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Industry Q&A: Six Questions on Supply Chain & Tier 1 Service

More than 18 months into the post-COVID era, medtech OEMs continue to face new challenges of complexity, especially in the orthopedic market. With changes to elective surgery delivery models, persistent supply chain disruptions, labor shortages, and more, the nature of the market looks to be disruptive for some time to come.

As we look to 2022, Millstone is sharing industry perspectives on market trends and must-knows from some of our experts. Millstone’s Marketing Manager Brittany Arnone recently talked with General Manager Tom Williams about what to expect in 2022 and how Millstone’s comprehensive Tier 1 service is helping many OEMs speed product launches and boost the bottom line.

BA: It’s early in Q3 of 2021. What are some of the top current pressures you’re seeing in the orthopedics market?

TW: From our side of the industry in outsourcing and contract manufacturing, we continue to see a great deal of pressure in the supply chain. Raw material shortages continue to drive supply chain disruptions and delays. Add to this the fact that we’re facing a significant labor shortage across industries, and the net effect is challenges up and down the supply chain.

For OEMs, defining success at this moment is all about inventory allocation and management. Across the industry, everyone is trying to quicken the pace as medtech continues its post-pandemic recovery and elective surgery volumes steadily increase. So, for OEMs, it’s about getting inventory—and getting it where it needs to be, when it needs to be there. When demand pressure meets supply chain challenges, the stakes are high. We’re seeing OEMs missing surgeries because they can’t get product to surgeons and patients. Sometimes this is about inventory, and sometimes it’s purely about shipping as major carriers are also feeling the pressure of labor shortages and high demand, especially as we enter the holiday period.

BA: What do you see as some of the emerging trends in the industry heading into 2022?

TW: First is the continual and accelerated migration to robotic assisted surgeries in orthopedics. Whereas once a robotics platform was a “nice to have,” it’s a must-have now; if you don’t have it, you’re behind.

The ability of the robotic assisted platform is going to drive a larger industry shift, the next frontier. We’re already seeing this with the increase in outpatient procedures being performed in ambulatory surgery centers (ASCs). Not too far into the future, the majority of elective joint replacement surgeries are going to take place in ASCs. Robotics platforms are going to make this a reality, while also shifting the economics of the business. Orthopedic robots will help surgeons be even more precise, and we’ll see the industry tilt toward greater procedure volume in a less-costly setting than hospitals.

BA: Considering this trend, what can OEMs do to prepare?

TW: Right now, given how success is driven by proper inventory management, OEMs really need to make sure that they have the capacity to deliver or get to market. Most large implant manufacturers have well-established supply chains and a good understanding of historical demand. But this will need to change as the shift to ASCs accelerates.

This is a critical time to think about scaling up going forward, especially around instrumentation. With increased volumes in an ASC setting, the emphasis is going to be on efficiency, as this is what will really drive increased surgeries. So, there are strategic decisions for OEMs to make on delivery of instruments into the ASC setting. Are you preparing to support efficiency and volume? Sterile, single-use instrumentation will. Reusable instrument sets drive a need for large sterile processing operations, which are standard in the hospital setting but may not be replicated within these new settings. There are lasting business implications to this shift.

BA: Millstone’s facility expansion in 2020 increased our ability to support OEMs with Tier 1 services. Tell me about the growth you’ve seen for this service.

Under Tier 1, Millstone assumes management of the supply chain for an OEM. The OEM can choose (or continue to work with) a preferred contract manufacturer, and Millstone will receive, quality inspect, clean, package, and sterilize product, delivering a finished good to the OEM. Seeing an increase in the number of firms engaging us for this comprehensive service was a major factor in expanding our footprint within our Fall River campus.

We’ve seen a lot of growth in Tier 1 service, especially over the last 18 months to three years. It’s a reflection of our supply chain management, which Millstone is excellent at and has invested in. Yet we’re also seeing a lot of growth come down to our ability to increase speed to market.

What we’ve found is that large organizations trying to launch a new product inevitably must contend with a great deal of bureaucracy. And this can slow things down because there are so many stakeholders. Often, when you’re able to launch that same product externally, especially when the OEM has a project champion focused entirely on the partner—in this case Millstone—it can really speed up the process of packaging, assembly, validation, and everything else required to get to market. We’re able to bring that kind of speed, through our best-in-class processes as well as our critical expertise around things that tend to hang up product launches, like validation expertise, universal packaging, and others, while maintaining the highest levels of quality and oversight

So, our growth in Tier 1 is about reducing supply chain complexity, but it’s also about launching products safely, on time, and more effectively and efficiently than many OEMs have the capability to do internally.

BA: What kind of business success can Tier 1 help OEMs achieve?

TW: Aside from a faster product launch, which is a big one, I think of resource optimization. Often, a large OEM will acquire a smaller company, and that smaller company isn’t at the point where it can scale. Nor does the OEM want to make the investment necessary to scale the acquisition from an operations, supply chain management, or packaging standpoint. Often, when this is the case, Tier 1 can be the answer. The OEM can acquire a small company and migrate it to us. The OEM is then able to issue a single PO and have Millstone manage the supply chain to deliver the finished good. The OEM can be confident that we’ve managed the contract manufacturer to the highest quality standard, so it’s a strategic approach to expert sourcing that helps them reap the upside of acquisition without the investment to scale. In fact, the large OEM can achieve the synergy of that transaction without having to stretch their own internal resources to manage production.

BA: What should be top of mind for any firm considering Tier 1 service?

TW: It really comes back to this question: As a medical device manufacturer, who do you really want to be? Do you want to be the team that is ordering trays and boxes and labels, or do you want to be the team that is designing, marketing, and selling medical devices? If you’re choosing the second, then the strategic decision is to focus on that and outsource the rest. Otherwise, you get bogged down in the day-to-day of supply chain management, which is more challenging and complex than ever before.

Millstone’s Tier 1 service gives OEMs a streamlined approach to expert sourcing, with contract manufacturing, quality critical inspection, cleaning, packaging, and sterilization handled under a single PO.

At Millstone, we understand the challenges OEMs face in the robotic assisted surgery products market. We have successfully launched and supported packaging for four major orthopedic robot platforms and bring a birds-eye view of the growing robotic assisted surgery products 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 https://millstonemedical.com.