Manufacturing

Supply Chain Management–Boon Or Bane For The Medical Device Industry

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The phrase supply chain management (SCM) invokes images of the three biggest e-commerce enterprises presently operating in India – home grown Flipkart & Snapdeal & American giant Amazon.

Flipkart, Snapdeal & Amazon are examples of companies who have effectively & efficiently used the supply chain management to deliver diverse products to millions of customers across the country.

So why can’t it be replicated in the medical device industry? Why is the medical device industry slow in adapting to the changing trends in the logistics field? The answer lies in the different working models of Flipkart & medical device manufacturer. Flipkart follows a marketplace model of e-commerce which acts as a facilitator between buyer & seller by providing an information technology platform on a digital & electronic network i.e. Flipkart is not involved in the manufacture of any of the products it sells. On the other hand, medical device manufacturers source raw materials (components, semi-finished goods, packing materials, finished goods), manufacture / assemble, label, package, sterilize&distribute their products. Another important factor to be considered while applying supply chain management in the medical device industry is the regulatory requirements. Manufacture of medical devices is governed by regulatory requirements at every stage – procurement of materials, manufacture process, labeling, packaging, sterilization & distribution in foreign markets.

According to the expectations of regulators & ISO standards, specific requirements have to be met at the time of purchase of products. Clause 8.4 Control of externally provided processes, products & services in ISO 9001:2015 and Clause 7.4 Purchasing in ISO 13485:2016 outlines the need to document the criteria for selection, monitoring, evaluation & re-evaluation of vendors. The criteria thus established should be proportionate to the risk associated with the medical device. It also requires the results of all these activities be documented & records maintained. The clause also requires the manufacturer to determine the controls to be applied to external vendor. Subpart E purchasing controls (820.50) also states similar requirements at the time of purchase of products & services. However, the type & extent of control of the manufacturer over the vendor depends on potential effect of purchased product/service on the final product quality. For this reason, elaborate contract agreements between manufacturer & vendor should be signed to define the extent of control. The depth of contract agreements may cover but is not limited to costing, delivery timelines, product liability, product specifications, process parameters, notification to manufacturer about any changes in product/process/activity etc.

Manufacturers can follow ‘push’ or ‘building-to-stock’model which is producing stock on the basis of anticipated demand. Another model that manufacturers can follow is the ‘pull’ or ‘building-toorder’model which is producing stock in response to actual demand. In order to overcome the drawbacks of both pull & push model, the push-pull model can be used wherein both the push & pull models are incorporated at different points in the supply chain. In this, upstream units employ ‘building-to-stock’, while the downstream units employ ‘building-to-order’. For a legal manufacturer, upstream activity may include but is not limited to procurement of raw materials, components, semi-finished goods, finished goods, packing materials, sterilization services, other relevant lab services etc. The downstream activities may include but is not limited to distribution of final product via the network of distributors, wholesalers & retailers.

Manufacturer looking to adapt supply chain management must follow the same regulations that they would if they were individually sourcing materials. Prior to including vendors in the supply chain, manufacturers must conduct vendor qualification to ensure that the vendor will supply quality products/service& will follow the delivery schedules. If required, manufacturers can sample & test the vendor materials prior to finalizing them as approved vendors. Materials/services will always be sourced from theses approved vendors. These vendors are also evaluated regularly to ensure that they continue providing quality services. Elaborate & descriptive contract agreements between manufacturers & vendors will ensure no ambiguity in the scope of services of the vendor. In case of discrepancies in the services of the vendor at the time of actual delivery, a manufacturer can always stop sourcing from the vendor & instead look for alternate vendors who will provide quality services.

Supply chain management can be applied even on the downstream side, i.e. for the distribution of finished products from the manufacturers to the consumers either directly or through a network of distributors, wholesalers & retailers. Once again when the manufacturer is looking at applying supply chain management for distribution of finished goods, they have to follow all applicable regulations. A main concern during distribution is maintaining the integrity of the final product while in distribution so that the product reaching the consumer is of the same packaging & labeling as originally intended by the manufacturer. For this, packaging
validation is completed at the time of design & development to ensure that the packaged product is not damaged during handling & distribution. Manufacturers outsourcing logistics via the supply chain must give clear instruction on how to handle the product. If any special environmental conditions are required to be met, it must be clearly instructed to the logistic vendor. Again, elaborate contract agreement will help reduce ambiguities in the scope of the logistic vendor. As with other activities involved in the manufacture of a medical device, the validation of supply chain must be carried out to demonstrate the integrity & feasibility of the supply chain in maintaining the quality & safety of the product.

The idea of supply chain management in medical device industry sounds appealing. It can help manufacturers focus on design, development & manufacture of the product while outsourcing the supply chain management to a reputed firm. It will help in reducing the overall expenses that are incurred during the sourcing & delivery of materials & dispatch of semi-finished & finished goods. Several factors need to be considered while studying the feasibility of applying supply chain management at a manufacturing site. The type of product being manufactured, raw material availability, country regulations, customs and taxes are only some of the deciding factors. While it may not always work in favor of the manufacturer, it nevertheless has proven to be an efficient management tool in other industries which we hope can be equally adapted in the medical device industry in the coming future.

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