Dhaval Shah
The road to recovery for medical device supply chains starts with technology
November 08, 2021
By Dhaval Shah and Manan Shah
Like many industries reliant on the dissemination of physical goods, the medical devices market experienced significant issues in 2020 due to COVID-19-related disruptions. This growing field, which witnessed a 4.4% CAGR since 2015 and reached $457 billion in 2019, was plagued with a variety of supply chain issues: High prices, stringent barriers to entry, limited competition, increased lead times for distribution, and complex country-specific tariffs were just the beginning. Sourcing of parts became difficult due to shortages, and medical device organizations faced the difficult task of optimizing their available parts inventories while ensuring their provider facilities and hospitals had the stock they needed to serve patients. Because medical device supply chains are highly regulated, there were also challenges in staying compliant with the myriad of related requirements (one example is the CARES Act Section 506J, which requires organizations to notify the FDA of an interruption or permanent discontinuance in manufacturing). Perhaps most importantly, the need to adhere to strict quality standards for medical device parts is a top priority for all device organizations as it impacts the subsequent safety of patients – preventing them from rapidly engaging new parts suppliers due to both lengthy quality-assurance and compliance processes.
Further, accurately forecasting demand for medical devices was difficult because of the dynamic nature of the pandemic. While the demand for medical devices had significant impact on the overall supply chain, some trends emerged regarding the effects of the pandemic based on product types:
Impact across devices
● Positive Impact:
○ Ventilators, dialyzers, air purifiers, PPE, testing equipment, catheters, hematology products, needles and syringes, vital sign monitors, infusion pumps and anesthesia devices
● Neutral Impact:
○ CT machines, ECMO machines, mobile X-ray equipment and ultrasound equipment
● Negative Impact:
○ Orthopedic implants, devices for ophthalmology, aesthetic, MRI, surgical devices (both minimally invasive and robotic) and mammography equipment
Leveraging technology to optimize supply chain operations for medical devices
An important lesson that came out of these obstacles related to COVID-19 is that hurdles in the medical device supply chain can be addressed through the adoption of digital technologies. Device organizations must utilize and synchronize two supply chains: the physical supply chain, consisting of tangible products, and the digital supply chain, which contains clinical, operational and financial information generated across various subsystems of the supply chain. The clinically linked, digitally optimized device supply chain plays a key role in achieving lower costs and improving healthcare outcomes.
A path for progress: A guide to supply chain digitization maturity
Medical device organizations can use the following Supply Chain Digitization Maturity Framework as a reference for adopting digital technologies.
Maturity level 1: Building a digitally enabled foundation
▪ ERP: The impact of COVID-19 on supply chains will spur manufacturers’ spend on ERP, which is expected to reach $14 billion by 2024. ERP systems can assist in precise scheduling of work, dispositioning materials, monitoring equipment for output, and managing quality and maintenance issues in real-time
▪ Data integration and management: Connecting data from operational systems (such as inventory management) with clinical systems using interoperability standards (such as GS1, HL7, EDI and FHIR) can help generate business insights, including optimum inventory levels, demand trends, and more. Besides valuable integration capabilities, investing in data quality and governance is crucial in streamlining and accelerating time-intensive data curation and analytics.
▪ Mobile apps: Real-time location tracking of medical device parts not only prevents theft and unauthorized use, but also ensures optimum inventory is maintained across facilities. Remote access to supply chain data using mobile and tablet apps can help device service teams check the availability of parts and troubleshoot issues while on the go.
Maturity level 2: Harnessing digital tools for proactivity
▪ IoT: The Internet of Things has brought unprecedented connectivity, efficiency, and visibility to many different industries, and helps medical device suppliers to realize enormous potential in their operations. Digitally enabled medical devices allow for remote service, maintenance, and configuration of devices – this not only reduces the cost of servicing, but also improves customer satisfaction as they benefit from enhanced operations.
▪ Descriptive analytics: ERP data analytics can generate insights for device demand planning, inventory optimization, cost drivers, and other functions that drive critical business functions. Armed with these insights, medical device organizations can make customized action plans based on practical data, such as checking the status of the stock at medical centers or suggesting production line ups based upon the availability of finished goods.
Maturity level 3: Process improvements through analytics & automation
▪ Advanced analytics: Carrying analytics capabilities a step further, medical device organizations can proactively identify products that require maintenance and notify service staff to carry out servicing even before the device fails. Machine learning algorithms can be used to understand batch release and UDI patterns over time, and identify any suspicious or potentially disruptive activities. Again, this can significantly reduce service costs and support greater operational optimization.
▪ Process automation: Intelligent robotic process automation (RPA) bots can assist with accurate and rapid inventory management, as well as timely delivery of critical medical supplies to the correct storerooms, by mitigating resource-heavy manual process. RPA can also accelerate exchange of data and automate workflows between a new supplier and a device organization. Using RPA tools, organizations can process high-volume orders sent in from distributors across the globe via a variety of channels (fax, online forms, spreadsheets, etc.) and enter the details into the ERP system for automatic completion of shipment.
Maturity level 4: Next-gen capabilities for supply chain management
▪ Digital twin: Having a digital twin for a device – that is, a mirrored digital counterpart for a physical device – can help predict its anomalies and subsequent failure. Proactive maintenance of devices likely to fail can reduce service needs and inventory-related costs for a device organization. Through digital twin technology, supply chain disruptions for devices can be simulated and potential responses can be planned in advance, so business can continue uninterrupted.
▪ Blockchain: Blockchain-empowered supply chain networks can be used to trace issues with the device quality as it provides visibility and transparency at every step of the process. Automatically conveying reports of critical issues to the relevant stakeholders or vendors via an integrated system provides an audit trail of all activity and helps all parties to avoid errors or miscommunications when collaborating on issue resolution.
Looking ahead
The medical device supply chain is expected to stabilize as the industry adjusts to a new post-pandemic normal, and the overall devices market is expected to grow to $603 billion by 2023, growing at 6.1% CAGR. Digitization of the supply chain for medical devices will undoubtedly play a key role in the general growth of the devices market as the spotlight continues to shine on the medical and healthcare sectors. To provide timely care, reduce costs and drive operational efficiency, medical device organizations must consider a plan for supply chain digitization. These efforts can be executed using a phased, multi-step approach, but it’s vital to purposefully prioritize this business-critical initiative.
About the authors: Dhaval Shah is the executive vice president of medical technology at CitiusTech. Manan Shah is the healthcare consultant for medical technology at CitiusTech.
Like many industries reliant on the dissemination of physical goods, the medical devices market experienced significant issues in 2020 due to COVID-19-related disruptions. This growing field, which witnessed a 4.4% CAGR since 2015 and reached $457 billion in 2019, was plagued with a variety of supply chain issues: High prices, stringent barriers to entry, limited competition, increased lead times for distribution, and complex country-specific tariffs were just the beginning. Sourcing of parts became difficult due to shortages, and medical device organizations faced the difficult task of optimizing their available parts inventories while ensuring their provider facilities and hospitals had the stock they needed to serve patients. Because medical device supply chains are highly regulated, there were also challenges in staying compliant with the myriad of related requirements (one example is the CARES Act Section 506J, which requires organizations to notify the FDA of an interruption or permanent discontinuance in manufacturing). Perhaps most importantly, the need to adhere to strict quality standards for medical device parts is a top priority for all device organizations as it impacts the subsequent safety of patients – preventing them from rapidly engaging new parts suppliers due to both lengthy quality-assurance and compliance processes.
Further, accurately forecasting demand for medical devices was difficult because of the dynamic nature of the pandemic. While the demand for medical devices had significant impact on the overall supply chain, some trends emerged regarding the effects of the pandemic based on product types:
Impact across devices
● Positive Impact:
○ Ventilators, dialyzers, air purifiers, PPE, testing equipment, catheters, hematology products, needles and syringes, vital sign monitors, infusion pumps and anesthesia devices
● Neutral Impact:
○ CT machines, ECMO machines, mobile X-ray equipment and ultrasound equipment
● Negative Impact:
○ Orthopedic implants, devices for ophthalmology, aesthetic, MRI, surgical devices (both minimally invasive and robotic) and mammography equipment
Leveraging technology to optimize supply chain operations for medical devices
Manan Shah
A path for progress: A guide to supply chain digitization maturity
Medical device organizations can use the following Supply Chain Digitization Maturity Framework as a reference for adopting digital technologies.
Maturity level 1: Building a digitally enabled foundation
▪ ERP: The impact of COVID-19 on supply chains will spur manufacturers’ spend on ERP, which is expected to reach $14 billion by 2024. ERP systems can assist in precise scheduling of work, dispositioning materials, monitoring equipment for output, and managing quality and maintenance issues in real-time
▪ Data integration and management: Connecting data from operational systems (such as inventory management) with clinical systems using interoperability standards (such as GS1, HL7, EDI and FHIR) can help generate business insights, including optimum inventory levels, demand trends, and more. Besides valuable integration capabilities, investing in data quality and governance is crucial in streamlining and accelerating time-intensive data curation and analytics.
▪ Mobile apps: Real-time location tracking of medical device parts not only prevents theft and unauthorized use, but also ensures optimum inventory is maintained across facilities. Remote access to supply chain data using mobile and tablet apps can help device service teams check the availability of parts and troubleshoot issues while on the go.
Maturity level 2: Harnessing digital tools for proactivity
▪ IoT: The Internet of Things has brought unprecedented connectivity, efficiency, and visibility to many different industries, and helps medical device suppliers to realize enormous potential in their operations. Digitally enabled medical devices allow for remote service, maintenance, and configuration of devices – this not only reduces the cost of servicing, but also improves customer satisfaction as they benefit from enhanced operations.
▪ Descriptive analytics: ERP data analytics can generate insights for device demand planning, inventory optimization, cost drivers, and other functions that drive critical business functions. Armed with these insights, medical device organizations can make customized action plans based on practical data, such as checking the status of the stock at medical centers or suggesting production line ups based upon the availability of finished goods.
Maturity level 3: Process improvements through analytics & automation
▪ Advanced analytics: Carrying analytics capabilities a step further, medical device organizations can proactively identify products that require maintenance and notify service staff to carry out servicing even before the device fails. Machine learning algorithms can be used to understand batch release and UDI patterns over time, and identify any suspicious or potentially disruptive activities. Again, this can significantly reduce service costs and support greater operational optimization.
▪ Process automation: Intelligent robotic process automation (RPA) bots can assist with accurate and rapid inventory management, as well as timely delivery of critical medical supplies to the correct storerooms, by mitigating resource-heavy manual process. RPA can also accelerate exchange of data and automate workflows between a new supplier and a device organization. Using RPA tools, organizations can process high-volume orders sent in from distributors across the globe via a variety of channels (fax, online forms, spreadsheets, etc.) and enter the details into the ERP system for automatic completion of shipment.
Maturity level 4: Next-gen capabilities for supply chain management
▪ Digital twin: Having a digital twin for a device – that is, a mirrored digital counterpart for a physical device – can help predict its anomalies and subsequent failure. Proactive maintenance of devices likely to fail can reduce service needs and inventory-related costs for a device organization. Through digital twin technology, supply chain disruptions for devices can be simulated and potential responses can be planned in advance, so business can continue uninterrupted.
▪ Blockchain: Blockchain-empowered supply chain networks can be used to trace issues with the device quality as it provides visibility and transparency at every step of the process. Automatically conveying reports of critical issues to the relevant stakeholders or vendors via an integrated system provides an audit trail of all activity and helps all parties to avoid errors or miscommunications when collaborating on issue resolution.
Looking ahead
The medical device supply chain is expected to stabilize as the industry adjusts to a new post-pandemic normal, and the overall devices market is expected to grow to $603 billion by 2023, growing at 6.1% CAGR. Digitization of the supply chain for medical devices will undoubtedly play a key role in the general growth of the devices market as the spotlight continues to shine on the medical and healthcare sectors. To provide timely care, reduce costs and drive operational efficiency, medical device organizations must consider a plan for supply chain digitization. These efforts can be executed using a phased, multi-step approach, but it’s vital to purposefully prioritize this business-critical initiative.
About the authors: Dhaval Shah is the executive vice president of medical technology at CitiusTech. Manan Shah is the healthcare consultant for medical technology at CitiusTech.