The medical device market is one of the biggest industries in healthcare, with a current global market size of over $389 billion dollars, with growth estimated at over 28% by 2020. As the industry continues to see unprecedented growth, medical device manufacturers are confronted with mounting pressures and challenges related to operating efficiency, product availability, costs, logistics, and patient outcomes. Furthermore, losses from expired and obsolete products are commonplace, estimated between $2.8 to $5 billion per year. Plus, with more to lose in healthcare, it is critical to adopt a real-time, automated, accurate inventory tracking process. There continues to be strong demand on the industry for optimized tracking and automated processes as it relates to supply chain management, forcing the industry to design out inefficiency.
While many solutions exist for managing inventory, a fully connected smart inventory management system using Internet of Things (IoT) technology presents the most proactive solution for automating inventory management. Connecting assets using IoT technology offers medical device manufacturers real-time information throughout the supply chain. Many medical device organizations are turning to IoT technology to solve complex supply chain and logistics problems.
INDUSTRY UPDATE: WHAT IS DRIVING THE NEED FOR CHANGE IN SUPPLY CHAIN MANAGEMENT WITHIN THE MEDICAL DEVICE INDUSTRY?
Amidst regulatory changes and healthcare uncertainty, medical device organizations are finding themselves with mounting inefficient inventory management processes. There is a need stemming from healthcare organizations to increase efficiency and meet margin pressures. Healthcare organizations are prioritizing cost control, efficiency, and support from suppliers as they look for ways to control costs and increase value-based outcomes. In a study of U.S. hospitals conducted by UPS, 78% of respondents said that controlling supply chain and logistics costs are top priority over the next three years. 25% of hospitals are not currently satisfied with their supplier, and "poor inventory management, physician preference items, lack of good data, lack of standardization, and inefficient practices all contribute to a system that is costly, ineffective, and a potential area of savings" for healthcare organizations (UPS Healthcare Supply Chain Vital Signs Survey, 2017).
THE CURRENT LANDSCAPE IS NOT SUSTAINABLE
As it stands today, many medical device manufacturers have developed complex and manual supply chain distribution models. However, as the data shows, healthcare organizations are looking for medical device manufacturers who provide operational efficiency and real-time visibility that can mitigate supply chain costs. Based on survey analysis of 33 medical device companies performed by Health Industry Advisor, LLC., the current state of medical device supply chains can be measured using four key metrics:
Sales, General, and Administrative (SGA) Costs Percentage of Revenue
Days Revenue in Accounts Receivable
Inventory days on Hand