The medical industry, with its growing adoption of electronic devices, is changing rapidly, and the supply chain needs to evolve with it.
In a previous article, I outlined how the burgeoning LED market has driven changes in the way electronic components supply chain participants conduct business. This segment provides another case study about how the supply chain is adapting to vertical industry needs. In this case, technological advances, the medical demands of an aging population, and strict regulation combine to create new opportunities for players in the electronic components supply chain.
The use of electronic devices in the medical industry began in the 1940s, with the development of pacemakers for heart patients, and has evolved rapidly to include highly advanced surgical and diagnostic equipment. Analysts across the board agree that this industry shows strong signs of sustained growth:
- According to a September 2013 study by market research firm IHS iSuppli, revenue for consumer medical devices is forecasted to reach $8.2 billion by the end of 2013, and grow to $10.6 billion in 2017.
- In June 2012, research firm Global Information predicted medical semiconductor revenue to reach $6.4 billion in 2017, driven by increased demand for new devices gaining regulatory approval.
- KPMG ranks the medical industry as one of the top drivers of a semiconductor rebound in 2013.
While the medical industry presents an attractive market opportunity, there are many factors that supply chain participants, including manufacturers and distributors, must consider in order to successfully penetrate this market.
- Adherence of changing regulation — In the United States, the Food and Drug Administration is responsible for regulating firms that manufacture, package, and distribute electronic medical devices. Manufacturers and distributors must continually be aware of any changes in regulation, such as approval of new devices or product recalls. Distributors must ensure that they work only with approved manufacturers and be able to prove compliance with complex regulations that often differ across geographies such as Restriction of Hazardous Substances Directive (RoHS), Registration, Evaluation, Authorization and Restriction of Chemicals (REACH), and Persistent Organic Pollutants (POPS).
- Continued support of extended lifecycles — Medical devices often require multi-year development cycles before obtaining government approval and, after entering the market, are then expected to last from seven to ten years or more. These varying product lifecycles require distributors to maintain a range of components and date codes, including obsolete and end-of-life components, and to adapt warehousing facilities and fulfillment processes accordingly. Franchised and authorized distributors that specialize in managing a diverse portfolio of EOL and obsolete components have an advantage over other distributors in pursuit of the medical components business.
- Prevention of counterfeits — The threat of counterfeit medical devices is small but troubling, since just one counterfeit device failure can result in injury or death to a patient. According to the World Health Organization, 8 percent of medical devices worldwide were counterfeit as of 2010. Franchised and authorized distributors, who guarantee direct lineage and traceability of components, are best positioned to stop counterfeits and preserve the integrity of the supply chain. These distributors have warehousing and logistics facilities that are certified to properly store components to be used for medical devices such as temperature or moisture controlled and ESD 20.20 certified environments.
As both the medical and LED industries illustrate, the electronic components supply chain is dynamic, and players must be proactive in developing their business models and processes if they wish to compete in today's leading markets. Neverending changes in technology reward manufacturers and distributors with the vision and appetite to adapt.
Franchised and authorized distributors, who have long maintained their own forward-looking standards, have proven themselves to be successful in competing for these high-risk, high-reward opportunities, and provide just one example as to how the electronic components supply chain is responding to the unique needs of diverse verticals.