Sean Fenske, Editor12.14.15
Especially during this time of year, when so many of us are shopping online and checking in with shipping companies to see who can deliver our holiday presents to their destinations quickly, efficiently, and most importantly, for a very specific deadline, we get a small taste of what those who are intimately involved with the shipments of medical technologies go through all year round. These members of the medical device industry supply chain are critical in ensuring products get to where they need to go and arrive on time. Additionally, they need to work with a logistics partner who understands the complexities and attention that’s needed when shipping such sensitive, regulated devices.
Recently, UPS provided the results of their 2015 Pain in the Chain survey. This initiative poses questions to global healthcare executives regarding the most significant “pain points” in their supply chain.
In order to get insights beyond the results of the survey, MPO spoke with Mark Quinlan, director of healthcare strategy at UPS. In this interview, Quinlan shared some highlights of the survey results, while also discussing how a logistics expert like UPS doesn’t just ship Christmas gifts, but truly understands the specific requirements of the medical device industry in delivering sophisticated technologies to hospitals and doctors.
Sean Fenske: Thank you for taking the time to speak with me about the specific challenges involving logistics in the medical device space. As a lead in to that, UPS recently released data from its Pain in the (Supply) Chain survey of global healthcare executives. What were the most surprising findings?
Mark Quinlan: What’s most interesting from this year’s survey is the significant progress that healthcare companies have made over the year in addressing top issues that have been causing pain in their healthcare supply chain.
Medical device executives are increasingly demanding supply chain improvements to drive strategic business results. Much of the impetus for change is being driven by the increased regulatory and cost pressures of the ACA, the medical device 2.3 percent excise tax, and the unique device identifier (UDI) requirement. While regulations are necessary, manufacturers constantly grapple with the varied and changing requirements from one government agency to another (for example, the European Union’s Good Distribution Practices vs. the China Medical Device Good Supply Practice).
Despite the murky legislative environment, healthcare companies also report success addressing regulatory compliance issues. Year-over-year, success rates in addressing compliance increased 13 percentage points from 57 to 70 percent for the industry overall. Medical device companies reported a success rate of 66 percent.
Another area healthcare companies are experiencing more success is in addressing product security challenges. In fact, medical device companies reported their success rate in this area saw a 24 percentage point jump over 2014 findings, from 47 to 71 percent. This was a slightly bigger jump than the 20 percent increase realized for pharma and biopharma counterparts.
This increased success can be attributed in part to more collaboration. Logistics and distribution partnerships are cited as the top strategy healthcare companies have employed to address supply chain pain points. Partnerships with local third-party logistics providers (3PLs) is the top strategy used to combat regulatory compliance challenges cited by 55 percent of respondents, and 57 percent reported success addressing cost management through logistics and distribution partnerships.
Fenske: What were some of the challenges identified that would be specifically relevant to medical device manufacturers?
Quinlan: Medical device companies reported a lower success rate in addressing supply chain cost management concerns, with only 49 percent of respondents citing success in this area. Respondents see opportunities to better manage costs through optimizing transportation costs and gaining better inventory visibility.
Inventory management is another top supply chain pain point for medical device manufacturers. A lack of control in this area can lead to extensive capital costs, logistics challenges for sales teams, and very limited supply chain visibility. For example, implantable device stock-outs are costly, and sales representatives are unwilling to risk relationships with surgeons. These factors lead to bloated inventories with low visibility to what product is in the field. UPS estimates that about 70 percent of implantable medical device inventory is located in the field to ensure it is readily available for surgeries. The result is a disproportionate amount of working capital tied to inventory.
To help address this, UPS recently opened its first facility with comprehensive medical device replenishment services that features decontamination and inspection services for surgical kits. It is fully integrated into UPS’s overall transportation and field stocking location (FSL) network and provides an end-to-end solution for healthcare customers seeking increased inventory visibility and control of their supply chains. This network also makes it possible for healthcare manufacturers and distributors to reach more than 80 percent of U.S. hospitals within four hours.
Fenske: Let’s move on to another pain point for medical device manufacturers that was identified in your survey—product security. How does UPS help these companies mitigate risks?
Quinlan: UPS works closely with clients to help them assess the risks inherent in their supply chain. We work to streamline the supply chain, leveraging our integrated multimode network to reduce unnecessary hand-offs and implement visibility technologies and intervention capabilities when products are at risk. Tracking and monitoring systems such as UPS Proactive Response, UPS Quantum View, and UPS Flex Global View give customers ample visibility throughout the supply chain, the ability to address potential issues before they happen, and a more optimized logistics experience for medical devices to mitigate risks and enhance product security. Furthermore, UPS healthcare facilities are designed with state-of-the-art security systems, including restricted-access vaults for protecting high-value healthcare products.
We also collaborate with healthcare companies to implement best practices with regard to packaging and shipment scheduling to avoid certain days and events, when products have increased chances of being stolen.
Fenske: Still another pain point with regard to shipping products that’s related to security is ensuring the correct products are getting to the customer. With that in mind, can you tell me what role UPS plays in the fight against medical device counterfeiting?
Quinlan: IT investment can be a critical part of the anti-counterfeiting equation and the survey results reflect that. In fact, 76 percent of respondents in the medical device industry reported tremendous success in addressing product security through IT investment (bar coding, serialization, etc.). In addition, while the UDI regulation could have been viewed as a burden, many manufacturers are finding their IT investments are realizing secondary benefits with regard to improved enterprise-wide inventory controls and cost management. Implementing a strong quality assurance program with a single global IT platform delivers the best results.
We encourage collaboration and for companies to use all the resources available to them when doing business internationally. For example, leveraging U.S. commercial service and high-quality global 3PLs like UPS that have resources in country and relationships with local firms helps reduce risk. Counterfeit risk can be derived from decisions to partner with unethical contract manufacturing organizations or international distributors based on incomplete information. Many smaller companies have neither the breadth of employees nor the bandwidth to conduct the due diligence on potential partners with which they’re engaging.
Fenske: Obviously, handling the sensitive nature of shipping medical devices is not the same as transporting a vending machine or consumer products. How does UPS aid with regulatory compliance pain points?
Quinlan: UPS’s Public Affairs team plays an active role working with legislative bodies and our manufacturer clients to help shape supply chain regulations. Legislation is necessary to protect patients and improve care, and UPS helps manufacturers navigate and rationalize the varying regulations from country to country.
Since 2008, when the UPS Pain in the Chain survey was first fielded, regulatory compliance has been the top supply chain concern for medical device manufacturers. Regulations such as European Good Distribution Practices and European Medical Device Directives are requiring medical device manufacturers to look more closely at how their products are stored and transported to ensure patient safety.
While China has had Good Supply Practices in place for drug distribution since 2000, there has not been, until recently, similar regulations guiding the distribution of medical devices in the country. New GSP guidelines enacted in 2013 will require medical device companies, depending on the device classification, to keep accurate records of procurement, inspection, storage, sales, inventory management, return and replacement, temperature and humidity, inspections, and disposal of nonconforming products for specific lengths of time.
Healthcare regulations will only get more stringent, which is why UPS has a world-class team of regulatory compliance experts who have deep knowledge of global, regional, and local regulations. They keep healthcare companies ahead of the curve on current and changing legislation and provide expertise when considering new markets. Our facilities are cGMP-compliant, meet region-specific licensing requirements, and we employ quality assurance experts.
Fenske: As outsourcing becomes more popular among medical device manufacturers, costs increase to transport products, components, and supplies. How does UPS address this?
Quinlan: The industry is challenged to do more with less, and a holistic supply chain assessment is the key. Medical device supply chain executives cited rapid business growth, fluctuations in fuel, and new market expansion as the biggest challenges to managing supply chain costs.
Medical device manufacturers reported success in managing these cost by optimizing transportation by speed and service level 71 percent, gaining better inventory visibility 62 percent, and consolidating transportation providers 61 percent.
UPS completes network and transit mode optimization analyses to drive savings for our clients. In addition, we have 36 compliant FSLs in the U.S. that support the medical device industry, enabling our clients to get inventory closer to the point of care, improve time-in-transit, and lower transportation costs.
UPS continually invests in its global healthcare network to serve medical device customers. UPS operates 50 fully compliant, healthcare-dedicated facilities—about 7 million square feet—in strategic global locations.
Fenske: In recent years, we’ve seen significant events that could have dire consequences on a company’s supply chain and their ability to send and receive products or components. That said, what were the survey results regarding contingency planning within the healthcare industry and how is UPS addressing this area of concern?
Quinlan: Our survey reveals there is room for improvement in the area of contingency planning, with 40 percent of respondents not considering it a priority. Although most established companies may be prepared for frequent disruptions that have a smaller effect on the supply chain, they are more challenged in the area of dramatic disruptions. It is the high-impact, low-probability disasters that are generating concern.
Contingency planning is particularly important when developing operations strategy and planning for future expansions. Oftentimes, having an alternate distribution facility and additional transportation capability are vital if an unplanned event occurs. When a network is being evaluated for optimization and efficiency, it is a great opportunity to discuss strategies to build in resiliency at the same time. In many cases, optimization and business continuity initiatives complement each other. We work closely with medical device manufacturers on supply chain analyses to determine supply chain pain points and develop contingency plans for both everyday issues and large-scale disasters. We often engage in white-boarding sessions with customers where we produce detailed maps of their supply chain and develop contingency plans for multiple scenarios.
Fenske: Before we wrap up, are there any final thoughts you have regarding the medical device manufacturing supply chain that you’d like to share?
Quinlan: Medical device manufacturers that view supply chain as a strategic business priority and leverage collaborative partnerships to navigate the ever-changing market landscape will be positioned for success. UPS will keep its finger on the pulse of supply chain challenges with tools like the UPS Pain in the Chain study to help the healthcare industry move more from “pains” to “gains” in the supply chain.
Recently, UPS provided the results of their 2015 Pain in the Chain survey. This initiative poses questions to global healthcare executives regarding the most significant “pain points” in their supply chain.
In order to get insights beyond the results of the survey, MPO spoke with Mark Quinlan, director of healthcare strategy at UPS. In this interview, Quinlan shared some highlights of the survey results, while also discussing how a logistics expert like UPS doesn’t just ship Christmas gifts, but truly understands the specific requirements of the medical device industry in delivering sophisticated technologies to hospitals and doctors.
Sean Fenske: Thank you for taking the time to speak with me about the specific challenges involving logistics in the medical device space. As a lead in to that, UPS recently released data from its Pain in the (Supply) Chain survey of global healthcare executives. What were the most surprising findings?
Mark Quinlan: What’s most interesting from this year’s survey is the significant progress that healthcare companies have made over the year in addressing top issues that have been causing pain in their healthcare supply chain.
Medical device executives are increasingly demanding supply chain improvements to drive strategic business results. Much of the impetus for change is being driven by the increased regulatory and cost pressures of the ACA, the medical device 2.3 percent excise tax, and the unique device identifier (UDI) requirement. While regulations are necessary, manufacturers constantly grapple with the varied and changing requirements from one government agency to another (for example, the European Union’s Good Distribution Practices vs. the China Medical Device Good Supply Practice).
Despite the murky legislative environment, healthcare companies also report success addressing regulatory compliance issues. Year-over-year, success rates in addressing compliance increased 13 percentage points from 57 to 70 percent for the industry overall. Medical device companies reported a success rate of 66 percent.
Another area healthcare companies are experiencing more success is in addressing product security challenges. In fact, medical device companies reported their success rate in this area saw a 24 percentage point jump over 2014 findings, from 47 to 71 percent. This was a slightly bigger jump than the 20 percent increase realized for pharma and biopharma counterparts.
This increased success can be attributed in part to more collaboration. Logistics and distribution partnerships are cited as the top strategy healthcare companies have employed to address supply chain pain points. Partnerships with local third-party logistics providers (3PLs) is the top strategy used to combat regulatory compliance challenges cited by 55 percent of respondents, and 57 percent reported success addressing cost management through logistics and distribution partnerships.
Fenske: What were some of the challenges identified that would be specifically relevant to medical device manufacturers?
Quinlan: Medical device companies reported a lower success rate in addressing supply chain cost management concerns, with only 49 percent of respondents citing success in this area. Respondents see opportunities to better manage costs through optimizing transportation costs and gaining better inventory visibility.
Inventory management is another top supply chain pain point for medical device manufacturers. A lack of control in this area can lead to extensive capital costs, logistics challenges for sales teams, and very limited supply chain visibility. For example, implantable device stock-outs are costly, and sales representatives are unwilling to risk relationships with surgeons. These factors lead to bloated inventories with low visibility to what product is in the field. UPS estimates that about 70 percent of implantable medical device inventory is located in the field to ensure it is readily available for surgeries. The result is a disproportionate amount of working capital tied to inventory.
To help address this, UPS recently opened its first facility with comprehensive medical device replenishment services that features decontamination and inspection services for surgical kits. It is fully integrated into UPS’s overall transportation and field stocking location (FSL) network and provides an end-to-end solution for healthcare customers seeking increased inventory visibility and control of their supply chains. This network also makes it possible for healthcare manufacturers and distributors to reach more than 80 percent of U.S. hospitals within four hours.
Fenske: Let’s move on to another pain point for medical device manufacturers that was identified in your survey—product security. How does UPS help these companies mitigate risks?
Quinlan: UPS works closely with clients to help them assess the risks inherent in their supply chain. We work to streamline the supply chain, leveraging our integrated multimode network to reduce unnecessary hand-offs and implement visibility technologies and intervention capabilities when products are at risk. Tracking and monitoring systems such as UPS Proactive Response, UPS Quantum View, and UPS Flex Global View give customers ample visibility throughout the supply chain, the ability to address potential issues before they happen, and a more optimized logistics experience for medical devices to mitigate risks and enhance product security. Furthermore, UPS healthcare facilities are designed with state-of-the-art security systems, including restricted-access vaults for protecting high-value healthcare products.
We also collaborate with healthcare companies to implement best practices with regard to packaging and shipment scheduling to avoid certain days and events, when products have increased chances of being stolen.
Fenske: Still another pain point with regard to shipping products that’s related to security is ensuring the correct products are getting to the customer. With that in mind, can you tell me what role UPS plays in the fight against medical device counterfeiting?
Quinlan: IT investment can be a critical part of the anti-counterfeiting equation and the survey results reflect that. In fact, 76 percent of respondents in the medical device industry reported tremendous success in addressing product security through IT investment (bar coding, serialization, etc.). In addition, while the UDI regulation could have been viewed as a burden, many manufacturers are finding their IT investments are realizing secondary benefits with regard to improved enterprise-wide inventory controls and cost management. Implementing a strong quality assurance program with a single global IT platform delivers the best results.
We encourage collaboration and for companies to use all the resources available to them when doing business internationally. For example, leveraging U.S. commercial service and high-quality global 3PLs like UPS that have resources in country and relationships with local firms helps reduce risk. Counterfeit risk can be derived from decisions to partner with unethical contract manufacturing organizations or international distributors based on incomplete information. Many smaller companies have neither the breadth of employees nor the bandwidth to conduct the due diligence on potential partners with which they’re engaging.
Fenske: Obviously, handling the sensitive nature of shipping medical devices is not the same as transporting a vending machine or consumer products. How does UPS aid with regulatory compliance pain points?
Quinlan: UPS’s Public Affairs team plays an active role working with legislative bodies and our manufacturer clients to help shape supply chain regulations. Legislation is necessary to protect patients and improve care, and UPS helps manufacturers navigate and rationalize the varying regulations from country to country.
Since 2008, when the UPS Pain in the Chain survey was first fielded, regulatory compliance has been the top supply chain concern for medical device manufacturers. Regulations such as European Good Distribution Practices and European Medical Device Directives are requiring medical device manufacturers to look more closely at how their products are stored and transported to ensure patient safety.
While China has had Good Supply Practices in place for drug distribution since 2000, there has not been, until recently, similar regulations guiding the distribution of medical devices in the country. New GSP guidelines enacted in 2013 will require medical device companies, depending on the device classification, to keep accurate records of procurement, inspection, storage, sales, inventory management, return and replacement, temperature and humidity, inspections, and disposal of nonconforming products for specific lengths of time.
Healthcare regulations will only get more stringent, which is why UPS has a world-class team of regulatory compliance experts who have deep knowledge of global, regional, and local regulations. They keep healthcare companies ahead of the curve on current and changing legislation and provide expertise when considering new markets. Our facilities are cGMP-compliant, meet region-specific licensing requirements, and we employ quality assurance experts.
Fenske: As outsourcing becomes more popular among medical device manufacturers, costs increase to transport products, components, and supplies. How does UPS address this?
Quinlan: The industry is challenged to do more with less, and a holistic supply chain assessment is the key. Medical device supply chain executives cited rapid business growth, fluctuations in fuel, and new market expansion as the biggest challenges to managing supply chain costs.
Medical device manufacturers reported success in managing these cost by optimizing transportation by speed and service level 71 percent, gaining better inventory visibility 62 percent, and consolidating transportation providers 61 percent.
UPS completes network and transit mode optimization analyses to drive savings for our clients. In addition, we have 36 compliant FSLs in the U.S. that support the medical device industry, enabling our clients to get inventory closer to the point of care, improve time-in-transit, and lower transportation costs.
UPS continually invests in its global healthcare network to serve medical device customers. UPS operates 50 fully compliant, healthcare-dedicated facilities—about 7 million square feet—in strategic global locations.
Fenske: In recent years, we’ve seen significant events that could have dire consequences on a company’s supply chain and their ability to send and receive products or components. That said, what were the survey results regarding contingency planning within the healthcare industry and how is UPS addressing this area of concern?
Quinlan: Our survey reveals there is room for improvement in the area of contingency planning, with 40 percent of respondents not considering it a priority. Although most established companies may be prepared for frequent disruptions that have a smaller effect on the supply chain, they are more challenged in the area of dramatic disruptions. It is the high-impact, low-probability disasters that are generating concern.
Contingency planning is particularly important when developing operations strategy and planning for future expansions. Oftentimes, having an alternate distribution facility and additional transportation capability are vital if an unplanned event occurs. When a network is being evaluated for optimization and efficiency, it is a great opportunity to discuss strategies to build in resiliency at the same time. In many cases, optimization and business continuity initiatives complement each other. We work closely with medical device manufacturers on supply chain analyses to determine supply chain pain points and develop contingency plans for both everyday issues and large-scale disasters. We often engage in white-boarding sessions with customers where we produce detailed maps of their supply chain and develop contingency plans for multiple scenarios.
Fenske: Before we wrap up, are there any final thoughts you have regarding the medical device manufacturing supply chain that you’d like to share?
Quinlan: Medical device manufacturers that view supply chain as a strategic business priority and leverage collaborative partnerships to navigate the ever-changing market landscape will be positioned for success. UPS will keep its finger on the pulse of supply chain challenges with tools like the UPS Pain in the Chain study to help the healthcare industry move more from “pains” to “gains” in the supply chain.