Smart Logistics and Inventory Innovations

Medical device manufacturers win big when supply chain management and cloud-based technologies synchronize field stock.

Changing demographics, new product innovations, downward pressure on reimbursement and growing regulatory demands are driving changes in supply chain management in the medical device industry.

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One of the biggest logistics challenges for medical device manufacturers is excess inventory.

At the same time, one of the biggest logistics challenges for manufacturers is excess inventory — including implantables, cardiac pacemakers, insulin pumps, advanced surgical kits and more — which can be costly.

A recent UPS analysis showed that 73 percent of medical device manufacturers’ inventory is located out of their direct control. In other words, it’s with sales representatives (trunk stock), in branch or field offices or in hospital consignment.

This setup makes it difficult to track and manage inventory and can result in product expiration, scrap, write-offs and sub-optimal inventory turns. Ultimately, this could adversely impact the patient experience, particularly through higher costs, potential surgery delays, compromised goods and diminished quality of care.

UPS analysis of customer data.

Control issues

It’s common for manufacturers to have little to no visibility or control over their field inventory, making it difficult to address the needs of local markets.

Instead, the onus is placed on sales representatives to manage redundant inventories and logistics rather than focusing on selling products and meeting other surgical needs. To compensate, sales reps would bloat their inventories to avoid stock-outs, jeopardizing relationships with surgeons.

In a 2017 Cardinal Health Hospital Supply Chain Survey by SERMO, more than half of respondents said the lack of a product or device had interfered with a patient’s care, reinforcing the importance of real-time inventory data.

New pressures

As new innovations emerge, medical device manufacturers face continued pressure to optimize their supply chain while maintaining compliance of evolving, complex regulatory mandates. Patients, practitioners and administrators rely heavily on accurate inventory and data management to keep quality care in motion, safe and harmonized.

One way to make this happen is tapping into a reputable field stocking network that gets critical medical inventory out of sales reps’ vehicles and garages and close to patients in nearby facilities with tracking and data monitoring capabilities.

UPS maintains one of the world’s largest networks of field stocking locations, with more than 950 sites. In fact, in the U.S. alone, 36 healthcare-capable FSL sites provide medical device manufacturers access to more than 80 percent of U.S. hospital beds within four hours.

These facilities feature temperature control and monitoring technology in compliance with greater FDA scrutiny, which enables medical device manufacturers and their field sales representatives’ same-day delivery services — all the while better managing their inventories and gaining efficiencies.

Through a collaboration with WebOps, a medical device logistics and analytics technology provider, and Baxter Planning, an inventory planning and optimization solutions provider, UPS launched new field inventory technology in 2018 to help ensure surgical kits and implantable medical devices arrive where they need to be, when they need to be there.

The additional platforms provide cloud-based capabilities to refine field inventory through enhanced planning, visibility, streamlined logistics and final-mile services.

The solution centralizes inventory for better control and visibility and can help maintain product integrity, reduce inventory, enhance sales force and customer service effectiveness and improve field resource and asset utilization. Manufacturers can achieve a 20-50 percent reduction in inventory and a 10-30 percent reduction in expedited order requests.

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UPS maintains one of the world’s largest networks of field stocking locations, with more than 950 sites.

Embracing smart logistics

According to the Cardinal Health Hospital Supply Chain survey, 78 percent of hospital workers manually count inventory at some point in their supply chain. Also, clinicians typically spend two hours each shift on supply- and inventory-related tasks, taking valuable time away from patient care.

Today, through supply chain best practices, companies are becoming more agile, adaptable and automated than ever before.

Strategically located FSLs and enhanced inventory management technologies are becoming game changers in the medical device industry. The more cost-saving measures that can be identified without sacrificing speed to market, the more suppliers can focus on priority areas like quality assurance.

Medical device manufacturers must embrace smart logistics networks and leverage supply chain scalability, visibility and control. This asset-light model can drive big gains in efficiency and customer service — not to mention lower inventory management costs.

David O'Leary is UPS Vice President of Operations, Global Logistics.

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