A recent report from Supply Chain Dive emphasized the importance of electronics supply chain upgrades (redundancy, agility, resilience efforts, and more) to weathering the COVID-19 pandemic. This same insight applies equally—if not more so—to key medical supply chains such as the manufacturing of electronic medical devices.
When it comes to special procedures and intervention areas, only the cost of labor is a larger expense for hospitals than medical devices. According to Medical Care Research and Review, devices can represent up to 40% of the total budget for hospital expenses. No other supply-related expense remotely compares. This critical role in patient care clarifies that the medical device supply chain must target waste prevention and promote lean inventory to keep stock agile and hospitals efficiently equipped.
Effectively selected supply chain performance measures called Key Performance Indicators (KPIs) must reflect those priorities as we track the pandemic’s impact on the medical supply chain. Our ability to continue serving at-risk and critical care patients moving forward hangs in the balance.
How Many KPIs Should Medical Supply Chain Managers Track?
We can take initial guidance from the 2016 Supply Chain Insights report, Supply Chain Metrics That Matter: A Focus on Medical Device Companies. Their comprehensive, year-long study concluded that “most supply chain leaders measure too many Key Performance Indicators (KPIs).”
Often, they explain, supply chain leaders needed three years to drive lasting year-over-year improvements, and disruptions tended to limit leaders to driving progress on a single metric at a time rather than an entire portfolio. Too many metrics on the dashboard will serve only to cloud the next steps and focus. There are nearly innumerable options, many of which Supply Chain Insights reviewed as a part of their research:
The study doesn’t recommend tracking just a single KPI, of course. Their critical takeaway was a finite list of 4 KPIs that had the most significant impact and were most meaningful across industries. For convenience, we’ve added links to KPI definitions from Investopedia within the quote:
“After a year of research, we determined that the patterns and trade-offs between year-over-year Revenue Growth, Operating Margin, Inventory Turns, and Return on Invested Capital (ROIC) were the most helpful in the determination of performance improvement. We term these as the Supply Chain Metrics That Matter™ (links added ).”
So should you limit your medical device supply chain KPIs to those four? Perhaps, but not all supply chain managers agree. For example, Temple University Health System uses a highly comprehensive portfolio of supply chain KPIs and feels this approach better captures their needs.
Frank Longo, the system’s Interim Director of Supply Chain Services, told Healthcare Business Insights that “We run a lot of KPIs, and most experts in this area say ‘you run too many.' I don’t think we do, I think we run the ones we feel comfortable running to give us the needed information and we are very judicious about running a KPI.” You can browse their list of supply chain KPIs here as an example of metrics to consider. The key to their management strategy is to have a leader in charge of each of their four KPI categories, then a director to oversee everything.
Medical Supply Chain KPIs for Quality Management
The KPIs highlighted above are intended for general use across the medical industry. Your selection of KPIs may also reflect particular supply chain challenges that you wish to target. For example, Manufacturing.net recommends supply chain KPIs based on these five metrics for quality management and compliance tracking—cornerstones of medical device supply chain success.
- Corrective action
- Complaints
- Audit findings
- Medical device reporting (MDR)
- Nonconformance
(You can read more about their rationale behind the five they’ve selected here.)
The impact of COVID-19 on the manufacturing of electronics such as medical devices cannot be understated, but it can be understood. Select medical device supply chain KPIs based upon the particular disruptions experienced in your supply chain, track progress, and target a limited number of high-impact gaps, year-over-year, for a sustainable economic recovery.
