Abbott, bioMerieux, and Stryker on the Future Of Medical Device Supply Chain

We asked three top medical device supply chain leaders, also LogiMed 2018 speakers, about the major challenges they’re currently facing, along with their approach to cost optimization and the impacts of the shift to value-based care. Here’s what they said:

On Top Challenges Facing Their Supply Chains in the Next 12-18 Months…

Kulwant Sandhu, Director, Supply Chain, Abbott : Integration (due to acquisition) and achieving cost reduction targets.

Ivan Lai, Senior Director, Global Supply Chain, Neurovascular, Stryker:

1. Consignment/field inventory
2. Capacity flexibility and responsiveness

Anthony Manganaro, Head of Supply Chain – Americas, bioMerieux: The top challenge we are looking to overcome is improving our partnership with our customers to add value and have supply chain be a differentiating factor. We are partnering with our top customers to learn about their supply chain flows and look for opportunities to better collaborate. There are also many emerging technologies that that can add value to our supply chain and our customers and suppliers

Managing, Optimizing and Reducing Costs

80% of costs are still moving things from point A to point B - and the supply chain is under tremendous pressure from the C-suite to reduce costs. With margins falling and competition increasing, there is a need become efficient and eliminate waste. What happens if supply chains don’t cut costs? If device manufacturers don’t free up capital for new investments, like R&D, they won’t be able to introduce new products to grow the business or capitalize on opportunities in the market

On Their Approaches to Cost Optimization…

Kulwant Sandhu, Director, Supply Chain, Abbott : Removing waste from processes, volume negotiations, contracts, dual sourcing.

Ivan Lai, Senior Director, Global Supply Chain, Neurovascular, Stryker: Stryker has taken a comprehensive approach to cost optimization that enables us to reduce cost that don’t add value, and reinvest the savings back into the business to drive further growth. Here are the eight areas of focus in our “Cost Transformation for Growth (CTG) initiative:

1. Product Life-Cycle Management
2. Plant Network Optimization
3. Supply Chain Optimization (optimize supply chain network)
4. Direct Sourcing
5. Shared Services
6. Global Operating Model & Organizational Design
7. Indirect Spend
8. Global ERP system

Numbers 1,3,4, and 7 are supply chain related areas.

Anthony Manganaro, Head of Supply Chain – Americas, bioMerieux: We approach any cost optimization project (from distribution networks to new technologies) by evaluating the customer impact and the sustainability of our solution. Our goal is not have the lowest cost but to have a consistent and sustainable solution that is cost-effective. As we implement solutions to our core SC infrastructure we re-invest a portion of the savings into projects to improve our supply chain offer.

The Changing Healthcare Landscape

Healthcare is shifting toward value-based reimbursement. Hospitals are consolidating and reducing the number of products they carry, making decisions around reimbursement. With increased scrutiny on the clinical value of products, manufacturers are under greater pressure to better serve both providers and patients.

What happens if they don’t adapt to the new healthcare landscape? If device manufacturers don’t understand how hospitals are buying and evaluating products, they will lose significant business and could ultimately lose significant parts of their sales revenue.

On The Role of the Supply Chain in Value-Based Care…

Kulwant Sandhu, Director, Supply Chain, Abbott: Lower cost materials, better availability and technology enabled solutions.

Ivan Lai, Senior Director, Global Supply Chain, Neurovascular, Stryker: A few thoughts:

• Risk-sharing will be demanded by providers, which requires data sharing between suppliers, providers and perhaps payers. Technology advancement is needed to make this a reality.
• Supply chains will need to be optimized as an extended supply chain, crossing the divide between suppliers and providers. Most companies still haven’t optimized internally yet, which is the near-term step, so this will be a long journey. Companies need to first be able to optimize their supply chains within their boundaries before extending it out to their partners.

Anthony Manganaro, Head of Supply Chain – Americas, bioMerieux: We are trying to bridge the multiple supply chains (customer, suppliers and us) to:

1. better leverage of resources and capabilities
2. improve traceability and transparency
3. understand the needs and opportunities that we can collaborate on