Having a reliable system to manage consignment inventory not only helps to reduce inventory and lower operational costs, it can also help save lives. In this posting, I would like to highlight the critical reasons why medical devices companies should take a serious look at how a well-organized consignment inventory management (CIM) system can help transform the way they currently manage their supply chain processes.
Most medical device decision-makers are already aware that consignment inventory is a supply chain management strategy in which the inventory is in the possession of the customer, but is owned by the supplier until after the goods are sold and paid for by the customer.
But did you know that poor CIM can lead to having over 30 months of overstock in hospital consignments? That is what a DKSH commissioned survey among customers and clients found. Furthermore, the research also revealed that 30% of the sales representatives’ time was taken up in finding items, solving disputes and commuting, while 9% of sales were marked as write-offs owing to lost items, expired goods and special discounts.
CIM brings several benefits:
Having the required medication or equipment available whenever required is critical for healthcare providers so that surgeries can be performed at the right time and there are no “lost surgeries” due to product unavailability.
A reliable CIM can help reduce inventory levels, cut down on stock losses and better manage expired and write-off items.
Through CIM, the existing sales force can increase their effectiveness by focusing more on selling than looking for the correct stock items or mediating inventory disputes. It can also facilitate more accurate sales forecasts.
Shorter lead times for patients waiting for their medications together with surgeries being performed as promptly as possible will lead to increased customer satisfaction.
Getting all elements of CIM right is, however, a daunting task. Typically, a comprehensive CIM would encompass many features such as stock count, expiry date management, log book checking, replenishment, reconciliation, order taking and processing, transport and transfer, product return and exchange management, as well as monitoring and reporting.
This is where having an experienced partner like DKSH is important to ensure your business receives the most suitable CIM solutions. With a broad client base across eight markets including China, Taiwan, Hong Kong, Singapore, South Korea, Thailand, Malaysia and Vietnam, DKSH have been working with businesses to continuously improve the effectiveness of CIM systems for respective business industries.
Case study: an eye for detail
How can you do it well? Let’s look at a case study.
A leading global eye care company in Taiwan was dealing with challenges like maintaining product availability, minimising product loss, manage expiry dates and utilisation records, as well as ensure billing accuracy.
They then implemented a CIM solution with features such as periodical cycle counts and stock tracing, timely replenishment, computer managed consignment stock information via PDA scanning, expiry date management, user training and education of hospital staff.
As a result of implementing the CIM solution, the company achieved 40 times fewer stock deviations, recorded reduction in write-offs of USD 650,000 annually and attained a 30% increase in consignment value due to sales increases. The benefits of a proven consignment inventory management system are obvious for a medical devices company as it improves cash flow, saves time, lessens discrepancies and reduces inconsistencies; and yes, helps save lives too.
What are your CIM challenges and how are you striving to overcome them?
Harvey Yeap oversees Business Development for DKSH’s Medical Device and Diagnostic clients across Asia.