Future-ready supply chains in MedTech: Is tomorrow too late?
April 4, 2022
April 4, 2022
One of the things the COVID-19 pandemic made clear to all industries and sectors, including MedTech, is the importance of an agile and resilient supply chain. We learned just how dependent we are on medical devices and all the parts that keep them in good working order.
This personally hit home for me when a family member with the virus had to go on a respirator. He was one of the lucky ones—there was a machine available—and he survived the experience. But one additional day of waiting may have been too much for him. It really made me think about how many lives are affected daily by MedTech supply chain issues and the availability of the right equipment in healthcare centers.
Of course, respirators are just one of numerous medical devices that we rely on in a hospital, clinic setting or increasingly at home as care moves closer to the patient. From imaging equipment and electrocardiogram monitors to blood glucose meters and pulse oximeters, these machines are a critical part of our medical infrastructure. Disruption to their delivery or maintenance can mean loss of life.
MedTech supply chains are incredibly complex
Let’s think about the supply chain required for a dialysis machine as an example. The manufacturer must source hardware, electrical and firmware components. Each machine is made up of thousands of parts coming via different supply chains. Plus, there are disposables like dialyzers, concentrates and bloodlines. Inventory of these machines must also be managed. And the machines must be delivered and maintained—whether through scheduled maintenance or when they break down.
All these things require demand planning and forecasting, visibility, traceability, in some cases temperature control, time-certain delivery and documentation to ensure regulatory compliance. Plus, companies need to work with suppliers, their internal or external manufacturing network, and logistics.
MedTech companies also face other challenges. More volatile demand, a move to connected and personalized solutions in place of traditional products, and continuous pressure to reduce costs and asset intensity. They must also meet evolving security and regulatory requirements and provide visibility and transparency for healthcare stakeholders and patients. That’s a lot of moving parts to manage.
At the same time MedTech companies are expecting the supply chain to become a growth engine. This is over and above its traditional role of ensuring efficiency—which is now simply table stakes. Chief Supply Chain officers and their teams are expected to:
A future ready supply chain can help address these challenges
To rise to the occasion, leading companies are leveraging technology-driven supply chain models (AI, cloud and IoT enabled) with end-to-end digitized and transformed processes that leverage data and analytics at scale. They also optimize talent in their supply chains leveraging human+machine collaboration and with knowledge workers performing judgment-based work (rather than manual and repetitive processing) to enable an agile workforce at scale. They leverage asset-light models and an ecosystem of partners to focus on core capabilities and drive value in their supply chains.
A clear example of the opportunity at hand is the management of last mile delivery and after-sales supply chains to service medical equipment like dialysis machines, CT scanners and MRI machines. For instance, keeping equipment up and running at hospitals and other care centers requires a complex orchestration of logistics for service parts and consumables that need to arrive on time at the hospital for the technician to repair a particular machine. Too frequently, the technician cannot fix the equipment the first time. This downtime reduces critical capacity in hospitals and care centers, the cost-to-serve is very high and there is limited visibility and control over the inventory of required service parts.
In a future-ready after-sales supply chain model, the service engineer, technician and patient experience is transformed and service times dramatically improved. A dialysis machine repair technician can restock service parts using natural language processing via a voice assistant and access a personalized Amazon-like portal to order service parts, consumables or PPE that will be billed automatically without any paperwork. In addition, it is possible to specify the timing of delivery with the flexibility of receiving shipments at the technician’s home, the hospital or a convenient storage lock. The system forecasts service parts requirements based on real-time service orders and advanced AI-based models, automatically sets inventory levels and adjusts deliveries as new maintenance orders arrive. So, when a dialysis machine needs to be repaired, the technician has everything that is needed to complete the job.
For the hospital staff, the experience also becomes frictionless. When the dialysis machine stops working, the repair order can be quickly placed through an online portal that provides scheduling options with approximate wait time based on the available technicians and the fastest possible delivery of service orders. The order is automatically placed in the system, the right technician notified, and the service parts immediately shipped to provide the best possible after-sales service.
Technology and an ecosystem of partners is a powerful solution
This new model can be enabled by combining digital control tower capabilities to orchestrate the flow of service parts and an ecosystem of partners to support the management of inventory and fulfillment of service parts, driving tremendous value for MedTech companies. But, as we have seen above, optimizing the end-to-end process, from service parts demand planning to inventory management and last-mile delivery, can also be incredibly valuable for healthcare providers and patients, who benefit from increased availability of critical care resources.
More and more companies are taking an asset-light approach for after-sales service—working with a partner using an as-a-service model. This is one way to reduce the fixed costs of keeping a team and assets to manage or orchestrate all the after-sales supply chain activities. The concept is not new as many companies leverage third party logistics partners for service parts. What is new is doing it at scale with a transformational future-ready model that leverages state-of-the-art control tower capabilities, full visibility and best-in-class delivery partners.
As MedTech increases its focus on direct-to-consumer solutions, future-ready last mile capabilities will also enable the optimization of other supply chains, such as those for the distribution of consumer MedTech products. And the management of distributed medical devices inventory such as orthopedics implants and surgical kits.
To enable this future-ready supply chain model, I recommend a robust centralized and intelligent orchestration of capabilities as shown in the figure below.
Benefits of this model include a transformed after-sales service experience, better service levels and revenue from servicing equipment, a reduction in the cost-to-serve and a significant reduction of working capital and overall logistics assets needs. Accenture analysis anticipates a potential increase in first time fixes by 25%, a lowering of warehouse and distribution costs by 15% and reduced labor costs of up to 40%.
However, what it really comes down to is that patients’ lives are at stake. For this reason, I see more agile, efficient and resilient supply chains as an urgent priority. Ensuring the right MedTech equipment and products are readily available to patients is the ultimate goal.
The good news is that with the right technology and ecosystem of partners in place, MedTech companies can build future-ready supply chains that are efficient and customized to meet the specific requirements of the MedTech industry—supply chains that can respond to disruption quickly and ensure that these life-saving machines are available when and where they’re needed. Healthcare providers and patients will thank you.
If you’d like to discuss how your company can tackle this challenge, please feel free to reach out to me directly.