Supply chain is a critical function of Medical Device OEMs and is continuously driven to improve the following core imperatives:
- Simplify the engagement with providers, i.e., engage partners and technology to achieve simplification
- Avoid stock-outs, ensure availability through consigned inventory for critical products while balancing cash deployment for consigned inventory vs. other priorities
- Take cash out of the system through collaboration in the eco-system from component supplier to end consumer
All of the above are required to be done while meeting regulatory and other needs, which are:
- FDA UDI, Purchasing Controls (21 CFR Part 820.50), Device Tracking (21 CFR Part 821) and others
- Improving Recall efficiency, Preventing/eliminating counterfeit of medical devices and consumables
- Addressing increasing expectations from providers and helping them do their job better by reducing readmissions, promoting patient safety, preventing product abuse and others
To meet the above supply chain imperatives, Medtech OEMs have invested in ERP systems implementing Advanced Demand Planning and Forecasting/Replenishment software that allows decision making based on demand forecasts and feed through to production planning. While these methods have helped maintain service levels over the years, they have not been successful in reducing the heavy reliance on consigned inventory and/or trunk inventory with sales teams. This situation has resulted in inadequate visibility of the inventory and incorrect inventory accounting leading to further complications. Hence for these apparent reasons, Medtech OEMs’ inventory turnover ratio and other supply chain key metrics have been very low compared to other industries, particularly FMCG.
The severity of the challenge was compounded given there was no uniformly accepted industry standard to identify the products across the supply chain. For instance, hospitals would add their own bar codes to standardize identification of products to track them for inventory accounting and various purposes. To address this and certain other strategic imperatives like recall accuracy, FDA has now mandated compliance to Unique Device Identification (UDI) standards starting from Sep 2014 and later - depending on the class the medical device belongs to. This is leading to standardization in product identification and labeling with GS1 and HIBCC as the underlying dominant standards.
IoT when combined with the capability that UDI can provide, significantly improves supply chain efficiency while providing the right experience to stakeholders in the digital age. Some of the benefits that can be driven by IoT includes:
Improving visibility of inventory: Consigned inventory is typically stored in smart shelves in provider premises and trunk inventory with sales teams. At a minimum, the shelves should be connected and have the functionality to authorize the caregiver while vending the devices and transmitting the details of the same to the Medical Device OEM. At this point, the consigned inventory can be turned to a regular order, automating the Order to Cash cycle leveraging EDI transactions thereby improving operational efficiencies for both provider and Medical OEMs. This allows automated inventory level tracking and hence easier auto-replenishment decisions that optimizes transportation costs and at the same time significantly improve service levels.
For trunk inventory (mainly smaller in size but high value items like implantables), depending on the technology chosen for the label, a simple mobile app can easily scan the existing inventory held in the trunk or a briefcase by the sales person thereby allowing reporting of existing inventory for accounting accuracy. To ensure adoption by sales person, it is required to look beyond inventory accounting and look at scenarios where the app can help sales be more effective. Despite best efforts, there are situations around stock-outs for critical products. For example, can the app provide insight to the sales person on the fastest way to get the same in a situation of stock-outs? Can the concept of “uberization” that could allow the sales person to see who are the nearest peers who may have the product and reach out to them to get the same?
Auto-replenishment of medical consumables: For a significant segment of medical device OEMs, consumables are the main source of revenue. Over the years, OEMs have prevented counterfeit through several measures including bar-code reading of consumable while accepting the consumable, ensuring patient safety and allowing labs and hospitals procure consumables from the same OEM. However this functionality can be significantly improved by monitoring usage of consumables and have auto re-order functionality based on availability thresholds. This information when transmitted to the OEM, can also in-turn help OEMs to trigger replenishment and also serve as input to improve demand forecasting of consumables and also deliver better experience by reducing stock-out of consumables or last-minute expensive deliveries.
Improving recall efficiency: This being one of the main objectives of UDI, lot/batch level serialization combined with product genealogy is critical to identify which lot/batch/items are affected by the recall. One of the major issues during recall is that providers end up sending back some items that are not affected by the recall or the other way. A simple mobile app that can be used by providers to quickly scan the barcode/tag on the product and confirm the same is affected by the recall - which is a great way to ensure the right items are recalled. The mobile app can even generate a return label for providers to ship back the items and other functionality like leveraging information from FDA Global UDI database for product information.
While IoT, mobility and analytics has provided the opportunity for supply chains across the eco-system to collaborate, it is important for each party in the value chain to look beyond their own interest and ensure every stakeholder in the value chain is benefitted and successful. Also choosing partners who are willing to collaborate and establish the benefits is critical before going for larger rollout including other partners.