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By GHE Team | June 14, 2020
In a world before the coronavirus (COVID-19) pandemic, the manufacturing of medical devices was becoming more complex, the need for more products was increasing, and supply chain operations were stretched to a critical point. This was a time when the focus was widely on quality and compliance while growing inventory at lower costs.
Today, with the vulnerabilities of the supply chain of medical devices and pharmaceuticals laid bare as a consequence of COVID-19, there is a pressing need for collaboration across the healthcare value chain to mitigate any disruptive effects to the supply chain by implementing new digital capabilities to ensure greater agility. There is also a need for government and companies to explore the complexities of the supply chain management of medical devices as well as the necessity to re-evaluate and drive new operational models to be cost-effective and more efficient in a post-COVD-19 world.
"As the crisis evolves, complexities and vulnerabilities in global supply chains, which extend beyond China's central role in manufacturing and goods trade, are coming to the fore."
PWC COVID-19 CFO Pulse Survey
Case study: Tamer Group, KSA
Interview with Ayman Tamer, Chairman and Managing Partner, Tamer Group (Saudi Arabia) with Oxford Business Group:
“COVID-19 has impacted the supply chain industry at large. This is true not only for finished products, but raw materials as well. We have noticed interruptions in the supply of both pharma and medical supplies related to Covid-19; however, the latter has been impacted more. If the crisis persists for a longer period, accompanied by longer lockdowns, further interruptions to global supply and delays in deliveries may occur.”
“Logistics services are the primary reason for this delay. As such, Saudi Arabia is looking to foster localisation and encourage local production, and continue sourcing products from various countries to reduce the impact of any disruptions. Inventory levels will go up for the same purpose. Production and availability of local materials will need to increase in the future to overcome such disruptions.”
Source: Oxford Business Group
Saudi Arabia healthcare market predictions amid COVID-19 outbreak:
Where to find guidance
In a recent interview for Medical Device Outsourcing Magazine, president of the A.S. Freeman Advisors LLC in New York City Tony Freeman highlighted that as medical devices companies plan to ride out the disruption, many are finding they have no point of reference around which to organise their efforts and understand how it will hit their company’s segment of the medical device industry.
“Traditionally, the supply chain has looked to original equipment manufacturer (OEM) sales as the best indicator of industry outlook,” Freeman commented in the article. “In this situation, it is more useful to look beyond the OEMs to their customers—the hospitals, clinics, and physicians that comprise the provider segment—as the first movers that will set in motion the chain of events to which suppliers must react.”
Mitigating the impact at each stage
As medical staff and equipment continues to be shifted to fight the virus and its complications, and elective procedures are cancelled or delayed with only critical procedures still taking place, Freeman predicts their short-term, mid-term, and long-term impact on the supply chain.
Over the short-term, there will be a series of demand shocks, both positive and negative, on the supply chain as medical device OEMs and their suppliers respond to providers’ changing needs. Beneficiaries of the epidemic will be vendors of basic hospital supplies and manufacturers of diagnostic consumables and imaging suppliers. Telehealth devices and services also have the opportunity to demonstrate real value during the crisis.
As demand shocks make their way to OEMs and through the supply chain, financial strains will emerge. Over the next 12 months, deferred and diminished orders will show up as cash flow issues, particularly at smaller suppliers and heavily leveraged companies. Specific financial impacts will vary by area of medicine and by company.
The 2020 coronavirus pandemic will cause OEMs to re-evaluate their supplier lists. In the coming years, OEM procurement teams will consider which suppliers are best suited to survive and supply products in the face of global health issues. Other reactions to the pandemic experience will include an increase in dual sourcing of key components and a preference for larger, more financially stable suppliers with multiple manufacturing sites. These biases will present new challenges for smaller and more leveraged companies, regardless of their expertise.
Diversifying beyond the crisis
According to Nada Sanders, a supply chain management professor at Northeastern University, mitigating shortages should be part of the healthcare system’s emergency plans — especially with procurement heavily weighted toward global sources. Speaking to Supply Chain Drive in a recent interview, Sanders highlighted that a diversified supply chain means sourcing domestically and globally. "Globally means more than just location. It should look like a stock portfolio. It may be more expensive, but it balances out the risk of losing supplies, and also adds potentially shorter delivery times.”
Meanwhile, a survey by PwC found more U.S. CFOs plan to change their supply chain range, because of the current pandemic, and about one-third of those surveyed said supply chain issues are one of the top three concerns. However, cost containment is still their top priority.
Global procurement market intelligence firm SpendEdge recently released a whitepaper that enlists alternate sourcing strategies to address the supply chain risks in the medical device market. One approach is to engage with suppliers for inventory planning of spare parts and products. Another is to engage with suppliers who can meet demand variations, and also prefer suppliers based on their logistics capabilities.
The need for a robust cold chain
As scientists and pharmaceutical giants across the globe grapple to discover a lifesaving vaccine against COVID-19 at a global scale, its development will only be the beginning of a long fight to immunise 60% to 70% of the world’s population. The task of delivering the vaccine - a colossal task in itself – will require not only massive manufacturing and logistic capabilities but also strong cold-chain systems.
An unbroken cold chain is essential as once exposed to hot or freezing temperatures; vaccines lose their potency. They must be immediately discarded to prevent the risk of giving children and the elderly a potentially ineffective and unsafe antigen. With the world waiting for a vaccine, and governments forced to act quickly and collectively, there is a pressing need to develop reliable cold-chain equipment needed to bring the pandemic under control.
Indeed, researchers from the University of Birmingham and Heriot-Watt University in the UK are launching a new research project in India that will help to engineer an efficient and sustainable delivery mechanism for the distribution of an eventual COVID-19 vaccine to billions of people around the globe.
According to the researchers, universal vaccine access is a major challenge, particularly in low-income countries – partly due to the lack of robust cold-chains. Their work in this area will ultimately help to develop a short- to medium-term crisis exit solution aimed to deliver COVID-19 vaccine in a safe, efficient and clean manner, while still maintaining routine vaccine deliveries.
Key pillars to help companies build a resilient supply chain:
Source: EY Global
In order to build a resilient supply chain, a fine balance is required between current state efforts and a long-term foundation for resilience.