The Healthcare Supply Chain Is in Dire Need of a Tech Disruption

August 9, 2018 - 7 minutes read

MedTech app developerSupply chains in every industry across the world are transforming as the Internet of Things develops. But healthcare, a known lagger in upgrading technology, already has much room for improvement in its supply chain.

In Dire Need of an Upgrade

Many devices still used in hospitals and clinics use technology that’s more than 20 years old. Imagine that — you’re being treated with technology from the 90s. The 90s are when computers were just becoming a household utility. Even high-tech hospitals in New York City and San Francisco are using outdated technology!

Because healthcare is complex, tech players who want to transform the healthcare supply chain are intimidated and stopped from moving forward. And because healthcare is so deeply entrenched in the federal government, regulators like the Food and Drug Administration (FDA) are known to be extremely slow in making decisions and subsequently enforcing them.

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If something’s not urgently needed, redesigning current products or working on new ones is frowned upon. Return on these types of innovations has been extremely low between lack of mass adoption, time to create a minimum viable product, and lack of support from the FDA and its fellow regulators.

A Problem That Can’t Be Ignored

Devices are usually in use for decades without any form of update, and electronic chip manufacturers often discontinue the specific chips due to lack of demand. Additionally, a shortage in electronics components is affecting supply chains in every industry.

Because healthcare still isn’t up to speed, this shortage is going to cost the industry more than others who have been updating technology every few years. The overwhelming majority of electronic devices, like blood pressure monitors, pacemakers, and emergency defibrillators, run on semiconductors.

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As MedTech develops more wearables, semiconductors will only become more entrenched in the healthcare industry. But semiconductor manufacturers, even the big ones like Intel, can take years to source components and supplies needed in the semiconductors.

And between the government’s slow operations, this lead time with electronics manufacturers, and the fact that medical devices need extensive testing before being sold, things are ripe for a disaster.

Out of Touch, Out of Time

Connected devices are impacting healthcare by lowering costs for patients, improving contextual data, and better patient outcomes. Additionally, big data and other advanced analysis tools are helping healthcare products develop rapidly. There is a wave of processes and technologies aimed at improving healthcare device manufacturing.

But because most healthcare manufacturers have been out of touch with the most advanced supply chain technologies, they still have a lot of work to do. There needs to be better reconciliation on technology versus product lifecycles while keeping manufacturing costs low. It typically takes 18 months to bring a product to market, but that shouldn’t hinder innovation, and it definitely shouldn’t impede progress.

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Several factors affect healthcare device manufacturing: impact of immediacy, revenue loss during research and development, the components’ lifecycle, how long components will be available, revenue loss from supply chain failures, cost of development, regulatory costs and revenue loss from testing, and much more. When all of these factors are considered along with the age of the technology, it’s easy to see why manufacturers would hold off on upgrading technology in favor of developing the next big product.

But if components run out, as they are likely to do, the factory could be on hold for almost six months. So spending some time in redesigning devices and investing in upgraded technology could save healthcare manufacturers hundreds of millions of dollars a year, despite the high perceived cost.

Turning It Around

If companies want to update their line of devices and supply chain technology, there are several steps to take. If you haven’t felt the urgency of updating from this article yet, the first step is to start researching today. Analyze your products’ lifecycles and start looking into how your products can be redesigned.

This step requires working closely with the suppliers because electronic components are always changing and advancing. Remember, the goal is to get the products’ lifecycle as close to the technology’s lifecycle as possible, so when it’s time to update the device, the technology can also improve greatly.

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Second, don’t make the mistake of not upgrading technology again. It’s important that you learn from this mistake and set your company above your competitors. Don’t go for cheaper or older technology when upgrading; go for the best.

Third, going for a modular design, where you only need to swap out a few components to keep the device working, will keep engineering and development costs low as you upgrade. It’ll also be much easier to get approval from the FDA and other regulators since you’ll be able to make the requested changes quickly.

Fourth, optimizing your current supply chain will ensure your business never ceases operating due to a lack of components or from a delay by another manufacturer. Continuing MedTech development, even when it feels like you’re losing money and gaining nothing in return, is part of the game. Think about your “opportunity cost,” which is what you could gain from investing resources the correct way.

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Next Steps For All

The healthcare supply chain’s mistake of not upgrading technology for decades is a lesson that every industry and employee could learn from. While it may not seem like a big deal to skip upgrading at the time, not investing in technology will always come back to destroy more revenue than the upgrade would’ve cost.

Maintenance is always better than repair. We hope this is a lesson that healthcare supply chain leaders take to heart.

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