When COVID-19 broke out, healthcare systems all over the world were confronted with a crisis unlike any other. Because the supply chain for critical medical products was disrupted, managing the pandemic became especially difficult.
Thus, as to avoid repeating the same dilemma again or, at the very least, to mitigate the effects on the healthcare system, stakeholders must address the major supply chain challenges in order to build a sustainable, resilient supply chain.
1. Major Challenges in the Medical Device Supply Chain
It is noteworthy to point out that every level of the supply chain experiences its own set of difficulties. The figure below hence shows a simplified illustration of the medical device supply chain.
Let us then go through the major challenges that is threatening the smooth flow of medical devices across these chains.
Challenge no. 1. Fluctuations in the supply and demand.
This is also known as supply shock where the supply and demand changes abruptly due to unexpected events.
At the beginning of the pandemic, the demand of personal protective equipment (PPE) was pushed to an all-time high. But as more countries are now making, for example, the wearing of masks optional, the landscape changes drastically once again.
The opposite happened for products needed for non-emergent and elective procedures, which has been postponed mostly at the beginning of the pandemic and has recently getting more attention.
Challenge no. 2. Transport difficulties and ever-changing COVID-19 protocols
Different regions or countries implement health protocols that change with the infection rate in the area, which can result in unexpected closing of borders and delay in the delivery of supplies, raw materials and finished medical device products. This also drives the freight and other associated costs higher, and hence ultimately inflating the price on the patient’s end.
The issue becomes even more significant for companies, whose supply chain is lengthy and complex with locations around the world. Some essential supplies and raw materials production may be concentrated only in one region. For example, China and India are the primary producers of a plenty of low-value or basic pharmaceutical ingredients.
Challenge no. 3. Compliance to regulations at every level of the supply chain
Before the pandemic, many regulatory bodies were scheduled to transition into a new set of requirements that involves almost all parties to the medical supply chain. Although most postponed implementation in 2020, some of them are now in effect and posing challenges to its stakeholders.
• European Union- EU MDR or EU 2017/745, was supposed to be implemented by 2020, but moved to 2021 to prevent impeding COVID-19 measures.
• USA- The requirement for Unique Device Identification (UDI) has been postponed until this year.
- • ASEAN- The member countries are gradually requiring full or partial compliance to the ASEAN Medical Device Directive.
Challenge no. 4. Rise of counterfeit medical device products
In 2018, the World Health Organization, WHO, estimated that 10% of medical products in low to middle-income countries are counterfeit. The WHO alternative term is SF, which stands for substandard or falsified.
SF products pose risks for both the patient and the manufacturer. Since the quality of SF products are questionable, patients may harbor serious injuries or in some cases die. The manufacturer, on the other hand, can be held legally responsible for such adverse events.
Challenge no. 5. Cybersecurity Issues
With the adoption of electronic patient records and interconnected medical device products comes the vulnerability to cyberattacks. They can come in the form of ransomware, cloud threats, misleading websites, encryption flaws, phishing attacks, and even employee errors.
For instance, if a hacker disables a hospital's network, software, or systems, physicians may be forced to cancel surgeries, radiological scans, and other procedures. Without immediate care, some patients condition may progress rapidly and put them in danger.
An institution’s vulnerability to these attacks can be caused by any or combinations of the following shortcomings:
• lack of suitable security features on medical equipment
• inadequate security on medical professionals' remote access to patient data
• insufficient cybersecurity training for healthcare employees
• use of outdated technologies
Challenge no. 6. The unknown- other unforeseen circumstances
This includes economic crises, geopolitical disputes, terrorism, extreme weather, and (hopefully NOT) another pandemic.
2. Tried and tested hacks to medical supply chain sustainability and resilience
Let us define first what resilience and sustainability mean in the context of the medical device supply chain.
A resilient supply chain is one that has a firm grasp on where risks exist, their potential effect, and the systems in place to manage or reduce them. This definition is adopted from to McKinsey & Company from their 2020 research.
A sustainable supply chain, on the other hand, is one that can move products at the minimum cost and time to the intended consumer with minimal or without negative social and environmental impacts.
Although resilience has a more immediate and direct effect in the profitability of a company, the sustainability aspect should not be overlooked, because of its impact on attracting investors and customers. Governments are also giving out incentives in the form of tax credits and innovation grants.
A 2022 publication from the Massachusetts Institute of Technology, MIT, shows that the pursuit of sustainability is driven primarily by end users. The company’s direct or indirect customers, leadership and creditors of the companies are the ones expecting or demanding alignment and investment in sustainability.
Fool-proof Hack No. 1. Diversify supplier portfolio and have a back-up supplier system in place
To reduce the possibility of running out of stocks or supplies, medical device businesses must have a back-up list of suppliers, preferably located in different locations. When access to one supplier is lost, another may be employed.
In addition to diversity, taking the sustainability practices into consideration during the choice of suppliers will ensure that a company can protect its brand image and customer base.
Fool-proof Hack No. 2. Optimize inventory and transportation
Because supply chain disruption has become a regular occurrence, many companies might be tempted to stock-up on raw materials and supplies to ensure continuous production. However, excessive inventory also translates to money sitting in warehouses. Warehouse operation incurs expenses for heating or cooling, lighting and labor costs and contributes as much as 13 % of the total supply-chain greenhouse gas (GHG) emissions.
Transportation, on the other hand, contributes to almost a third of the GHG emissions in the US in 2019. Companies can reduce GHG emissions by maximizing the product load in trucks or ships, obtaining their supplies from nearby distribution station, and using electric-powered vehicles.
Fool-proof Hack No. 3. Revisit and re-evaluate product portfolio, amount of debt and insurance
The diversity of the product portfolio has a direct impact on production volatility and susceptibility to supply and demand fluctuations. In general, mature companies have more diverse product portfolios and experience less operational volatility.
Corporate debts are funds borrowed from banks and other financial institutions. Companies may use these for short-term expenses, expansion or as hedge against potential losses. Businesses may also reduce their exposure to risk by purchasing corporate insurance, which protects them against a variety of unanticipated events.
Optimization of these factors ensures that the company is minimizing their cost and at the same time maximizing profit.
Fool-proof Hack No. 4. Use digital technology to improve forecasting and get real-time end-to-end visibility of the supply chain
Production networks were not designed for resilience and sustainability but to maximize margins and the economics of scale. In addition, every company has a unique set of circumstances and needs that make a one-size-fits-all solution simply impossible.
Companies must have an accurate grasp of the vulnerabilities, impact, and necessary mitigation measures in real time to make timely and impactful decisions. The only way to get there is by investment in digital advanced analytics and other digital tools.
Full supply chain visibility enables companies to monitor and ensure quality at every level of the supply chain. This is only possible when the different business processes are integrated in one platform, such that sharing of critical information will not get in the way. Inventory management can be tied to ordering and payment through an automated system, so that much of the focus can be redirected to more urgent and pressing issues.
Accurate supply and demand forecasting enables organizations to modify production capacity to avoid shortages and wasteful overproduction of final goods. The projections can take into account important parameters like recent sales history and emerging trends to ensure precision.
Due to the fact that these technologies are capable of in-depth investigation, blind spots are eliminated. Supplier A, for example, may be dependent on supplier B's supply. If monitoring and forecasting are entirely based on information from firm A, problems may arise only when it is too late to avoid the disruptive effect.
Fool-proof Hack No. 5. Invest in new technologies, staff training and regulatory intelligence
Aside from sophisticated analytics, new technologies that address the inadequacies of conventional production and legacy technology are now accessible.
• In manufacturing, 3D printing technology can be the answer to the demand for customized medical devices and replacement to obsolete parts. There is also no need for a minimum order volume.
• Advanced robotics and automation will be minimally affected by labor shortages.
• Manufacturers may add Q-codes or QR codes, or RFID for easier inventory and stock management as well as protection against counterfeit products.
Staff training at all stages of the supply chain is still required, regardless of how advanced the technology is. The idea that a tool is only as good as its user still holds true. Each employee must understand how to leverage the tools and information at his or her disposal, and have a backup plan in place in case the digital system fails.
With the ever-changing nature of regulations, having a sound grasp of the best regulatory processes can save companies a ton of money. Regulatory agencies are opening up fast track/ abridged/ reliance systems that can be exploited to get medical device products in the market early.
The pandemic has exposed shortcomings and opportunities in the medical device supply chain. Companies must begin realigning long-term strategies above short-term aims in the quest of sustainability and resilience.
“Risk, resilience, and rebalancing in global value chains” by McKinsey & Company
“7 Ways to Improve Your Supply Chain Sustainability” by AIMultiple