Monday, February 6, 2012

Help! I Need Somebody's Help!


Well Nation:

Eventually, someone does respond to a Call To Arms.  Our first anonymous post is poignant and addresses one of the most pressing issues that each and everyone of you are challenged with on a daily basis.  If ever there was a post that drives a point home, well, it may be this one.  How many of you work for companies that work on a shoe string budget, have no understanding of inventory management,  or subsidize companies providing courier services? Some of readers will view this post as a someone complaining, while others will fully understand what this blogger addresses.  Who knows, maybe it will open some peoples eyes.  But one thing that TSB will say, if you don't have what you need or spend your day running around picking up and dropping of instruments and implants, you can't get the job done.  Kudos to Mr. Anonymous for a well written blog post.

For some time now we wonder about our industry cluttered with medical devices, implants, me-too products, trays and the like and dislike and continue to ask ourselves a series of questions that lead to the underlying “what matters” or ding an sich from which all things are created or problematic. Poor spending, trickle down economics, inflation, pricing issues, pay cuts, layoffs, fire your cover rep cause we can’t afford him, less innovation, more renovation, horrible training labs and bigger inventory warehouses so everything isn’t so cluttered and we can actually find stuff. And there lies the issue! Who is the number one user of FedEx in the world? One would argue that its Big Blue and Medium Red with a close second and maybe Little Purple growing every year. But the real question is why? Could it be possible that inventory management is one of the most crippling ipso facto of the medical device industry? The ugly duckling kept in the back room behind a locked door hidden in the depths of accounting books so that no shareholder can see the ugly truth. The life suck duck that couldn’t turn into a swan if you paid it to. Millions of dollars each year spent on lost inventory? No, you don’t say? TSB, how many reps have a garage full of product that no one knows about? How many implants do you have in your drawer? The FDA and CMS working together to create a universal system to track products because in the event of a recall they have not a clue on how to stop a faulty product from reaching a patient (site stent article). Seth Jayson from the Motley Fool even goes as far as using inventory as a method to track which companies will outperform others based on how long product sits on the shelf. Seth, hate to burst your prolific profiling bubble but that product is on the shelf because the company overbought to make up for a lack of efficient tools for projection on usage. Numerous companies are creating satellite distribution centers instead of creating new tech based supply chain management systems. Spending millions on new facilities full of sweat shop bean counters. Big Blue pulls the plug on an RFID based system because they can’t launch it effectively? What happened there? Verify this…

The problem or dare I say it shouldn’t be their problem is that reps in the field are ordained inventory managers in the field. Once it leaves the warehouse it’s off the grid so the only one who can monitor it is the field reps as if they don’t have enough to do. 

For example,

Inventory Manager:  Hello Johnny Rep, I need those trays back and if it’s late you owe me $100 per day, per tray. Yup, we’re docking your pay to help pay for this huge shipping bill we have. Why do we have this huge shipping bill you ask? Well, you see we don’t actually trust you. You see since you’re incentivized by sales and not turnover of loaner sets in the field we need you to ship that tray back priority first overnight back to the warehouse, which by the way is very costly, so we can begin our manual bean counting session so that whoever needs this tray next will have it available to them. Yes, there is a team of manual bean counters here in our warehouse and they put their fingers on every item to make sure it is present. Yes, we pay them a lot of money to do that which is also why we need to charge you a late loaner fee. Yes, I know automation would make this more affordable but my brother’s sister-in-law is really good at the bean counting plus the technology needed is a little high tech for my crew so we can’t really look at that as an option. I know it could save the company millions but I don’t work in the accounting department even though I manage the bean counters, and plus my brother’s sister-in-law’s kid needs a new pair of shoes and I’m tired of my brother hitting me up for a loan.

Johnny Rep: So this isn’t my fault and I shouldn’t be charged!
Inventory Manager: I know but sh*t rolls down hill and I’m afraid you’re at the bottom my friend.
Johnny Rep: We’re not friends. So you mean to tell me the real reason why it takes so damn long to get a customs request, or why my pay is constantly docked, or why the stock options I have are worthless, or why we haven’t innovated anything great in the past several years is because we’re pissing all of our money away on inefficient inventory management. Why don’t you teach your brother’s sister-in-law how to read a computer screen?
Inventory Manager: Because that would require me to implement a training program and yes, we spend roughly 20% per year of our revenue on my department but don’t tell anyone. (Cite source)
Johnny Rep: But I paid close to $20k in loaner fees last year and that’s a fraction of what my distributor overall paid. All because you want a bean counter to do something technology can do for a fraction of the price?
Inventory Manager: I know can you imagine if we absorbed those fees? We probably wouldn’t be talking right now and I would have no one to manage.
Johnny Rep: So who makes the call on whether or not to implement a new system that incorporates affordable technology which will probably pay for itself overnight?
Inventory Manager: I do, isn’t it great!
Johnny rep: So the largest cost factor of our entire company is basically in your control?
Inventory Manager: I know but don’t tell anyone because the tops think its R&D.

Why is a screw so expensive because for every one we lose we have to inflate the pricing. What do we do when demand is up and there doesn’t seem to be enough inventory to go around, we purchase more sets. What do we do when traffic is high, we hire more bean counters. Does anyone have an automated software system that tracks inventory in the field? Answer/guess: Less than 15%, if that. What do we do when there is a recall? We deploy a team into the field and rummage through offices, rep’s garages, hospital closets, SPD and anywhere else we can think of until everything is found. What do we do if someone dies because we couldn’t find what we were looking for because it was on the shelf in a closet we didn’t know about and someone used it in a case? We say its not our fault and refer it to legal.

Bottom line…yeah and while that’s compromised as well, we need better accountability because at the end of the day it could be your wife, your son or daughter on that table. And what now? Pricing cares and wears go out the window when morality and principle takes its course. Like Mel Gibson said so well in the movie the Patriot, “I’ve run my course”. Mr. Inventory manager if you can’t step up and say something then Johnny Rep and “the accused” pirates of the inventory closet should. There has been enough mowing in the field, there has been enough cutbacks and lack of innovation. Want to run lean and mean? Then Mr. Operations needs to look a lot closer at his operations and not the surgical ones. And Steve M. said, “Wide river runs open to the sea. “Run like a river and we’ll always be freeeeee, run like a river and we’ll always be freeeee.” Wide river carry me back home. Run like a river to the setting sun. Run like a river that has never been won!” Mr. Operations you’re never going to win if you open your eyes and create a transparent inventory management system that utilizes technology to meet the objective congruent with not only your sales force but the FDA, CMS and the like. Go big, or go home! Better yet tell the shareholders the real reason why you don’t hit your quarterly numbers. Or here is a novel idea…search the internet for “medical device tracking system”!! Money is pouring out of our pockets and into the sea and water is flooding the boat and we’re all about to sink. 



TSB,

Please ask the readers and more specifically the reps how familiar they are with this issue. Ask them what happens when the tray they need is not available or mysteriously missing or not at par? How does that fare with their surgeon relationships? How much are they spending out of pocket for local courier fees? How big is this issue? Ask the FDA? What is “Unique Device Identification”? What is Bill H.R. 3580? Why is Depuy putting implant vending machines in hospitals? Why is Eisertech selling product on an on-line store? Why is the industry shifting away from autoclaving product and to pre-sterile packed items? Why is CMS licking their chops waiting for the UDI mandate to become effective at the end of this year? Why haven’t we done something sooner? Why are the reps and distributors footing the bill? What tech companies have viable solutions? Better yet what companies started by former distributors or reps have created solutions and what are they?

- WebOps Mobile
- Itraycer
- SurgiTrace
- Awarepoint
- Clearcount Medical

The list goes on! Be a Patriot TSB and post this to light a fire under someone’s arse to make this happen. Set the reps free! Support innovation, support new tech that serves the corp at its core and leads to a revolution that sparks the industry into a new era. The ball is now in your court.

With care and love for this industry,

- Anonymous

43 comments:

  1. Really? A blog on inventory management,, REALLY??

    If this is the best that's been submitted,, what's that telling us?

    ReplyDelete
  2. Whoever wrote that blog clearly has a stake in the tracking technology. So obvious! Sales professionals do not care about this.

    ReplyDelete
  3. If you had a rural territory you would better relate to the post. I spend so much time running sets around it's absurd! Hard to hire a runner with crappy and dropping prices.....
    Good article!!

    ReplyDelete
  4. Agree with 7:28. Great blog. However, having used webops for a few years I can say that it is only valuable when dealing with sterile packaged inventory. Until the companies start sterile packaging their products evertyhing is "pie in the sky".

    ReplyDelete
  5. Just an FYI... here is theoretical breakdown of what goes into the cost of a screw (based on my knowledge)...

    1) Cost to develop the screw (FDA submission cost, development labor costs). I realize there is nothing groundbreaking about developing a screw, but it still takes time and work to get it to the market.

    2) Cost to make the screw. This cost has a pretty big range depending on what type of screw (fixed, poly, uniplanar, iliac, reduction, etc)

    3) Instrumentation cost. Companies do not charge for instrument sets (unless a distributor or hospital buys them), unless it is a disposable, so the instrument costs are built into the implant price as well. You can argue that instruments are used multiple times, but instruments get damaged or broken all the time and therefore require replacements.

    4) Royalty payments are built into the implant cost. If there is a patent that has to be licensed to use the implant or if a "design surgeon" gets a cut every time a screw gets used.

    That's my understanding of what has to be built into the cost of the implant in order for companies to make a profit. I agree with the individual that wrote this post. With the market becoming commoditized, in order to stay profitable, you have to improve your operational efficiency to bring down costs in order to maintain some level of profitability. Ask anyone about that in the automotive industry.

    Sterile packaging is the future and will help with being able to track implants much better. The big ortho companies (total joint companies) are already doing it for most products already. Spine is just a little slower to hop on that bandwagon.

    ReplyDelete
    Replies
    1. After a blog post completely dedicated to the outrageous costs of shipping, you neglect to include this in your list of "what goes into the cost of a screw"? What about the overhead of all the folks at the corporate office and the cost of the building they work in?

      Saying that pedicle screws should only cost $150 each because that's what they cost to make is like saying that a pair of Air Jordan's should only cost $3.50 because that's what it actually costs to make. Do you think Michael Jordan and Kobe Bryant do all those endorsement deals for free?

      12:22, that second paragraph was not directed at you. I just felt that it needed to be said. Wu-Tang Clan OUT!!!!!! **Drops mic on stage**

      Delete
  6. Inventory Manager: Because that would require me to implement a training program and yes, we spend roughly 20% per year of our revenue on my department but don’t tell anyone.

    Roughly 20%? That's a big number in the grand scheme of things!! Shouldn't it be under 10%?

    ReplyDelete
  7. How about a blog topic on whether or not the spine industry can/should move towards selling terminally sterilized implants. Several posts have already thrown this idea out and it is a topic that would be interetsing to hear about. Europe has talked about mandating this but it has failed to gain traction due to the costs associated with it. Key items; 1)how would the physical volume of inventory be handled at a distributor/hospital? You can fit a full set of cervical plates and screws in a single tray. To provide each plate/screw in its own sterilile tray/pouch with an IFU would require 10 times the cubic space, 2) would the OR staff, including the surgeon, be open to having to wait for the correct size to be pulled from a shelf, delivered to the non-sterile tech, and then passed through to the sterile tech and ultimately the surgeon for a complex spine procedure, 3) would the hospital be willing to pay extra for the components (reduced number of trays to sterilize, reduced risk of infection, etc.), 4) who would pay the extra shipping costs for loaner sets due to the increase in weight/volume? & 5) if a company provided both sterile/non-sterile implants at the same price, which would the hospital/surgeon choose?

    ReplyDelete
  8. You forgot #6, would the hospital be open to adding time to the procedure for opening and transferring all of the implants even if it means a lower risk of infection for the patient? Or....does the longer procedure increase the risk of infection to a greater level than utilizing implants that have been through the hospital's cleaning system dozens of times and may not be sterilized to the time parameters noted in the company's IFUs?

    ReplyDelete
  9. I think the inventory management piece and sterile implants are a worthwhile discussion but I have just a few points. Let's say companies adopt RFID technology and software to support it do you think they are going to make more or less inventory? I realize we will use it much more effectively but they will just produce less inventory and we the sales folks will be in the same predicament as we are now trying desperately to cover all of our cases without enough inventory. I have a novel idea, manufacture enough stuff, it worked pretty well for Synthes. Here is a little secret is doesn't cost shit to make, the inventory management software and shipping charges are much more when you factor in time, missed cases, lost business and poorly trained reps who don't have access to the stuff they sell.

    Show me a study that shows a statistical clinical advantage for sterile implants because I use some and in my opinion if they don't do any good there not worth it.

    ReplyDelete
    Replies
    1. What about when you roll out new tech? Just build more sets? Then gen 2,3,4??

      Delete
    2. I think they do that with automobiles. When is the last time you bought a brand new twelve year old car? It is preposterous to think, in fashion, food, computers, phones etc. do they squeeze every dime of profit and sell antiquated technologies and charge a premium. In fact, most other businesses don't have near the margins and still roll out a new model with some upgrade every year. Imagine going to Best Buy and paying more for a twelve year old tv. People in healthcare are greedy, lazy and stupid and that is the fat that is going to and needs to get trimmed in this recession/slowdown/healthcare overhaul. Unfortunately many of us work for them. I recently attended a NSM and the plan to make quota in 2012 is increase prices 25%. Brilliant! How about coming out with something new and better and adding that into your costs and offset it with increased sales and profits. Just an idea, call me crazy/

      Delete
    3. Nice tangent. The question is how many more sets do you build? Car makers build cars they can sell and seldomly nothing more. Medical device manufacturers try to get as many turns out of loaner sets and only charge for consumables. What happens in your scenario when demand suddenly settles?

      Delete
    4. Oh and you're crazy!

      Delete
  10. The richest one percent of this country owns half our country's wealth, five trillion dollars. One third of that comes from hard work, two thirds comes from inheritance, interest on interest accumulating to widows and idiot sons and what I do, make and sell sterile implants. It's bullshit. You got ninety percent of the American public out there with little or no net worth. We make the rules, pal. The news, war, POD's, Obama Care, upheaval, the price of a pedicle screw or cervical plate. We pick that rabbit out of the hat while everybody sits out there wondering how the hell we did it. Now you're not naive enough to think we're living in a democracy, are you? It's the free market. And you're a part of it. You've got that killer instinct. Stick around pal, I've still got a lot to teach you.

    ReplyDelete
  11. The poster puts a bit more weight on the issue than the rest of us do. I agree that the he/she has a stake in some sort of UDI product. They have posted random and out of context comments about UDI on this blog before. I just hope the poster is not writing the marketing material or the user's manual. People, where did you all learn to write?

    I personally think sterile implants will reduce inventory, improve product tracking (because we know so many people have been injured by recalled pedicle screws, NOT) and make filling out charge sheets easier. I don't think it is the panacea for all companies to become profitable and efficient as the poster suggests so passionately, yet poorly.

    ReplyDelete
    Replies
    1. You obviously have never been a rep or have dealt with the inventory chaos we have or maybe you do and there is zero demand for your products.

      Delete
    2. I am sure there are ways to be more efficient, especially with inventory, and loaners and shipping. And there are probably ways to reduce shipping cost.

      However, doing cases with a fast surgeon, who wants the right implants, fast, will be no-go with pre-packaged dispensed, implants.
      Additionally, at the end of the day, when you get rid of "lower paid type" employees and replace them with smart, high paid computer software people, the equation doesn't work out. There will be LOTS of highly paid computer people to fix all the bugs, constantly train people, and fix all the bugs, and keep fixing the bugs!

      Do we want bugs happening when a patient on the table needs a special screw that was put in the wrong package? The computer read the barcode for the correct screw and marked it in inventory in the dispenser. Now what? You got no screws and patient needs one.

      Can anybody else see their favorite circulator smashing open a dispenser or opening every sterile package around to find the right screw to get the patient off the table?

      Smart computer people running complicated software and fixing bugs all the time does not replace a rep looking at his wares before a big case.

      Any new technology adoption comes at a big cost and with big hopes it pays for itself.

      If this does go down, I only hope they do some pilots where I don't live and in 15 years when they figure it out, I'll be doing something else.

      Delete
    3. Oh...so you must work in distribution.

      Delete
    4. I sell sterile implants and the cases take no longer and the surgeons and staff love it. Everything is scanned and is instantly sent to the home office and the hospital. I doubted it would work but now I cannot go back to 17 trays using implants that may be 5 years old and changing color.

      Delete
    5. I've been a rep or distributor for 15 years and manage a large volume of sets, and have for years. Perhaps the chaos is caused by your particular company's loaner policies, their inability to manage their inventory or you might be too disorganized to manage loaner/trial/consigned sets. I think having sterile implants can reduce the overall quantity of screws required to do the same number of cases, but it wont eliminate any chaos in getting cases set up. It WILL slow the case down a bit, but that is manageable. It also introduces the risk of sterile implants being hauled around in hot cars, thru parking lots on rainy days and damaged packaging ending up in surgery where the implants may not be sterile after all. Sure you can keep them in large insulated cases, but that is less than ideal and those implants will be divided up on busy days and some will end up in a plastic bag or a cardboard box. In the end, you could argue that on-site steam sterilized implants have a higher degree of validated sterility than a sterile packaged implant whose storage conditions have not been "controlled".

      Delete
    6. 4:11: well said. There is a big difference between "validated" for the perfect storage conditions of the company's warehouse, vs. "validated" for the reality of distribution.

      Sterile implants are fine, but *please* make the hospital stock them. Having them riding around in cars all over the field is bound to lead to trouble.

      Steam sterilization is pretty darn effective for the types of stuff we use in spine. I think you'll have a hard time making the case that there is a measurable rate of equipment-induced infections in spine surgery. Just pull those PEEK implants out of the sets when they change color! It's time for the trash!!!!

      Delete
  12. 3:09PM

    Either you or someone else repeatedly posts that same butchered quote from Wall Street. While it's still a great scene to watch, your version is neither funny, nor clever nor ironic. Give it a rest and spare us your juvenile Gordon Gekko fantasies.

    ReplyDelete
    Replies
    1. You're walking around blind without a cane, pal. A fool and his money are lucky enough to get together in the first place.

      Delete
    2. The rich have been doing it to the poor since the beginning of time. The only difference between the Pyramids and the Empire State Building is the Egyptians didn't allow unions. I know what this guy is all about, greed. He don't give a damn about Nuvasive or the POD's. He's in and out for the buck and he don't take prisoners.

      Delete
  13. Good post on the crummy inventory control in our industry. If we were in computers, we'd all be working for bankrupt companies. Loaners are the scourge of our industry, though they are a product of customer demand.

    I'm always amazed that the hospitals demand the instruments free, then complain about the price of the implant or our inability to provide a set for that 7am add-on tomorrow morning.

    Where do they think "free" comes from?

    Um...HELLLLOOOOO?

    ReplyDelete
  14. Are there any published studies about the cost for a hospital to clean and sterilize the implants and instrumentation for spinal surgery? If so please provide a reference. If not, is there any other information available on this subject?

    Thanks

    ReplyDelete
    Replies
    1. Ask your SPD manager, they usually know exactlty what it costs. I have heard between $250 and $350 per tray when you add in all the overhead. AORN has been demanding sterile bar coded implants for years. Spine is one of the last specialties that still bring in non-Sterile implants for the hospital to process. Sterile implants are the future and exactly what the hospitals want.

      Delete
    2. I have a hospital that tracks costs for SPD very closely and they attach a charge to every individual tray in the OR for processing. The charges are typically between $18-$40.

      Delete
    3. It's a lot more than $40 per tray unless you are in a very rural area.

      Delete
    4. Medium-large metro area. That's the charge in their system for what it's worth

      Delete
  15. Trauma still mostly brings in non-Sterile implants for the hospital to process.

    ReplyDelete
    Replies
    1. IM rods and screws have been sterile packed for 15+ years

      Delete
  16. This will all probably all change in 2 years when Syn-Puy contracts directly with materials management and adds vending machines to all hospitals. The Syn-Puy reps can do (Pharma) lunches and get signatures from surgeons to show they are making sales calls. I heard the Synthes managers like to get daily activity reports. I heard they check the shine on your shoes. Syn-Puy will be shelving spine implants next to the sutures. Maybe the Ethicon reps can start co- promoting spine.

    ReplyDelete
    Replies
    1. " Hello Doctor, I am your Depuythyes vendor. I just confirmed the O.R. Vending machine is fully stocked with screws and rods. Can you please sign my electronic pad? My manager asks I get 12-15 signatures a day" .
      "Would you like some literature?, I can have it shipped direct to you, Just one more signature required......"
      " eh,,, thanks Dr. Have a nice day"
      Rep walks to parking lot and texts husband/wife - "4 more signatures and I am done for the day, wanna meet for lunch?"

      Delete
  17. I can share one specific story, however there are many more examples I could share regarding wasted shipping charges. After completing a case with a loaner set the doc booked a second case for later in the week. I reequested the manufacturer (atec) ship to me the needed implants to restock the tray. Instead of doing that, they required me to return the set via FedEx priority overnight. Two days later I received the exact same set (they are numbered)back via FedEx with the 4 screws, 2 rods, and 4 set screws replaced. So they spent hundreds of dollars in shipping to restock a set, when they could have sent me the implants for $20.

    ReplyDelete
    Replies
    1. FedEx must love us. Has happened to me more times than I can count. What a waste!

      Delete
    2. EXACTLY! Been there, done that...many times.

      Delete
    3. ATEC grants loaner extensions very liberally. Their costs aside, my effort to pickup trays and box them and then receive and unbox and deliver is reason enough to ask for extensions and I have never been denied an extension request

      Delete
  18. Does anyone know an exact figure on how much med device companies spent on inventory management last year?

    ReplyDelete
  19. This was a really good blog attempt by the guest blogger. Wish I could have the time to read it though. Someone tell me how ends.

    ReplyDelete
  20. they now will have to stand accountable for their implant devices that do not have a warranty to the F D A---------will they now be considered inferior with there faulty products

    ReplyDelete