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December 11, 2015
Three Ideas to Improve Medical Device Supply Chains
By: Ivan Xu & Jeff Keene

Medical device companies are in transition. Traditionally, this industry has not focused on supply chain management because high margins masked the need to address inefficiencies. Now, however, tighter healthcare budgets in Europe and the US require lower cost products. As global economic growth drives more complex product portfolios and expanded global networks, companies face new challenges including lower visibility to local facilities.


Today, the medical device manufacturers are on a supply chain plateau. They face a great challenge to retool and gain greater competency in their supply chain management. Under these circumstances, we recommend three ideas to improve medical device supply chain performance.

  1. Faster Data Exchange: Better Visibility at Local Sites

    It is common to find medical device companies that hold over 50% of finished goods inventories in consignment and customer locations. However, the distribution centers have very limited visibility to products once they leave their door. Even the major players only audit field inventories one to two times a year. Once the inventory reaches the field warehouses, visibility is lost until they are returned to the distribution centers as scrapped goods. The consignment sales channels create a natural barrier to reducing excess inventory while maintaining customer service levels.

    Medical devices companies should fully integrate multiple tiers of trading partners electronically, and have agreements with consignment locations to control the field inventories as needed. Improved visibility at local sites will provide the foundation to optimize and right-size safety stock buffers across the entire supply chain by taking into account the complex interdependencies between lead time, demand, and supply chain volatility.

    Modeling the end-to-end supply chain, from raw materials to components to finished goods and doing “what-if” analysis will provide opportunities to make significant changes with typical savings of 10 to 30 percent in inventory costs. These can alter key configurations of suppliers, lead times, transit links, and tests postponement strategies, SKU rationalization, and more.

  2. Segmentation: One Size Does Not Fit All

    Most medical device companies lack of segmentation in the supply chain. We normally see:

  • All products share a single mode of transportation

  • Many product categories share a blanket target fill rate

  • Same logistics for both high runners and slow movers, etc.

    First, a one-size-fits-all type of supply chain misses the value of synergies. Even worse, it costs huge amounts of company capital and human resources for no benefits. Segmentation is the process of designing multiple supply chains tailored to the unique characteristics of the products, channels and service models in order to provide the most profitable overall supply chain. We have implemented many successful cases for Online Retailers, PC Manufactures, Heavy Equipment Rentals and many other industries. The segmentations strategy provides the foundation for other advanced predictive analytics.

  1. Advanced Analytics

    According to [Name Redacted], 92 percent of supply chain executives said they expect to have implemented advanced analytics in the next two to five years, and 80 percent said the same for modeling to optimize flows. You will not be surprised to hear this when you remember how many times important strategy decisions have been washed out due to the lack of supporting data modeling evidence.

    One advanced anaytic opportunity that we have seen can make a major impact is price and assortment optimization using machine learning combined with optimization. Typical forecasting and price elasticity models do not take into account all the characteristics of the market. This is true in particular for health care where there are a few large buyers and the right pricing points are critical as noted in How [Name Redacted] Set the Cost of Its New Drug at $9,850 a Month.


The bar for the medical device industry is rising. Expanding product portfolios adds complexity and increasing demand from emerging countries further stretches out companies’ ability to control their networks. On top of this, the push for more affordable healthcare puts pressure on medical device manufacturers to reduce cost. Better supply chain performance and use of analytics will provide significant strategic benefits to tackle these issues.


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Accenture is a leading global professional services company, providing a broad range of services and solutions in strategy, consulting, digital, technology and operations. Combining unmatched experience and specialized skills across more than 40 industries and all business functions—underpinned by the world's largest delivery network—Accenture works at the intersection of business and technology to help clients improve their performance and create sustainable value for their stakeholders. With approximately 373,000 people serving clients in more than 120 countries, Accenture drives innovation to improve the way the world works and lives. Visit us at www.accenture.com.

Accenture Digital, comprised of Accenture Analytics, Accenture Interactive and Accenture Mobility, offers a comprehensive portfolio of business and technology services across digital marketing, mobility and analytics. From developing digital strategies to implementing digital technologies and running digital processes on their behalf, Accenture Digital helps clients leverage connected and mobile devices; extract insights from data using analytics; and enrich end-customer experiences and interactions, delivering tangible results from the virtual world and driving growth. Learn more about Accenture Digital at www.accenture.com/digital.

 

About Accenture Analytics

Accenture Analytics, part of Accenture Digital, delivers insight-driven outcomes at scale to help organizations improve their performance. With deep industry, functional, business process and technical experience, Accenture Analytics develops innovative consulting and outsourcing services for clients to help ensure they receive returns on their analytics investments. For more information follow us @ISpeakAnalytics and visit www.accenture.com/analytics.

This document makes descriptive reference to trademarks that may be owned by others. The use of such trademarks herein is not an assertion of ownership of such trademarks by Accenture and is not intended to represent or imply the existence of an association between Accenture and the lawful owners of such trademarks.

This blogpost is produced by consultants at Accenture as general guidance. It is not intended to provide specific advice on your circumstances. If you require advice or further details on any matters referred to, please contact your Accenture representative.


About Accenture

Accenture is a leading global professional services company, providing a broad range of services and solutions in strategy, consulting, digital, technology and operations. Combining unmatched experience and specialized skills across more than 40 industries and all business functions—underpinned by the world's largest delivery network—Accenture works at the intersection of business and technology to help clients improve their performance and create sustainable value for their stakeholders. With approximately 373,000 people serving clients in more than 120 countries, Accenture drives innovation to improve the way the world works and lives. Visit us at www.accenture.com.

Accenture Digital, comprised of Accenture Analytics, Accenture Interactive and Accenture Mobility, offers a comprehensive portfolio of business and technology services across digital marketing, mobility and analytics. From developing digital strategies to implementing digital technologies and running digital processes on their behalf, Accenture Digital helps clients leverage connected and mobile devices; extract insights from data using analytics; and enrich end-customer experiences and interactions, delivering tangible results from the virtual world and driving growth. Learn more about Accenture Digital at www.accenture.com/digital.

 

About Accenture Analytics

Accenture Analytics, part of Accenture Digital, delivers insight-driven outcomes at scale to help organizations improve their performance. With deep industry, functional, business process and technical experience, Accenture Analytics develops innovative consulting and outsourcing services for clients to help ensure they receive returns on their analytics investments. For more information follow us @ISpeakAnalytics and visit www.accenture.com/analytics.

This document makes descriptive reference to trademarks that may be owned by others. The use of such trademarks herein is not an assertion of ownership of such trademarks by Accenture and is not intended to represent or imply the existence of an association between Accenture and the lawful owners of such trademarks.

This blogpost is produced by consultants at Accenture as general guidance. It is not intended to provide specific advice on your circumstances. If you require advice or further details on any matters referred to, please contact your Accenture representative.

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