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Industry Q&A: Solving Supply Chain Pressures with Reverse Logistics

We’re living through the Great Supply Chain Reckoning as orthopedics firms grapple with material availability, shortages, and shipping delays worldwide. For OEMs of all sizes, disruption continues to dominate the outlook through the end of 2021 and well into next year.

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 Commercial President Kelly Lucenti about how reverse logistics can help OEMs of all sizes address the challenges and uncertainty of supply chain management while saving millions.

BA: Tell me about the top pressures and opportunities you’re seeing in the orthopedics market right now.

KL: No one in the industry will be surprised to hear me say that right now supply chain is everything. But it is. Material availability is a huge challenge. Sourcing has been difficult throughout the pandemic, and shipping delays—like the container ships backed up off the California coast—are compounding an existing problem.

As a result, OEMs are struggling to make new product. Even if they have the materials for devices and sets, firms might not have the material to package the product.

This is where reverse logistics can help to relieve pressure. Reclaiming and reutilizing existing inventory out in the field presents a huge opportunity to overcome the current supply chain pressure.

BA: What’s a top emerging trend in the industry heading into 2022?

KL: Changing how OEMs manage inventory is going to require visibility. It’s impossible to truly match supply with demand when you don’t have the confidence of knowing what you have, where it is, and where it’s needed. We’re monitoring developments in tracking devices and visibility and working closely with a potential partner on an innovation in this space. Ultimately, it will be about enabling visibility through technology that makes inventory reallocation much, much simpler. As a result, OEMs will be able to bring back inventory and redeploy it where it’s needed more quickly and easily, which unlocks the full benefit of reverse logistics programs even faster.

BA: What firm profile makes an ideal candidate for a reverse logistics program?

KL: The truth is that firms of any size can benefit from reverse logistics. Let’s look at it by size: large, medium, and small.

Large firms have enormous inventory, some of which is sitting on the sidelines out in the field and not being utilized. Flushing it out, cleaning and repacking it, and redeploying it to cover cases and relieve supply chain pressure represents an enormous opportunity: cost savings that can add up to the tens of millions annually. When we consider how the pandemic slashed revenues in Q2 and Q3 of 2020, and how important the continued recovery is for firms, these kinds of numbers speak to enormous potential.

While large firms may see the most “bang for their buck,” so to speak, they’re not the only ones who benefit. In fact, because large firms have the most buying power, they may be less affected by supply chain pressure than small or medium firms. And it’s not just supply chain woes for these smaller firms. When you’re growing, inventory is expensive, especially considered proportionally to your investment and your ROI. It’s why some firms can grow themselves right out of business if they’re not careful. So, while small and medium firms may not flush out as much inventory as the largest firms using reverse logistics, it’s critical for them to utilize inventory and reclaim what’s not being used.

Regardless of size, a lot of firms can get hung up on timelines when they’re considering reverse logistics programs. There are concerns that starting up these programs can take too long. Firm size is somewhat correlated to timeline, but this depends on how firms are scoping their reverse logistics. For instance, large companies may roll out by division rather than at a firmwide scale, and this can accelerate timelines. In general, some pilot programs can be up and running in 90 days; others, depending on scale, can take up to a year—but even then, the cost savings are so significant that they truly do boost the bottom line.

In fact, we’ve worked with one of the top orthopedics companies in the world implementing reverse logistics for their spine, trauma, and CMF divisions. For the last three years, they’ve averaged $30 million in savings each year through reverse logistics. They were able to address several problems at once: case coverage, high backorders, long timelines, and underutilized inventory through one reverse logistics program.

BA: What’s your best advice for any firm considering implementing a reverse logistics program in 2022?

KL: Year-end is an ideal time. At this point, companies are undertaking their year-end physical inventory and closing out their financials as they prepare to file taxes. While taking this physical inventory, they can get an accurate count of instruments and implants that are in inventory but aren’t being utilized. This information helps to lay the groundwork for a reverse logistics program. With it, we can help them determine what and how to redeploy.

Another consideration is the scale of any reverse logistics program. A pilot program can be an ideal place to start and helps OEMs see how this approach can address high backorders, for example, to prove value quickly.

As I noted earlier, deployment can be fast—90 days in some cases. This is because we’ve developed a world-class system. Our approach has been audited by the FDA and ISO and was built to get OEMs of any size up and running smoothly—much faster than they think. My advice for small, medium, and large firms is to look to reverse logistics as a strategic program for 2022, and to reach out to start the process now.

Learn how Millstone’s reverse logistics services can help you maximize case coverage and cost savings while helping you support surgeries, satisfy demand, and drive sales. Find more information and an industry case study here. Looking for more on reverse logistics? Read this article on the mission-critical nature of reverse logistics, and this one for five ways reverse logistics can help to augment your post-pandemic recovery.

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.