Recently we had the opportunity to sit down with one of the world’s leading experts on the medical device industry, Daniel R. Matlis, president of Axendia. Axendia, a leading analyst and strategic advisory firm focused on the life science and healthcare markets, recently completed a survey of med-tech executives for its report on how the industry was responding to globalization.
In Part One of our interview, Matlis gives his take on the current state of the med-tech industry and what issues it needs to address.
How would you describe the current state of the med-tech industry?
The medical device industry is experiencing a significant transformation. On one hand, we’re seeing globalization of design, sourcing, manufacturing, and distribution. This has created both challenges and opportunities for the medical technology ecosystem. On the other hand, globalization has increased the demand for medical devices. What’s interesting is that according to our survey, nine out of 10 executives expect growth for their companies in the next three years; primarily this is due to the growth in sales in emerging economies.
What industry-specific issues are executives concerned about?
The main issue we see is a confidence crisis due to the lack of visibility and control over global and outsourced operations. The overwhelming majority of executives we surveyed said that the biggest threats facing their businesses over the next three years were complying with an increasingly complex regulatory environment, ensuring the quality of product and raw materials supplied across the globe, and maintaining consistent standards across an extended network of external sites and partners.
When we asked them, “What keeps you up at night?” the leading answers were product quality, the ability to maintain quality standards across the extended supply chain, and protecting intellectual property.
How comfortable are industry executives with outsourcing?
That’s the interesting paradigm: the vast majority said they were going to continue and grow outsourcing operations, but at the same time they were very concerned about what’s going on with outsourcing. We see a “fog” of outsourcing’ going on. There’s lack of visibility into the supply chain, and as a result there’s a lot of concern, because they’re unable to collect, analyze, and act on critical-to-quality parameters that are important to the industry.
Industry is still relying on periodic audits as a means to gain visibility into their suppliers, but as a result there are significant challenges. Seventy percent of responding executives indicated they have moderate-to-high risk from this lack of visibility, based on current levels.
Med-tech companies have invested significantly in their IT systems. Are they getting the benefits they expect from this investment?
They’ve invested significantly into information technology over the past decade. According to our data, nearly 100 percent of large medical technology companies are using ERP, quality management solutions, product lifecycle management, and so on. But they don’t appear to be getting the benefits out of these, because many have been implemented as standalone solutions or stovepipes.
According to our survey, less than three out of 10 executives said that their current IT systems are effective in helping them gain visibility across their extended network. So this is a significant issue, because on the one hand there’s been a large amount of investment, but on the other they’re not seeing the benefits.
You mentioned enhanced visibility across the extended partner network.
How can med-tech organizations enhance visibility there?
To gain visibility across the network, med-tech organizations should gain tighter control over their partners and the ecosystem, all the way from ingredients or raw materials to the patient. They should deploy systems and technologies that provide visibility and control, not only in the supply chain, but across the entire value chain, from design through the consumer.
Also, to enhance this ability across the med-tech partner network, brand owners need to employ risk-based supplier management strategies, require partners to document their complete supply network, and look at integrating the data islands and point solutions that exist as a result of implementing stovepipe IT systems. Additionally, they should implement global, standards-based, interoperable systems that support visibility outside of the four walls of the corporation to be able to collect, analyze, and act on critical-to-quality indicators that are coming from that supply chain. Finally, they need to implement IT solutions to achieve business results, not simply to meet regulatory requirements.
Axendia Medical Technology Globalization Report: Walking the Global Tightrope