthopaedics. They know how to chase purchase orders and follow up with sales people to get kits returned. The WebOps platform can recognize that reps will sit on a kit, meaning a kit went out for a surgery on Tuesday, it’s needed next week at another city, and come Thursday, the rep still hasn’t returned it from Tuesday’s surgery. It’s about understanding the management of all of this inventory, having complete visibility of these kits and getting them used optimally. Without the 3PL, these manufacturers will need more inventory to support the surgery that they’re covering. We can do it more effectively.

Peary: Companies utilizing 3PLs are able to tap into our proven systems and efficiencies. 3PLs like Summit that achieve ISO 13485 and 9001 Certification are committed to providing the highest levels of services, lending clients peace of mind and assurance that their products are handled with the utmost care. 3PLs are able to provide clients with highly discounted shipping rates through carriers, such as FedEx, allowing them to save as much as 60 percent on many domestic and international shipments. 3PLs are better experienced with processing the documentation required to get products cleared through customs. These requirements differ significantly among many countries and pose a challenge to companies that are not experienced with the process. Utilizing 3PLs will help ensure that products arrive on time and allow for better use of inventory dollars.

Simon and McPherson: They should look at their supply chains through a new lens. The models prevalent in the market today are decades old, and are a result of the “fear” of not having the right product at the point of care at the time of surgery. Inventory is still used as a hedge to compensate for antiquated planning, technology and sub-optimized distribution networks. This does not need to be the norm any longer. Time-sensitive demand signals coupled with effective planning tools can not only reduce inventories without compromising service levels, but can improve the overall efficiency of orthopaedic device sales professionals.

In a sense, the orthopaedic industry has always used a form of outsourced logistics to gain strategic advantages. Consigned and field inventories were early “outsource” examples that helped provide near 100 percent service levels for hospitals. This provided assurances of product availability as surgeries were scheduled. These programs are still common practice for most major orthopaedic device providers. But these programs are costly and lock up inventory without an offset to the cost to carry added inventory. Products consumed are typically replaced on a daily basis, either by delivery from a local office or direct shipment from the central warehouse. Orthopaedic and other medical device companies seek “just in time” solutions that maintain hospital client confidence and reduce field inventories without driving up supply chain costs. Device manufacturers risk increased costs of loss, damage or obsolescence for inventory outside of their direct control. 

Emerging and start-up organizations find that contracting with 3PL providers allows them to preserve precious capital and focus their limited resources on manufacturing, product development, regulatory compliance and expanding sales and marketing activities while still delivering a “world-class” distribution option. “Pay-by-the-procedure” is a very efficient model for companies with limited capital or those in a rapid growth phase.   


10 Questions to Ask a 3PL

Forming partnerships with new service providers requires an assessment of each company’s
values, needs and expectations.

When seeking to hire a 3PL, the experts who
weighed in on this topic recommend

you ask potential candidates these questions.

1. What cost savings will you provide me vs. doing
these services in-house?

2. What do you know about my company and the markets we serve?

3. Do you understand the processes that take place at the point of care and what matters most to my sales representatives and their surgeons?

4. Can you precisely follow my instructions for stock rotation and data capture?

“Most clients follow strict FIFO or FEFO, yet some shipments may require LEFO. Device companies need to determine how a potential partner is prepared to address any non-standard practices,”
says Simon and McPherson.

5. What ERP system do you use for inventory management and product traceability?

“Are they able to provide timely up-to-date data on
sales and inventory levels? Do they track products and proactively get involved with notifying recipients of possible delays and addressing issues quickly when they arise?” says Peary.

6. Who is my point of contact if I have an issue to be addressed?

7. How do you train staff on the handling of my products and addressing my needs?

8. What expedite options can you provide?

9. What presence do you have in the markets I serve?

“Unlike other industries, such as automotive,
electronic, there are some unique barriers to entry in healthcare that very few 3PLs can satisfy,” says Marlatt.

10. What quality certifications have you achieved?

“A lot of times, manufacturers have unique capabilities and requests, the instruments need to be inspected a certain way or they need to be refurbished in certain cycles. The instruments need to be washed and kept clean and sterile. All of those things are important,”
says Ouellette.