Chain reaction: optimal logistics for shipping medical devices23 October 2013
The medical device and healthcare industries are heavily regulated from design to delivery. One key concern for the OEM is navigating regulations efficiently. The logistics process is no different. Ensuring devices are shipped efficiently allows manufacturers to deliver better customer service as well as saving money. Bruce J Stanley, a principal at the Stanley East Consulting Group, discusses the key methodologies and opinions on how the efficiency of logistics and supply chain can be optimised.
Global supply chains have become more complex and can act as a barrier to market entry if not holistically managed. Logistics is no longer just the moving, storing and delivery of goods. In global markets, leaders in the field need to know more about public policy, and local and regional legislation, and find the local expert in a particular area. One size no longer fits all. The new conventional wisdom is that the fastest delivery method is no longer the only consideration.
As OEMs determine where to produce and ship goods to customers, location is always an ongoing concern. Some choose to be close to raw material suppliers; some choose to be close to customers. In a perfect world, one would do both. Given that the economic world isn't perfect and is becoming more complicated every day, the choice one makes on logistics can be of great advantage or cause serious complications. Manufacturers can evaluate regions of the world as single entities or can analyse the effects of local regulations on import and export. This one facet is becoming critical to the overall decision- making of logistics leaders.
Dangers of an inefficient supply chain
Some of the various danger signals of an inefficient supply chain are increased costs, bad service, complaints, damages and overuse of expedited modes of transport. These, and many other signals, shout out a need for help. They are overlooked many times because other demands of the business get in the way. Few have time to deeply analyse data and metrics when logistics and supply chain leaders are expected to get the product out, in transit and delivered. Their service metrics show up routinely and are parked for another day or simply ignored.
The predominant issues of an inefficient supply chain are lost time and misplaced customers. Products, especially medical device products, can be diverted globally or held up at local borders for tariff and regulations. Some logistics leaders don't take this into account, which can cause major delays and inefficiencies on the way to market.
Some dangers in the operating system are very obvious; most are not. Logistics and supply chain leaders have done a great job over the last decade, working tirelessly to make their and their industry's supply chains as efficient and profitable as possible. The question remains: have the financial reconciliation and the data kept up with the needs of the expanding global markets?
Additionally, supply chains in general have become so efficient that one can track a shipment all around the world faster than it can deliver in a local area. Why does that happen? Consideration is often not given to local transportation systems, lack of solid road construction and access, border crossings, local regulations, tariffs and global security.
Data and knowledge are the best tools for managing an efficient supply chain. To be more specific: pristine data. Only when logistics leaders have at their command pristine data can the supply chain run effectively without glitches.
Using a third party's expertise can be a huge benefit for small and medium-sized OEMs. While the cost may appear to be higher than using in-house supply chain efforts, the benefits can have huge payoffs. Market leverage and expertise can pinpoint pinch points in product delivery and customer expectation.
Dangers in the system
OEM supply chain leaders will feel the effects of a disconnected network: products taking too long to process, documentation held up at borders, transportation hubs getting crowded, and so on. The net result is expedited shipping to customers who can't understand why manufacturers don't produce more efficiently. Costs shouldn't always be the determinant for effective logistics mapping. Companies use tools such as value stream mapping to take advantage of seeing first-hand the less-valued process steps involved in their unique supply networks. This also provides an opportunity to challenge why certain steps cost too much, take too long or are a legacy process with no value. Leading-edge thinkers know that, in order to be a world-class company, their organisations need to see the world as a global market with individual, discrete marketplaces. Costs aren't the only challenge. Storage, demerge and holding product at borders can present large obstacles for logistics leaders. Ensuring their organisations know the local regulations, the players and institutions that regulate, and why policies are being implemented in the short term, will help alleviate downstream issues, incremental costs and disruptive services.
One often overlooked danger is innovation. How can innovation be a danger? Often companies feel that in order to be competitive, they need to implement large-scale global processes and systems in order to deliver consistent service in every corner of the world. The reality is that, with existing physical country infrastructure, the use of plane, ship, container, rail and truck modes can only take the product as far as that internal infrastructure is capable. Does it make sense to ship a product around the world in three days to then be stuck internally at the border - stalled because there are no modern roads to effectively transport it forward? The danger is when logistics leaders try to outsmart the network by implementing sophisticated systems when a simple semi-automatic and rigorous process will do.
Getting the most out of the process
Logistics and supply chain have moved the competitive dial consistently for years. What most leading-edge companies have found is that they build the kind of system and logistics processes that support the business.
Far too often, systems and operating organisations overextend into areas that the enterprise was never designed, and never planned, to tackle. Thinking about the future is good. Wasting energy, skilled talent and the resources of an organisation to build a process that can never be fully implemented or utilised is clearly not. Competitors will leap ahead of those organisations by a steady stream of micro-innovating and sound implementation. The real truth is that customers haven't changed. They want their orders handled carefully and on time, and delivered when promised and in good, saleable shape. There is no extra credit for overburdening an enterprise's capabilities. That said, a leader should not forget innovation or change. Leading-edge companies know the boundaries and limits of change and realise that its supply chain is the vehicle of great customer service, not the end game.
The right technologies help build the bridge
Innovation always helps companies compete and grow. This is more important than ever in global markets. Knowing the regional landscape and the changing protocols, regulations and policies in each of these regions can be advantageous in planning the next innovation. Why bring barcode technology into an area where few use it? One hypothesis could be to lead the way in the market, but why change a company's global directive? In order to be successful, companies need to challenge their own efforts to see what fits where and what they can do better than anyone else. Only then does success follow.
Another key factor is global standards for the identification of products and entities. These help identify products worldwide and aid in the swift movement of goods through scanning technology. OEMs have to embrace this innovation and understand it will remain critical in the process of ordering, manufacturing and payment. Not only will the devices get smaller and more powerful, but data, when pristine, will become the critical engine of any global enterprise. Whether a company is building its own supply network or using third-party providers, pristine data will accelerate its competitive advantage worldwide. Bad data can cripple an enterprise for quite some time.
What an OEM should do
Be practical, build smart, ensure pristine data and don't be enticed into thinking one needs the best and the greatest. It's hard for logistics leaders not to be watchful of their competitors when deciding on their next innovation steps. Customer behaviour will tell a company if it has a supply chain problem. Many astute supply chain leaders analyse their own organisation first. They know what they do best and find focused specialists to do the rest. Recently, a retailer knew early on that it couldn't manage the import and tariff responsibilities on its own, and hired experts to run the process effectively. This way, the specialists stay current with any new import regulations in their country or region, while these experts can help translate current regulations and keep one informed well in advance of what may be coming downstream. Getting expert advice is crucial for success. Don't assume one organisation can do it all. It can't.
The size of the OEM enterprise can actually be a plus to fixing supply chain issues. Contrary to some beliefs, the smaller an organisation is, the faster and more nimbly it can work. Changes can swiftly be made to accommodate new insights and customer needs. Larger organisations can be driven by larger processes and lengthy approval requirements.
Some less intuitive ideas companies are trying are: sustainability programmes, major SKU rationalisation, accelerated receivable programmes and consignment - all with a focus on stretching their supply chain operations capacities in support of the overall business strategy.
Data alignment and synchronisation with customer data is increasingly becoming a critical component in uncovering new business opportunities. This alignment can also drive consistent favourable revenue and service metrics.
OEM logistics leaders need to stay abreast of contract laws in each country. It's crucial that OEMs understand where and when the law applies and how that affects the movement of their goods to customers. This leads to better analysis of operational needs and assessments, and that knowledge, in turn, shatters the fear of the global markets, provides the courage to think innovatively and the passion to execute flawlessly.
In the end, new technologies can help organisations build a bridge to the global marketplace while improving overall efficiencies and profitability. New, integrated systems with pristine data can help immensely as well, but only if organisations understand the complexity of the markets and systems, implement only what makes sense, and know upfront how implementing it will help the company grow.