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News & Trends - MedTech & Diagnostics

Australian medtech supply chain: Rising costs and workforce shortages persist

Health Industry Hub | July 16, 2024 |

MedTech & Diagnostics News: The results of a supply chain survey, aimed at systematically capturing the range of supply chain issues across the medtech sector, has been released b the Medical Technology Association of Australia (MTAA).

These results provide MTAA with a solid evidence base to advocate to the government on MedTech supply chain challenges, offer members an overview of key trends at the sector level, and help companies providing supply chain solutions identify ways to better support the MedTech sector.

The survey data highlights persistent pressures on suppliers managing rising logistics costs. Although these costs have decreased to almost pre-Covid levels, the financial pressures have not entirely receded. During the Covid-19 pandemic, suppliers navigated a sharp rise in logistics and inventory costs. Over the past 12 months, they have faced increasing freight and raw material costs, which they are now expected to manage seamlessly.

“Suppliers are being repeatedly hit with cost pressures and may not have necessarily fully recovered from COVID but still need to ensure reliable supply of their product,” the survey results indicate. Some suppliers reported cost increases of up to 50% for both air and sea freight and up to 40% for raw materials over the past year.

Emerging geopolitical tensions are making costs harder for suppliers to manage, with the potential for rapid escalation if conflicts intensify. Suppliers must navigate these challenges to maintain adequate levels of medical technology products, often by increasing their inventory levels.

Consequently, 66% of suppliers reported increasing inventory holdings, with costs rising between 10% to 40% over the six months between July 2023 to January 2024. This, combined with increasing freight and raw material costs, underscores the ongoing cost pressures suppliers face.

Suppliers are striving to minimise costs passed on to customers while maintaining high service quality and reliable product supply. Customers, in turn, expect high-quality products at competitive prices. Suppliers acknowledge the challenges in meeting these expectations, citing increases in product lead time, fuel surcharges, and workforce shortages.

To address these issues, innovative solutions such as consolidating purchase orders could help. While customers could consider consolidating orders to minimise freight costs, 81% of suppliers have not yet considered collaborating with other suppliers to supply technologies more cost-effectively.

Post-COVID, workforce challenges persist, with 48% of survey respondents indicating that workforce shortages have impacted supply chains, resulting in slower operations.

Specific roles affecting the supply chain include warehousing staff (48%), truck drivers (26%), and stevedores (16%). These shortages illustrate the struggle suppliers face in reliably providing products to customers. There is a need to review pathways to attract workers to the MedTech supply chain to mitigate the risk of inadequate supply, which could lead to longer procedure waiting times and reduced healthcare benefits for patients.

Supply chain resilience is often discussed but can be challenging to measure. Breaking resilience into different domains can help companies better understand their capabilities and areas for improvement.

From an industry perspective, 52% of respondents rated their visibility of supply chains at a 3, indicating challenges in managing complex interrelationships. In terms of flexibility – adopting solutions or alternative arrangements during disruptions – over 70% scored between 3-4, likely due to learnings from the Covid-19 pandemic.

Finally, regarding agility, 42% scored a 4, suggesting that suppliers are generally confident and capable of addressing disruptions as they occur.

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