Complexities are readily apparent to anyone working in medical device logistics. At a time when regulations are tightening and demand for value-added services is increasing, the industry faces a growing set of challenges. However, few issues are liable to cause such a headache as those relating to supply chain visibility.

In one study by the global logistics company DSV, supply chain visibility was cited as the single most important bottleneck for further supply chain optimisation. It received this dubious honour ahead of IT integration issues, cost containment, service quality and thirdparty logistics management (3PL), all of which pose difficulties in their own right.

The survey, conducted by DSV and Supply Chain Media, involved 70 supply chain executives at medical device manufacturing companies. And while it was conducted in 2013, it seems likely that the results would be even more clear-cut today. Not only have healthcare environments grown more complex since then, but the latest wave of track- and-trace requirements has moved transparency to the top of the corporate agenda.

In an ideal world, the medical device supply chain would be properly overseen from end to end. With suppliers and OEMs at one end, and their global customer base at the other, it should be possible to monitor everything relating to the product: purchase orders, invoices, bills and master data. This means that while supply chain visibility includes the ability to track the product itself, it is more far-reaching than just noting the location of items.

Using the right framework here brings clear rewards. Supply chain visibility increases awareness for all participants, as well as accelerating the movement of the product between them. It leads to cost savings, reduces regulatory compliance risk and stops different parties from doing the same work twice. Most of all, it enhances patient safety – always the end-game with medical devices. And should any issues arise, such as product delays or shortages, they can be swiftly resolved.

Given that the supply chain accounts for over 40% of medical device costs, amounting to around $122 billion a year, visibility can make a real difference to a company’s bottom line. According to consultants McKinsey, “The improvement from better-performing supply chains would range from about 6% for retailers to 20% for hospitals, and producers of devices and medical supplies.”

So what can medical device companies do to improve this visibility? Below, we explore some of the key challenges facing medical device companies and examine areas where industry professionals should focus their energies.

Large-scale outsourcing

Unfortunately, there is no longer a straightforward line between manufacturer and customer. These days, most medical device manufacturers choose to outsource much of their supply chain activity. This means dealing with 3PLs alongside all their other contractors. It is no secret that business models are becoming more complex.

The past few decades have seen an outsourcing boom across the industry, with many manufacturers shifting their production to lower-cost markets abroad. Supply chain visibility, then, is no longer quite so easy to ensure.

Fragmented supply chain

Aside from a few larger, more expensive items – such as medical imaging equipment – most products in the medical devices supply chain will be ordered in bulk and may need to be replenished at any time. This means hospitals will need in-house inventory and excellent channels of communication with the manufacturer to ensure they have the right product at the right time.

On top of this, it is not uncommon to have inventory in many different places. Alongside what’s kept in the hospital, most logistics providers will store the product in a number of warehouses and distribution points. These range from small centres used in the final step of the journey to large regional hubs. Then there is the wide range of distribution outlets – not only hospitals but also clinics, doctors’ offices, retail stores and homes.

Poor inventory management can also be a problem. According to a recent UPS report, only 27% of a medical device manufacturer’s inventory is directly within its control, with the other 73% in the hands of distributors, sales reps and hospitals. If companies don’t keep track of what’s kept where, the system can become extremely expensive and rife with obsolescence. You run the risk of overstocking a given product or, on the flip side, relying on emergency orders.

Regulatory pressure

In 2013, the US FDA released its final rule on unique device identification (UDI), bringing in various labelling requirements for all medical devices. With the first two deadlines already past, and two others still to come, medical device manufacturers are working hard to comply. Ultimately, this will enable all devices to be traced from the point of manufacture right through to the patient’s bedside.

There are similar rules in place in Europe, with a new EU regulation calling for “improved transparency through the establishment of a comprehensive EU database on medical devices and of a device traceability system based on UDI”.

On top of this, manufacturers must contend with a complex array of customs and excise regulations as their supply chain becomes more global. With the regulatory environment changing fast, medical device manufacturers must pay close attention or risk a heavy fine. According to, 66% of senior managers at medical device companies consider the changing regulatory environment to be the biggest challenge they face in 2017.

Customer pressure

All industries, not just the medical device industry, have become more customer-centric in recent years. Customers expect the ability to track their order and suppliers that lack the necessary technology will be at a disadvantage in a crowded market.

The medical device industry, however, faces an additional set of pressures in the form of new procurement and reimbursement models. With healthcare systems under strain, existing client relationships will be put to the test and purchasing decisions will be made on different grounds. This means competition between OEMs is intensifying. If they want to provide the best customer service, supply chain visibility will likely be an important piece of the puzzle.

Choose the right 3PL

With logistics becoming increasingly specialised, many OEMs choose to outsource the job to third-party providers. However, a 3PL that does its job badly is likely to create more visibility challenges than it solves. It’s therefore essential to partner with a trusted provider that knows the issues you’re facing.

A good 3PL will offer cost efficiencies and logistics expertise, including strong regulatory knowledge across markets. It will also offer visibility across the supply chain, ideally in real time. This goes together with improved inventory management and transparency about where inventory is at all times.

Taking advantage of new technology solutions

The market is full of solutions designed to foster supply chain visibility. Radio frequency identification, for instance, is becoming increasingly sophisticated and cost-effective, and it is starting to make real inroads into healthcare.

While adoption is still not widespread, it has proved useful for tracking high-cost items such as pacemakers and defibrillators, which require a particularly high degree of traceability between supplier and patient.

More common are technologies such as GPS tracking, which enables supply chain parties to monitor shipments, and offers better communication between the manufacturer and the sales rep. In places where GPS coverage is not available, a 3PL might be able to offer different kinds of tracking solutions using tag-based technology.

A lean, collaborative model

As the number of supply chain partners increases, effective collaboration will become more necessary than ever. It’s essential to ensure that everyone’s goals are aligned and that all parties are willing to work as a team. According to McKinsey, collaboration offers the single biggest opportunity to improve supply chain performance. At a recent meeting of senior supply chain executives, the company asked attendees whether they prioritised product segmentation, agility, benchmarking and alignment with global standards or collaboration. More than 70% of them chose collaboration.

Beyond that, it may be possible to collaborate with other medical device manufacturers who are shipping to the same customer group. An IQPC white paper, titled ‘Transformation of the US medical devices supply chain’, suggests that manufacturers could consolidate their resources by using a shared 3PL. Among other benefits, this could mean only needing to make one delivery to the hospital, eliminating duplicate orders and improving inventory control.

Be agile and creative

Traditionally speaking, supply chains weren’t the place to shake things up – innovation and creativity were the preserve of product development teams. Today’s supply chains, though, need to be especially agile and responsive. In the words of Josh Cannon from UPS, this means “treating the supply chain as a business asset”.

According to a report by Accenture, if companies want to achieve true supply chain visibility, they should implement a phased approach. This will mean addressing four factors: organisations and people (who is in charge of what?); processes (how will their medical supply chain data be managed?); data (what kind of structures and guidelines will be established?); and technology (how will their IT landscape support the supply chain?).

It will also be important to make better use of digital, which is underused across many industries. Although it’s not always an easy path – and can mean disrupting existing processes – digital is an essential component of an agile operating model.

Point of difference

Supply chain visibility will be increasingly crucial in the years ahead, becoming a real point of differentiation. As healthcare models continue to evolve and margins are squeezed, it is not advisable to cling to what worked in the past. Rather, medical device companies ought to explore new business models that help them keep better track of their inventory. This, in turn, will reduce costs, improve customer service and help eliminate waste.

Ultimately, businesses need to move away from a ‘firefighting’ approach to supply chain problems, where issues are addressed as they arise. The current state of the economy and industry means events will disrupt existing processes whether a company likes it or not. The manufacturers that succeed will be the ones that welcome change and take a clear-eyed look at their future strategy.

As is always the case when it comes to medical devices, the stakes are high. Supply chain visibility is not just about what’s best for the company or for the supply chain partners – it’s about what’s best for the patient. An inefficient, opaque system will not suffice.