Steve delivering a medical device to a doctor heading into surgery

Overcoming Challenges in Healthcare Supply Chain Management

By Read Time: 7 min.

Many healthcare organizations are facing roadblocks when it comes to supply chain efficiency. We've found the top challenges associated with the healthcare supply chain management and their solutions.

Healthcare logistics professionals face a complex, challenging environment with what may seem like competing priorities. Companies seek low-cost solutions, yet there are regulatory and quality measures that must be met regardless of the price.

Quality and compliance issues are increasing as regulations demand visibility into the supply chain in the event of product issues or recalls. The fragmented nature of the healthcare supply chain costs billions in value and reduces the healthcare sector's ability to overcome the challenge it faces. In fact, a recent study identified the supply chain as the second largest expense for healthcare providers. According to the survey, high-value medical devices create $5 billion in waste annually.

Many companies are looking for partners to help them create a lean supply for healthcare and medical devices. A lean supply chain is one that eliminates waste and non-value added activities. A company must analyze its supply chain to find waste such as multiple touch points for a product, duplicative inventory, a warehouse network that doesn't align with the current client base, or a transportation plan based on outdated fulfillment strategies.

Healthcare companies are looking at other sectors for insights. Fast-moving consumer goods companies are able to cut production lead times to reduce inventory-carrying costs. However, unlike retail or manufacturing supply chains, the point of sale for healthcare products can be hard to identify and manage. Blind spots in the process lead to excess costs and inventory.

Male doctor standing with an IPad in his hands

Improving the healthcare supply chain could give people around the world access to safer and more affordable medications and devices. It can also reduce costs and create additional revenue sources for manufacturers.

Here's a look at a few of the top challenges associated with healthcare supply chain management.

Overnight Shipping

Problem: Relying solely on overnight shipping costs adds up over time, eventually leading to lower profitability, lack of capital or innovation and difficulty in expanding. As the expectations for faster delivery rise in the world of two-day shipping from e-commerce sites, the legacy logistics networks lead to higher costs to meet the demand for overnight shipping.

Many pharmaceutical and medical device companies are stuck with one-size-fits-all thinking. However, products may have significant variations in profitability, value per unit, demand, and service expectations. Relying on a single supply-chain process for products with varied characteristics creates inefficiencies, such as high inventories for some products and short supply for others, which requires expensive overnight services to meet fulfillment deadlines.

Solution: The solution is to support on-demand shipping with a decentralized warehouse network that allows for quick, cost-effective delivery of medical devices, even in “patient on table” situations. A lean supply chain will segment the product base by product characteristics products and customer requirements to develop a transportation plan that reflects current market realities. Using a decentralized warehouse system supports fulfilling customer orders with more frequent, smaller shipments to increased velocity to meet customer expectations.

Inventory Shortages

Problem: Unpredictability within the medical device market can inevitably cause inventory shortages. A typical laptop manufacturer can fulfill an order for assembled customized computers and deliver them about a week later. Compare that to a pharmaceutical manufacturer with an average lead time of about 75 days. Healthcare manufacturers must align the production cycle with the patterns of patient demand and increase the frequency of the manufacturing process accordingly. Long-lead times and slow-moving products can lead to a lack of visibility that doesn't support the “on-the-table” demands for some products. If inventory data is managed locally, then the enterprise is operating blindly.

Male nurse in scrubs looking for items in inventory

Products that are stored on client premises or with field reps may be invisible to the rest of the organization. This lack of visibility can lead to delays in fulfillment or ordering additional safety stock to ensure there are no shortages.

Solution: The use of supply chain technology allows for medical device companies to account for what is on hand and place inventory where it's needed most. In a healthcare industry based on many regulations, the more transparency a company is able to attain while cutting costs on incorrect inventory numbers, the more the bottom line will benefit.

Management of medical device reverse logistics

Problem: When there is perceived to be an issue of safety or quality with a pharmaceutical or medical device, a manufacturer may implement a voluntary recall. Or, the FDA has the authority to force medical device recalls when there is believed to be an issue with the product in question. In either case, the recall presents a significant risk to the company. The best practice is to develop a recall plan before it is needed.

Solution: Effective recall management requires planning and strategic partnerships to ensure the speed and quality of the response, including the reverse logistics component to gather and return devices for further handling.

If medical devices are damaged, they may require special care when being handled. Devices with lithium-ion batteries present unique challenges due to transportation restrictions.

Managing reverse logistics can be difficult, especially with antiquated technology and fragmented processes. An experienced third-party provider can manage the reverse supply chain to allow materials to be shipped back to the manufacturer. Even sensitive materials can be handled with the assistance of a specialized third party.

Lack of Automation

Problem: Lack of visibility and highly manual processes can lead to increased costs throughout the healthcare supply chain. By relying on manual data entry and management, enterprises forgo the benefits of data-based decision making as well as suffer higher labor costs.

Female doctor manually counting boxes of inventory in storage

One of the issues facing the healthcare industry is a lack of global standards for data interchange, processes and capabilities. For example, bar codes are universal on most consumer goods. Upcoming FDA regulations will promote the use of unique product identifiers for verification down to the package level. Ultimately, the FDA plans to require fully secure electronic product tracing to enable a step-by-step chain of custody for drug products, establish product verification, and ensure that all parties involved in the supply chain have the ability to identify and investigate any suspect drug.

Solution: Going deeper with automated solutions will support the development of a lean supply chain to cut waste. Cost-effective, automated warehousing solutions allow for greater visibility into inventory, shorter lead times, and lower operational costs.

Final Thoughts

With increasing regulatory requirements, rising costs and customer expectations, the healthcare supply chain will only become more complex. The goal is to work with an experienced provider like Warehouse Anywhere to simplify operations and overcome challenges within your supply chain. Incorporating lean principles into the supply chain along with relevant technology and operation solutions can transform your bottom line.

By embracing a supply chain revolution, pharmaceutical and medical device companies can provide safer, lower cost access to products that improve or even save the lives of people around the globe.

To find out more about modernizing your medical device and healthcare supply chain, contact Warehouse Anywhere.

About the Author

Steve Ciemcioch | Warehouse Anywhere

Steve Ciemcioch

Steve Ciemcioch is the President of Warehouse Anywhere. He has over 15 years of experience building solutions in the supply chain industry and holds a degree in Business Administration and Management from Medaille College.

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