How to Shift from Reactive to Proactive Mode in Pharma Device Distribution
If you work in pharmaceutical device manufacturing—or in almost any medical manufacturing—you already know how disrupted a time we find ourselves in. We’re in the midst of an unprecedented period of upheaval as OEMs look to build supply chain resilience, address competitive pressures, nurture innovation, and bring products to market more quickly and profitably.
This is, of course, a tall order before you ever look ahead to anticipate change. Technological advancements and automation are changing everything from workflows to healthcare delivery, and businesses have to plan for them. In other words, change equals opportunity.
Up until last year, when the pandemic and its material shortages and restrictions upended long-held processes, supply chain planning was still mostly about translating market demand and managing risk to operations. While so much of the medtech industry has had its awakening in 2020, many organizations still have reactive supply chains. In other words, they’re still playing defense, dealing with supply chain disruptions and threats as they happen instead of planning ahead and being proactive.
Defining reactive and proactive supply chain strategies
Put simply, a reactive approach to supply chain management means responding to an unanticipated event (or crisis) only after it happens. A proactive strategy is designed to anticipate what could happen and how a firm will address it—before it ever happens, and even if it never happens.
In fact, the difference between reactive and proactive supply chain planning can come down to two factors: coordination and timing. Together, these determine a firm’s velocity, and its ability to get quickly and safely to market to satisfy demand, generate revenue, and drive business growth. They also determine if a firm can seize opportunity.
Clearly, proactive strategies can offer firms an edge. So, why aren’t some firms taking a proactive approach?
The supply chain struggle is real
First, moving from a reactive to a proactive supply chain approach is somewhat of a sea change for many OEMs. Some lack the tools or experience to predict risks with accuracy, while others have adhered to a traditional approach and standard operating procedures without embracing change as imperative.
This is an industry-wide struggle: pharmaceutical and medtech device manufacturers are grappling with supply chain challenges, especially in the wake of the pandemic-induced supply-chain shocks of 2020. In November, an industry survey by IDC found that pharmaceutical companies’ leadership were concerned about supply and demand, visibility, and lack of preparedness.
- Three-quarters of respondents to the survey noted that their “supply chain is in reactive mode and always expediting to meet demand.”
- Nearly 15% raised concerns about end-to-end visibility.
- Over 40% report lacking the agility and redundancy to navigate major business developments, especially in an industry heavily reliant on massive inventory to mitigate risk.
- In addition, two-thirds of respondents said they can no longer accurately plan supply and 63% have lost faith in their demand forecasts.
The onset of the pandemic may have finally given the pharmaceutical industry the “burning reason to pursue change,” according to the IDC report.
Of course, COVID-19 caused great disruption in the medtech industry, but it’s not the only threat to the industry’s supply chains. Recent research from the McKinsey Global Institute highlights the pervasive threat from other forces such as:
- Climate change
- Natural disasters
- Macroeconomic and political conditions, like Brexit, regulatory changes and other global events
- Malicious actions including cybersecurity breaches and events
- Counterparty issues, like fragile suppliers and material shortages
In fact, the research suggests that a shock powerful enough to interrupt supply chains for two months or more happens, on average, every 3.7 years. Again on average, these supply-chain shocks could cost OEMs up to 38% of one year’s earnings every decade.
Indeed, the stakes are high. And in a period when we’ve seen firsthand what can happen when supply chains aren’t resilient and designed to be proactive, the time to transform is now.
Build the supply chain before you need it
Recent research and industry trends suggest that bringing pharmaceutical device distribution into the go-to-market planning process can be a way to begin the shift to a more proactive supply chain approach. This is the concept of “build it before you need it.”
Going back to the difference between proactive and reactive supply chains, it helps to more tightly integrate coordination and timing. It’s a way of developing an agile, “one business” approach to functions and processes. What does this look like?
A reactive supply chain involves a low degree of integration between suppliers and partners. It can lead to unbalanced inventory, where supply doesn’t match demand across the market. This locks up working capital that could otherwise be reinvested in new inventory or in product development.
It can also result in poor customer service and damage to key relationships when stockouts, shortages, and other problems mean you can’t fulfill your promise to the account or the patient.
This reactive planning also keeps pharmaceutical device companies and other medtech manufacturers from developing a more strategic, innovation-first approach to meet today’s challenges and become ready to supply the future. Where to begin?
Engaging an expert partner with proven distribution excellence can help. With greater coordination and better visibility into demand and inventory movement, OEMs can advance the transformation of reactive into proactive supply chains. They can integrate risk management more fully into each stage of the supply chain—which is especially key when pharmaceutical device manufacturers are involved in distribution of devices across state lines. Transferring management of the complexity of state licenses and VAWD accreditation—necessary for a safer supply chain—to an expert industry partner can also free up vital firm talent to focus on core competencies that drive ROI and drive business shifts to capture opportunity.
Making the shift from proactive to reactive is a huge challenge, and pharmaceutical device companies will struggle to do it alone in a cost-effective way with processes proven to yield success. Firms that embrace change, though, unlock new opportunities—and come out ahead.
At Millstone, we understand the challenges. We believe that quality drives patient success and that the expertise of a trusted outsourcing partner can help at this critical time. That’s why we’ve perfected all the capabilities medical device manufacturers need to get to market. Today we offer post-manufacturing and aftermarket services to more than 50 customers, including some of the top 10 orthopedic companies in the world. We are constantly evolving our processes and services to help OEMs achieve sustainable success. We offer clean room packaging, medical device specific warehousing, finished goods distribution, loaner kit management, advanced inspection and reverse logistics services—all with an unparalleled focus on quality.
What could we help you do better? Learn more at http://millstonemedical.com.
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