The medical device supply chain shares a number of similarities with those in other sectors, not only in terms of processes but also with regard to discerning customers and management structures.

There are also differences in the supply chain relating to the specific characteristics and requirements of the sector. Medical device supply chains are complex, diverse and dynamic. This arises from the numerous companies and organisations participating, which are involved in many different interactions.

These complications are readily apparent to anyone working within the industry and are becoming ever-more challenging.

There are increasing cost and pricing pressures, and eroding operating margins are shifting the industry towards a leaner operation strategy and outcome-based payment models.

Prime suspect

There are also a plethora of non-health companies entering the industry, such as Amazon, which has already begun to make aggressive moves in the sector. Larry Smith, recently retired from his role as vice-president, global supply chain at Becton Dickinson; together with his colleagues Mark A Van Sumeren, managing director at Health Industry Advisor; and Joe Vidricksen, vice-president, global supply chain at Halyard Health, published a white paper entitled, ‘Amazon Healthcare 2023: AI or Logistics? The medtech supply chain and the factors that could influence an Amazon-led disruption of the industry’. As the title suggests, the paper questions the part that Amazon may play in the medical device sector, termed the potential for the ‘Amazonification’ of the supply chain.

The rise of health consumerism also impacts upon the supply chain. Patients and hospital procurement teams expect a smooth retail-like buying experience for medical devices. This is in stark contrast with the slower and often convoluted traditional medical device supply chain processes.

Within this evolving environment, companies must be adaptable and proactive, particularly with regard to developing multi-stakeholder relationships and demonstrating commitment to improving patient outcomes.

This means rethinking a product-centric, transactional business model, one where the healthcare professional or provider is the gatekeeper, towards a model that addresses the needs of a new and broader range of stakeholders. These include hospital administrators, payers, employers and patients as consumers, all of who are now more involved in how products contribute to clinical results, but also price and cost considerations. Collaboration is now imperative to success.

The industry is acutely aware of the need to adapt even if it is, at times, tentative in doing so. A 2015 Forbes survey found that medical device companies predict that partnerships, rather than in-house efforts, will drive future innovation and accelerate speed to market.

Kamaljit Behera, senior analyst at Frost & Sullivan, is passionate about leveraging longstanding working relationships across the industry to foster greater collaboration, including the use of technology to help facilitate these connections.

“From a process or logistics operation point, we are beginning to see increasing digitisation of process and automation especially for repetitive jobs,” says Behera. “For example, an ecommerce channel can not only help streamline processes and reduce errors, but also free up supply chain and sales personnel from monotonous administrative tasks.”

Implementation of AI in the supply chain can also be valuable in keeping everyone up to speed. “Predictive analytics can augment supply chain and logistics departments to effectively manage resources, minimise forecasting errors, and ensure quality and compliance management with machinelearning- based predictive insights,” explains Behara.

“Predictive analytics can augment supply chain and logistics departments to effectively manage resources, minimise forecasting errors, and ensure quality and compliance management with machine-learning-based predictive insights.”

In light of the new opportunities created by these technologies, there is a need to have partners that bring knowledge and capabilities beyond what has traditionally been necessary. For example, Californian start-up Zipline collaborated with UPS and vaccine distributor Gavi to deploy a fleet of drones in Rwanda, where the machines delivered medical supplies. This is sometimes the only way to send medical devices to more remote areas. The cost of delivery via drone is reported to be comparable to conventional means, especially in the case of emergencies. Overall costs are reduced by supply chain optimisation and the minimisation of waste. As of April 2019, the company had made an estimated 13,000 blood deliveries and flown more than one million kilometres.

There are, of course, also important regulatory considerations. In response to the increasing involvement of industry stakeholders and consumer advocacy groups, as well as the widely publicised safety concerns and product recalls, regulatory agencies are being compelled to take firmer action, which has implications for the whole supply chain. A 2016 report by KPMG International Cooperative found that regulatory risks are a much higher priority for OEMs than for other manufacturers.

“We can anticipate about 15–20% of logistics and supply chain activities will be automated, leveraging digital technologies and platforms, in the next five years.”

Keep track of the supply chain

In light of the recent EU MDR, applicable for all EU member states from 26 May 2020, integrating more technology throughout the supply chain can be hugely helpful in meeting all necessary obligations. This is particularly true for high-volume, high-frequency medical devices.

“There is an ongoing blockchainenabled pilot project in collaboration with Edinburgh Napier University, NHS National Services Scotland and industry collaborators to track the chain of custody of connected medical devices throughout their life cycle,” says Behera. “This includes devices and implants to monitor chronic conditions such as asthma, diabetes, heart disease and neurodegenerative disorders.”

As well as new ways of working that are driving the use of technology, the digitisation of the supply chain and logistics is also changing the traditional business and operating models. There is now an established software-driven marketplace for healthcare equipment, which facilitates transactions between manufactures and hospitals to minimise costs. Similarly, there are technology platforms that can integrate into hospital workflows to centralise equipment requests.

The rise of new markets, the rapidly evolving technology landscape and the shift towards personalised medicine is driving greater product variety, shorter life cycles and smaller volumes. These challenges can be met by OEMs investing in more closely integrated supply chains, and by working with suppliers to increase their agility and drive innovation.

KMPG has predicted that, over the next 5–10 years, supply chains that support centralised, high-volume manufacturing of a few products sold to mass markets will be supplemented or even substituted by distributed manufacturing of a larger number of different products in smaller volumes for niche markets.

Technology is clearly here to stay and is set to continue to grow. “We can anticipate about 15–20% of logistics and supply chain activities will be automated, leveraging digital technologies and platforms, in the next five years,” says Behera. “Ecommerce-enabled digital marketplaces and centralised contract-management platforms will drive much needed efficiency and replace high-cost gatekeepers, such as the traditional distributors and wholesalers.”

Medtronic’s collaborative approach

The world’s largest medical device company, Medtronic, is working to reshape the way the world manages chronic disease and conditions through innovation and global collaboration. Medtronic operates from more than 250 manufacturing facilities, sales offices, research centres, education centres, and administration facilities that serve customers and patients in 120 countries.

To help patients manage their health across the entire continuum of care – from prevention and diagnosis, to treatment and ongoing management – they are integrating devices with information technology and biologics that broaden their functionality. For example, Medtronic’s new heart rhythm devices automatically and wirelessly transmit information through a home monitor to a secure website accessible from the physician’s office – making it easier for physicians to manage patients’ conditions long term.

One component of Medtronic’s strategy is to partner with smaller, entrepreneurial companies in developing markets. This allows Medtronic to reduce its research and development spend, leverage the local company’s knowledge of the market, and access a partner’s existing sales and distribution network. In China, for example, Medtronic opened a research and development centre in partnership with Shandong Weigao Group to develop orthopaedic technologies and devices for the local market.

Source: KPMG