Managing medical device inventories is challenging for everyone concerned. These products have a host of characteristics seemingly designed to add supply chain cost and complexity. Large product portfolios? Yes. Devices such as the implants used in joint replacement surgery may be manufactured in hundreds of variants. Stringent storage and handling requirements? Yes.

Devices can be delicate, requiring tight control of temperature, shocks and vibrations, as well as protection from contamination. Complex regulations? Yes. Device makers must comply with rules governing good manufacturing and logistics practices, and Unique Device Identification (UDI) markings will be required on many devices by the end of the decade. A limited shelf life? Yes. Many devices have strict use-by dates, after which they have to be reconditioned or destroyed. Short delivery lead times? Absolutely. Medical teams embarking on life-saving or life-changing interventions need to ensure that the right devices are ready and waiting when they're needed.

The traditional approach used by manufacturers to meet these challenges is expensive, and often unsatisfactory. Large consignment stocks are held close to the point of use, either in hospitals or under the control of the manufacturer's field staff. Clinical teams request what they need from those inventories, which should then trigger the process of billing and replenishment.

Stock options

This model solves part of the availability challenge but creates plenty of other issues along the way. It requires manufacturers to tie up cash by making and storing products that might not be used for months or years. And if they don't forecast demand accurately enough, they may be forced to writeoff obsolete stock.  Dispersed inventories are hard to manage, leading to lost or damaged products, or shortages caused by insufficient awareness of true inventory levels. It most certainly leads to inefficient use of valuable resources.

Over the past three years, DHL has been working with major global medical device manufacturers to develop an alternative approach. The new solution combines DHL's Service Logistics infrastructure and expertise with its knowledge of the unique requirements of life sciences and healthcare supply chains.

Instead of holding consignment stocks at hospitals or in the sales rep's "trunk," the manufacturer now stores its inventories at a network of nearby forward stock locations. These locations sit within existing DHL Service Logistics facilities, but are built and operated in compliance with stringent healthcare regulations and guidelines.

The manufacturer's field service personnel still works closely with hospital staff to identify the correct products for each patient, and once the choice is made, an order is transmitted electronically to the appropriate holding location. From there, the devices are selected, prepared and shipped to the hospital in as little as two hours.

Speed and transparency

Its new last-mile solution has been a big success, allowing the medical device companies to reduce inventory costs while improving product availability for patients. The digitally enabled system has also eliminated a lot of slow, labor-intensive and error-prone paperwork for hospitals, and the company now has a much clearer view of its entire supply chain, as well as better control over the order-to-payment cycle.

Since 2016, the partnership has built a network of forward stock locations across Europe, and the rollout is continuing at a rate of around one new facility a month. Work has begun on the development of similar networks in Asia and Latin America, with special focus on Mexico and Brazil. This new supply chain approach is also helping the DHL customer in other ways. It is already using the network to deliver other devices from its range directly to the homes of patients living with long-term medical conditions, for example.

"DHL is working on the integration of a number of other technologies and approaches to address last-mile challenges in the healthcare sector," says Richard Dunn, Global Product Director, Life Sciences & Healthcare Sector. "We are looking at the whole information flow through the supply chain, exploring technology such as RFID that allows us to link replenishment directly to consumption."

Alongside these digital developments, Leonard Aerts, Chief Customer Officer, DHL Service Logistics, suggests that medical device companies can benefit from other new services in their physical supply chains. "In some markets, we are already playing a more direct role inside the hospital," he notes. "We are helping in the management of on-site inventories or even delivering products directly to operating theaters." —  Jonathan Ward

Published: June 2018

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