Chains of command

An efficient, well-oiled supply chain is essential to the smooth operation of any business, whether that business is selling food, cars or clothing. However, it is particularly important in the world of medical devices, a sector that is highly regulated and where companies typically carry large amounts of inventory.

Bruce J Stanley, president-principal at the Stanley East Consulting Group, has a wealth of supply chain experience in the healthcare industry, and now advises global biotech, medical device and pharma businesses in the management of their supply chains. So what does he see as the main challenges facing medical device companies aiming to make their logistics procedures as efficient as possible?

The biggest concerns, he says, continue to be geopolitical issues, and regional regulation of medical devices and healthcare. There was an optimism in the industry a few years ago that companies “could create a product and ship it anywhere around the world like it was Amazon”, but this has proved not to be the case.

More recently, Brexit has made it harder to know where to place facilities to serve EU countries. Before Brexit, “You could put a facility anywhere in that geopolitical area.

Now it is not so easy any longer. If anything, Stanley adds, “The geopolitical and regulatory issues are probably even more paramount today than they were five years ago.”

This is why one of the major pieces of advice he gives clients is, “Stay close to your regulating body, whether it is in London, whether it is in Washington DC, whether it is in Singapore.” It doesn’t matter how innovative the client’s logistic model is, he says, “The reality is you have still got to play by the local regional jurisdiction because if you don’t, you won’t be able to ship the product.”

Medical products are not like DVDs

When it comes to managing distribution, says Stanley, some medical device businesses imagine that it is possible to mimic the innovative distribution model of companies such as Amazon.

“They think, ‘If they can do it in DVDs and books, we can certainly do that in healthcare’,” say Stanley, urging caution.

“It takes a lot of courage for companies to make that leap because people don’t die if they don’t get their DVD on time, but people can be injured physically and die if the [medical] products aren’t where they need to be when they need to be, so there is some degree of hesitancy about saying, ‘Well, we will just use that model and drop it in here’.”

In fact, Stanley says, the real reason for Amazon’s success lies in its collection and analysis of customer data. It has, he points out, “figured out a way to translate the data into really workable operating parameters”, resulting in near-seamless logistics.

Many in the medical devices industry are keeping an eye on Amazon’s expansionist tendencies.

“This is what scares a lot of the people in my industry, because once Amazon figures out some of the other stuff, they are going to be a force to be reckoned with, because they do understand how to use their pristine data, turn it around, capture it, reuse it in such a way that everybody benefits,” says Stanley.

It follows that the companies that have risen most successfully to the challenges of medical device distribution, he says, are those that maintain “pristine data, whether it is customer data, product data or patient data”.

As companies come to realise that their data is a type of intellectual property, they become keen to protect it, and some of Stanley’s work involves offering advice on the multiplicity of tools they can use to manage their data more effectively.

“They have CRM tools for pricing and contracts and sales, and distribution and so on – and at the end of the day, they are all the same,” he points out. “Basically, they have all the same functionality.”

The important thing is not which tools businesses use but how they make best use of the data.

So how can businesses make sure that their data is pristine? Stanley says that many companies are reluctant, for security reasons, to use third-party organisations to manage their data. Although he agrees about the importance of security, he is also a strong advocate of making use of the global standards organisation GS1, which he describes as an “industry forum that helps create the mechanisms so that organisations, companies, hospitals and governments can actually have consistent, clean data.”

Predictability leads to success

The ability to have consistent data that adheres to the same naming conventions makes a substantial difference to an organisation’s ability to keep track of crucial information in supplier and customer databases. GS1’s Traceability in Healthcare standard, for example, makes it possible to see the movement of medical devices right across the supply chain, tracing backward to identify the product’s transfer history, and forward to see its route to the hospital or clinic.

“Take the identifier for what a customer is – you could have 10 different identifiers, or a product could have five different catalogue numbers,” says Stanley. “Organisations like GS1 are trying to drive global standardisation in such a way that when you pick up a syringe in the US it has got the same classification, the same catalogue number, as in Belgium or Germany or Norway.”

Keeping data up to date is a major challenge, he points out – data that is correct today could be wrong by tomorrow.

“Organisations like GS1 provide the platform for companies to stay current 24 hours a day, seven days a week, every day of the year, without missing a beat,” he says. “That is what is different now from maybe 10 years ago when each entity thought they had to create their own data profile. Now they can use organisations that help them keep it consistent and current all across the board, everywhere.”

The impact of having data that is both clean and up-to-the-minute is transformative when it comes to managing the supply chain.

“What we see now in healthcare is predictability models being utilised in such a way that manufacturers can start to predict with a better degree of certainty what their customers are going to need or what surgeries are being done,” Stanley explains.

They can even take into account what regulations government agencies are creating and how that affects manufacturers upstream, to the extent that now they have, “good predictability on product flow, product consumption, product usage and, for that matter, product discontinuation with some degree of certainty that they couldn’t do before”.

Look beyond healthcare for data analysts

In a world where collecting and understanding data has become essential to keeping the supply chain running, the key skill set, says Stanley, is that of the data analyst.

“You just can’t have anyone looking at data,” he says. “Now you need analysts who can ask, ‘How do we use this in such a way that actually creates optimisation up and down the network?’” Data analysts, he notes, “can pick trends, and predictability is hugely helpful”.

This makes it imperative, he says, that businesses employ staff with excellent data analysis skills.

“In healthcare you see a lot of data analysts coming from banking, because people in healthcare realise that these people think differently than we do. It is one thing to have an esoteric view of, ‘Well, we are in healthcare because we help patients and cure cancer’, but in order to optimise the system or process you need people to think differently.”

Stanley and his colleagues have done a lot of work with the banking industry, learning how its approach to data analytics could be applied to healthcare.

“They deal with billions of bits of information routinely – financial, transactional and customers and identifiers, all the kind of stuff that healthcare wrestles with,” Stanley explains. “So I always encourage healthcare providers and manufacturers to look to these other industries that may not seem connected, but are really connected when it comes to the capabilities of the people that do the work.”

At the same time, it is more important than ever to understand the different regulatory environments under which data is held.

“Data is protected differently from region to region around the world,” Stanley points out. “Companies that are global always have to always take that into consideration.”

This is another reason, he says, why he encourages global clients to have a presence in the country where they are doing business.

Sometimes you have to make hard choices

Although Stanley sees good management of data as integral to successful supply chain management, another area that he believes is essential is stock keeping unit (SKU) rationalisation.

“You see any kind of company and they say, ‘We have been making this for 50 years and everyone loves it’, and the reality is that they may not love it as much as people think,” he says. “Companies that tend to be state-of-the-art now are the ones that make the hard choices on SKU rationalisation. They look at their cost. They look at their sale price. They look at their market, they look at their gross profit on those products.”

It is a very hard decision to make, he acknowledges, but one that is “crucial to this optimisation of supply chain, because it affects everything from the end-user patient all the way upstream to the supplier or the items that the manufacturer makes on behalf of the patient”.

So, what are the big mistakes Stanley sees businesses making time and time again?

“The first one is that they are going to latch on to what they think is the new state-of-the-art technology and never really take a pause to see how that is going to affect how they work and what they do, and their market, their customers and their product line,” he says. “So in many cases, the biggest mistake they do is apply new technology on old processes. And then there is just a mishmash and it never works right.”

It is surprisingly common, he adds, for businesses to implement technology without understanding how it is going to help their bottom line.

“Often I have asked a lot of CEOs and company leaders, ‘How do you work? How do you know what you do?’ And I am shocked many times that good companies with good leaders can’t really tell me how they work.”

Too often, he says, companies “have never done the heavy lifting to do a self-assessment and research what they do, how they do it, and what the costs are.” Once you have that knowledge, he says, ”Bringing in systems is so much easier because then you go, ‘Well, this one really helps us get to that level’. So that is probably the biggest mistake – that people want to rush to new technology because they think it is great.”

Ultimately, he says, success is predicated on mastery of the business’s core data.

“Once I know with crystal clarity what my customers are, where they are, what their needs are, where they are moving – because they could be moving to a new technology or new procedure – once I have got that in my hands, all the other things are somewhat ancillary because it will tell you where to go. It will become so obvious to someone looking at that data that the rest of it is simple.”