Supply chains for medical devices are becoming increasingly complex and face unique challenges. In Part 1 of our series on challenges in supply chain for medical devices, we delved into these complexities and discussed solutions that can help drive these businesses to the next level, meeting company goals and serving the patients whose lives medical device manufacturers seek to improve. In Part 2, we dive in further into five critical areas of this subject including field inventory, customer centricity, regulations, contract manufacturers, and business planning.
Field Inventory
Challenge: Field inventory is a category of inventory that is unique to life sciences manufacturers and falls into the following areas:
- “Trunk stock” is inventory held by sales associates, whether in their vehicles, homes, or storage facilities.
- Consignment inventory is consigned to medical offices, hospitals, or even patient homes. This inventory is held at the facility until it is consumed or returned to the medical device manufacturer.
Field inventory is difficult to manage due to the number of locations in which it sits outside of a controlled warehouse environment. With varied locations and the number of people involved in managing inventory, from sales associates to hospital staff, visibility to inventory is easily lost.
Because visibility to this inventory type is imperfect, medical device manufacturers lose the ability to optimize inventory. Optimized inventory involves having enough of the right products to meet customer demand, while not having an oversupply, which can take up valuable warehouse space and cause write-offs. Additionally, demand patterns are not accurate, as consumption is not measured accurately. Further, inventory in various locations can lead to loss, expiration, and damage.
As a result, inventory levels increase, the potential for meeting patient demand decreases, logistics costs balloon due to the need for expedites, and write-offs increase.
Solution: Blue Yonder offers the capability to manage all aspects of the medical device supply chain, from end-to-end. Field inventory can be optimized and deployed via Blue Yonder Supply Chain Planning. Blue Yonder has a unique ability to optimize demand, inventory, and supply across the type of complex network required to support a medical device supply chain. Blue Yonder Transportation Management solutions can then optimize transportation within the complex network involved with field inventory. Through the ability to seamlessly connect Blue Yonder Supply Chain Planning and Transportation Management, processes can be managed in a continuous manner using one data model.
Customer Centricity
Challenge: Manufacturing is becoming more customer-centric than ever, and medical device manufacturers are no exception. While patient care has always been the top priority for medical device manufacturers, these companies are now finding new ways to serve the patient. Wearable devices are increasing, as is equipment that can be delivered direct to the patient’s home. Both of these trends result in an increase in direct-to-consumer transportation, which can enhance patient care but also increase transportation costs for medical device manufactures. Hence, to control costs and achieve corporate goals, companies must balance patient needs with costs.
Solution: Through Blue Yonder synchronized planning and execution solutions, medical device companies can appropriately plan for fluctuating demand. As more distribution channels are served, demand fluctuations increase, requiring Blue Yonder demand segmentation, powered by artificial intelligence (AI) and machine learning (ML). This granular level of channel and customer segmentation allows planners to address the unique requirements of each segment without impacting the plans for other segments. Proper demand planning combined with multi-echelon inventory planning can decrease inventory costs and enhance revenue growth.
From here, Blue Yonder Transportation Management solutions can optimize transportation to the various channels served by medical device companies, such as medical distributors, hospitals, medical offices, field sales, and patient homes.
Combined, Blue Yonder synchronized planning and execution solutions decrease costs and improve revenue, thus enhancing profitability.
SKU Proliferation and Complex Bills of Material
Challenge: In the previous installment we discussed challenges that result from the complex regulatory environment that impacts the life sciences industry. The regulatory environment affects the medical device industry to such an extent that we mention it again in this installment. Two additional challenges that arise from regulatory requirements are SKU proliferation and complex bills of material (BOMs).
Because different countries have unique requirements for labeling and components, SKU proliferation occurs. Each product variation is labeled with a different SKU. For example, a given country may require that a component is manufactured in a specific set of countries. SKU proliferation results in increased inventory levels and write-offs, and ultimately an increased cost-to-serve.
These requirements also lead to complex BOMs, with many potential variations for a given set of components. Creating a supply plan for complex BOMs is not possible when given a manual solution or generic linear programming.
Solution: These combined challenges require connected Demand, Inventory, and Supply Planning. SKU proliferation requires multi-echelon inventory management (MEIO). Solving for complex BOMs requires supply planning with an industry-specific optimizer that only Blue Yonder can offer.
Contract Manufacturers and Suppliers
Challenge: On the supply side, medical device manufacturers must collaborate with both Contract Manufacturers (CMOs) and suppliers. When collaborating with these organizations, visibility to inventory can be difficult, and it becomes a challenge to understand when product will arrive and ultimately serve the end customer. On the supplier side, it often becomes necessary to single source, as components may be specialized and only made by one supplier. At times, this single-sourced supplier may not be the manufacturer’s direct supplier but can instead be within another tier of the supply chain.
When a company relies on a single source within their supply chain, they are exposed to risk, whether with increased prices that impact cost-to-serve, or through fluctuations in supply, impacting ability to serve the customer.
Solution: Through network visibility to inventory, medical device companies can have an understanding for the inventory that exists throughout their entire supply chain, at supplier locations and CMOs, resulting in the ability to make decisions that best serve the patient and corporate goals.
Supplier collaboration provides the ability to provide medium- and long-term forecasts to suppliers, allowing for the ability to collaborate with suppliers in order to meet this demand.
Business Planning
Challenge: Historically, business planning has occurred in siloes. Supply chain organizations and finance organizations plan separately, often with the supply chain planning based on the number of items and finance planning based on dollarized information. It can be very difficult to align these processes both from a systems perspective and process perspective. While this challenge can impact any manufacturer, medical device companies also must collaborate with marketing organizations on new product launches. There is also an added element of products that are being phased out and associated write-offs.
Solution: Blue Yonder Platform, Powered by Snowflake, allows for data to be easily shared between Marketing, Supply Chain, and Finance functions. Blue Yonder Cognitive Integrated Business Planning solution enables the business planning process that occurs between these functions, ultimately meeting corporate goals for profitability, customer experience, and market share.
Conclusion:
The medical device landscape is complex and challenging. Blue Yonder solutions provide a single supply chain operating system that addresses these challenges. Great opportunity exists to solve challenges in this industry with the ultimate benefit of serving the end patient and enhancing lives across the world.
