Logistics Viewpoints

A complete analysis of logistics trends, technologies, and services

3PLs Offer Solutions to Manage Medtech Challenges in Europe

Guest Commentary | By •

Non-European medical device companies face a number of challenges — and opportunities — when attempting to enter the European market. Addressing these issues early in the process helps avoid unnecessary and costly delays and ensures a greater chance for a successful transition. Part of the plan should include partnering with an established and experienced 3PL to act as a consultant in setting up the operation from a full supply chain perspective.

The following prioritizes and examines a few key elements of an efficient market access plan as they pertain to the European market.

Lay of the Land
Despite economic uncertainty in some areas, the overall outlook for the medtech industry in Europe is positive. A company that can keep one step ahead of the trends that are shaping the market has a distinct advantage. Increasingly sophisticated buyers are demanding higher value and lower prices, which, in turn, intensifies competition. These pressures, along with regulatory changes, the growing demand for high-end medtech products and fast-growing Asian markets, require companies to respond quickly and effectively. A company that becomes complacent is at risk of falling behind.

Choosing the best country in which to locate your business is key. Currently the Netherlands, Belgium and Germany are the most desirable destinations due to tax deferments, air and ocean ports, infrastructure, workforce availability, education, logistics knowledge and fiscal advantage. The Netherlands is, at present, the largest trading country in medtech in Europe.

Infrastructure
While the infrastructure throughout Europe is not of consistent quality, it is still very efficient and modern. The EU is well connected through an extensive system of roads, highways, bridges, railways and international airports and seaports. Northern Europe in particular boasts sophisticated and plentiful roads and highly developed railways, while Southern Europe lags behind somewhat. However, Europe invests 5 percent of its GDP on transport and water infrastructure — more than twice that of the U.S. — ensuring constant improvement and upkeep.

Regulations
While each country has its own individual rules and regulations, there are specific EU rules for the registration and identification of medtech products in Europe. These rules apply to the 28 countries that make up the EU and may differ from those in the U.S. or other regions. An experienced 3PL can assist the company by working with any of a number of EU organizations (so-called Notified Bodies) designed to support a medtech manufacturer during the initial registration of their products and supply chain set-up process.

Before a medical device can be placed legally on the European market it must receive CE marking approval, signifying that the product meets the essential requirements of all relevant Medical Device Directives in the EU. The 3PL partner assists the manufacturer during the conformity assessment conducted by the Notified Body to help ensure efficient navigation of the path to compliance and avoid costly delays in meeting market deadlines.

Worldwide the regulations regarding medical devices follow the global requirements of the International Organization for Standardization (ISO) 13485, creating a much more aligned quality system. A 3PL provides the expertise to navigate within an ISO 13485 compliant process.

It is recommended that a company establish a legal presence prior to entering the market. 3PLs, however, can work with financial services providers that are able to serve as a fiscal representative on behalf of a shipper in the event that they don’t want to set up a legal entity.

ther important topic is the regulation on product labeling. The so-called Unique Device Identification (UDI) initiated by the FDA in 2012 and the European Commission in 2013 is in full implementation and sets strict requirements on the labeling of class I, II and III devices for the coming years. It is important that the 3PL can assure the processing of these bar codes through their WMS and TMS systems to provide the company with the required visibilty in the medical device supply chain.

Workforce
Globally, the labor market is evolving. The skills and competencies identified by employers as vital change as well, and it’s important to be aware of the availability and qualifications of the local workforce. In Europe, specialized training is required in the healthcare industry and the workforce is less transient than in many other regions, providing a welcome stability in the labor force.

Partnering with a 3PL
3PLs offer a wide spectrum of consultancy services in setting up the operation from a full supply chain perspective. As previously mentioned, fiscal representation can be arranged as well as specialized guidance regarding medtech compliance with ISO certifications. Additionally, 3PLs leverage knowledge concerning healthcare operations across a range of accounts and regions.

Often, medtech shippers who want to enter the EU market are smaller companies that don’t sell in the EU, ship direct from the U.S. or sell via distributors or wholesalers. A 3PL partner can provide a multi-client solution in the EU and reduce supply chain costs.

Larger medtech shippers, meanwhile, are looking more and more for postponement and VAS activities in each region in order to reduce SKUs and simplify production. 3PLs offer these services within the framework of an ISO 13485 compliant process.

Medtech manufacturers frequently require last mile or white glove deliveries of their products to the final customer. Recently we have experienced an increase in the number of B2C deliveries as well. A 3PL partner can provide transportation management services in order to supply a non-asset-based transport network that meets the quality and traceability/visibility requirements in medtech.

And finally, some medtech products use EtO sterilized components or consumables that, in larger quantities, require special storage and investments already in place at a medtech 3PL.

Partnering with a 3PL establishes the appropriate culture of shared purpose between both organizations to implement structured and continuous improvement by applying the Lean process to medtech supply chain logistics. The potential for development in the medtech industry in Europe establishes a unique opportunity for a partnership between these companies and 3PLs to create an efficient and productive entry into the European market.  3PL’s with a strong developed lean culture offer, besides the focus on continuous improvement, also a strong developed process driven approach in their operations. This is of great benefit for Healthcare manufactures in order to guarantee the required quality levels in their supply chain.

 

Arthur van Gerven is the Senior Director Business Development and Key Account Management for Menlo Logistics, Europe. He is responsible for EU marketing, sales, solutions, key account management and 4PL services. Based in Amsterdam, he’s been with the company for 17 years, with more than 25 years’ experience in supply chain and logistics, specifically in the Healthcare industry.

This Week in Logistics News (June 17-21, 2013)

EU | By •

Summer is finally here, so let’s go right to the news…and then maybe the pool.

Europe is on the brain for both C.H. Robinson and MercuryGate, with the two companies announcing this week that they’re expanding their presence in the region. C.H. Robinson Europe is opening a new office in Istanbul, Turkey. According to the press release, “Demand for logistics services in the region is rapidly increasing and with over 40 universities in the area, presents access to a large and talented workforce. The Istanbul office will primarily offer international road freight services including both full and less-than-truckload transportation modes.”

Meanwhile, MercuryGate has partnered with e4Data Systems to establish MercuryGate EMEA, which will be based near Liverpool, UK, with representation in Ireland. Here’s an excerpt from the press release:

MercuryGate EMEA will focus on developing new business opportunity for the MercuryGate transportation products in this rapidly growing market…Each day, over 125,000 users, from over 50 countries in 15 different languages log into the MercuryGate TMS to manage their international transportation. MercuryGate EMEA offers new prospects regional access to MercuryGate sales and delivery resources.

But wait, I thought most of Europe was still in a recession, with record unemployment? Well, not all of Europe is created equal, with some countries doing much better economically than others. Also, and somewhat paradoxically, demand for transportation solutions often increases in tough economic times as companies look for ways to reduce costs. Transportation is a natural target because, despite its strategic value, most C-level executives still view it as a “cost center” and a “low hanging fruit” opportunity to add significant money to the bottom line.

In other technology news, JDA Software announced the release of its integrated product roadmap following the merger with RedPrairie. Here are some details from the press release:

The six critical solution areas that make up the product roadmap are based on JDA customers’ greatest challenges and where the company can offer the most value. These areas are retail planning, retail execution, commerce, warehouse, transportation and manufacturing/distribution.

 

One of the most significant milestones outlined in the product roadmap is the Q1 2014 delivery of the company’s first fully integrated planning and execution offering, combining JDA’s supply chain planning (SCP) solutions and transportation management system (TMS) with RedPrairie’s warehouse management system (WMS).

For as long as I’ve been in the market, vendors have been promising a fully integrated TMS-WMS solution, but the promise has always fallen short of expectations. The reality is that relatively few companies integrate these solutions in the way analysts like to envision because they still manage transportation and distribution as separate operations, with transportation often dictating what happens at the distribution center. The fact that JDA is prioritizing its TMS over RedPrairie’s in the product roadmap implies that the benefits of its TMS (more functionality, larger customer base) outweighed the benefits of RedPrairie’s existing TMS-WMS integration.

Oracle reported disappointing financial results for the second quarter in a row, with total revenues of $10.9 billion in Q4 FY 2013, unchanged from the previous year. New software licenses and cloud software subscriptions revenues were up 1 percent to $4.0 billion in the quarter. Oracle blamed the weaker-than-expected results on disappointing sales in Asia and Latin America. In contrast, Infor announced this week that it expects its fiscal 2013 Q4 software license fees and subscription revenues to grow about 9 percent at actual currency rates compared to its fiscal 2012 Q4, driven primarily via organic growth and product investment.

While I believe the market shift toward cloud and software-as-a-service solutions is putting competitive and pricing pressure on traditional software vendors, not all vendors are being impacted the same. Ultimately, success in the software industry comes down to having the right strategy, business model, and products for the times, and having the right people to execute it.

In a posting last month, I wondered if we had reached the tipping point for natural gas long-haul trucks. My conclusion was that we hadn’t reached the tipping point yet, but that we’re getting closer every day — as long as the price difference between natural gas and diesel stays large enough to cover the higher price for LNG-powered trucks and other ancillary costs. As reported in the Wall Street Journal this week, the International Energy Agency (IEA) is also bullish on the use of natural gas in transportation sector. Here is an excerpt from the article:

In its five-year gas outlook, the [IEA] said it expects natural gas use in road and maritime transportation to rise to 98 billion cubic meters by 2018, covering around 10% of incremental energy needs in the transport sector. According to the IEA, this shift will do more to reduce the medium-term growth in oil demand than both biofuels and electric cars combined.

 

“Gas is already a major fuel in power generation, but the next five years will also see it emerging as a significant transportation fuel, driven by abundant supplies as well as concerns about oil dependency and air pollution,” said Maria van der Hoeven, the IEA’s executive director.

 

Several hurdles still exist that could stymie the development of natural gas as a transport fuel, not least the need to develop infrastructure like fuelling stations, the IEA said. But in several countries, notably the U.S. and China, activity is already underway to develop the sector.

Finally, the Wall Street Journal also published an article this week discussing how Walmart plans to compete with Amazon on the e-commerce front, particularly on how it fulfills online orders. According to the article, “Wal-Mart is creating a vast new logistics system that includes building new warehouses for Web orders, but also uses workers in stores to pack and mail items to customers, because Wal-Mart has determined it is faster and cheaper to send some shipments from its more than 4,000 U.S. stores.” The article goes on to say that Walmart “is vowing to solve its online problem with a distribution network that shares inventory information between 4,000 stores and 158 warehouses and immediately sizes up the most efficient way to deliver a television or T-shirt to a customer nearby [emphasis mine].”

As we’ve highlighted before, other retailers like Macy’s are also starting to use their stores as fulfillment centers, and this is a big reason why supply chain and logistics software vendors are so enamored with omni-channel fulfillment these days.

Have a happy weekend!

Song of the Week: “Sea of Love” by The National (I can’t stop singing this song, or watching the video).

Note: C.H. Robinson, JDA Software, and MercuryGate are  Logistics Viewpoints sponsors.

Guest Commentary: Single-Minded Procurement Losing Ground in Europe

EU | By •

During tough economic times, long established practices tend to come under scrutiny as companies search for ways to gain a competitive edge. This is one reason why freight managers in Europe are reviewing a practice that has been part of their industry for many years: allocating all the cargo in a lane or other operational areas to a single carrier.

Another approach is to employ multiple carriers in each lane to mitigate risks such as an unexpected capacity shortfall. This alternative strategy appears to be gradually gaining ground in Europe.

The traditional rationale for the one-carrier strategy is that dealing with a single provider is more convenient and less cumbersome than managing many partners. Also, there is a common misconception that giving all freight to one provider will yield the lowest absolute spend. The argument is particularly relevant in Europe where there are numerous middlemen such as forwarders and agents. Another justification is that sole providers find it easier to deliver on performance metrics, because having full responsibility for all cargo movements gives them a holistic view of that part of the network.

The economic downturn in Europe and associated market volatility, coupled with the availability of advanced transportation management system (TMS) technology, has exposed weaknesses in these arguments.

Freight managers have become much more vigilant as margins are squeezed in sluggish economies. At the same time, TMS technology is highlighting service gaps that went unnoticed before. For example, previously a local carrier could add an excessive charge with relative impunity; now these practices are coming to light as European shippers increase their usage of TMS-based invoice audit controls and business intelligence tools.

As managers gain more visibility into their networks, they are realizing that having at least two carriers on a lane creates a more competitive – and less risky – environment. The availability of secondary carriers encourages incumbents to be more transparent about their own performance, and makes the price of failure less onerous, because back-up capacity offers other options in emergencies.

Transportation managers are also coming to the conclusion that the price benefits of sticking with one provider are often illusory; even if they extract better terms from a main provider, hidden charges can quickly erode the cost advantage.

A strategy many managers are introducing – and one that we recommend – is to split their loads, say, 70/30, between a main and a back up partner. Dividing the business in this way spreads the risk and provides enough cargo to make the arrangement worthwhile for the secondary provider.

Timing is also important. As European shippers have discovered, it is difficult to transition to a multiple carrier model when capacity is tight and carriers are committed to moving loads for other customers. Yet there is a temptation to make the switch during these periods when the pressure to control costs and secure capacity is intense. In general, it is much better to make the change as part of a long-term freight management strategy, rather than a stop gap measure in response to short-term market demands.

In some cases, the single carrier model still makes sense. Examples are where specialized equipment is required, or where the shipper is relatively small, and is better advised to stay with one provider to get the best price (although it should be noted that while aggregating freight does yield benefits, the economies of scale can quickly erode).

Still, even when market conditions improve and there is less pressure to find alternatives to traditional practices, the chances are that those European transportation managers who have adopted multiple-carrier purchasing models will stick with the strategy.

Managers who adhere to the traditional approach should at least consider the alternative, or risk losing ground to competitors that are diversifying their strategies.

Glenn serves as the General Manager in Europe for TMC, C.H. Robinson’s Managed TMS® service. He is responsible for the TMC operations in Europe, including business development, account management, and employee development. Glenn has been a part of TMC since 2003 and has served in a variety of roles from operations to account management. He has played an integral role in developing TMC technology and now focuses on making the services available for a global audience.

Guest Commentary: European vs. US-based TMS: Differences of Shipment Execution in a Highly Complex Region

EU | By •

Why should a European transportation management system (TMS) differ from a US TMS? Because geography and demographics demand it.

There are more than 40 countries in Europe, of which the 27 member countries of the European Union (EU) form an area that is less than half the size of the US, but with a population that is 50% larger – not to mention 23 official languages! And while the EU has brought a level of economic, trade and political standardization to its member countries, there are still diverse freight rating methods, regulations, infrastructure and carrier networks that exist from country to country, whether part of the EU or not. This drives a level of complexity in transportation and trade that is not seen within the US domestic marketplace.

No Uniformity Leads to Disparate Rating by Carrier
When it comes to freight rating there is an assortment of rate calculation methods that European carriers can use. Because there is no uniform Postal Code system across Europe (although most countries do have their own), the impact is that rate-zone definitions differ by carrier, service (i.e., international vs. domestic) and country. These rate zones may be based on a combination of country postal codes, cities, regions, countries, etc. This is vastly different from the US, where carriers use the single zip code system to define similarly structured rate zones.

Additionally, although an estimated 75% of European freight goes by road, there are no common European-wide tariff structures like those found in the US, such as ‘CzarLite’ and Yellow Freight. Therefore, freight rating is done on a per-carrier basis, typically based on zones, weight, volume and distance, but also using other unique criteria such as load metres (one metre of loading space of a truck’s length) and number of packs. These multiple parameters, along with the use of different currencies, add further complexities, for both the calculation and the cross-comparison of rates for different regions.

Regulations Galore
In Europe, it is much more likely you’ll face additional documentation and reporting requirements due to individual country regulations. Just like in the US, “international shipping” adds another layer of complexity in terms of documentation and customs requirements. Goods (in free circulation) transported within the EU can move with a minimum of documentation (a Delivery Note or Packing List is generally sufficient). However, any shipment leaving the EU is mandated to be electronically reported to customs, with many member states using their own unique e-customs system and reporting infrastructure versus the US’s single Automated Export System (AES). In addition, shipments need paperwork to travel, which can vary by country of export, country of import, as well as the countries that the goods may pass through on their way to their final destination. Thus, shipment execution using a European TMS requires strong documentation capabilities alongside the need to integrate with multiple e-customs systems.

Many Carriers, Many Ways of Operating
In terms of carriers, the European market remains fragmented with an abundance of small country and regional-specific carriers, despite recent mergers over the past several years. In the case of larger carrier organizations that have grown by acquisition, one may deal with a single entity from a contract negotiation basis but then have to work with different carrier entities from an operations perspective. This is particularly prevalent when shipping from multiple countries where a carrier’s domestic country network may often continue to operate as they did prior to an acquisition. The challenge from an operational perspective is that a TMS needs to adhere to multiple formats for labeling, documentation and tracking number generation, and integrate with multiple systems for electronic exchange – all for a ‘single’ carrier.

Internationalization for Localization
Finally, and by no means unique to TMS systems, is Internationalization (known as I18N), defined by the World Wide Web Consortium (W3C) as follows:

“Internationalization is the design and development of a product, application or document content that enables [sic] easy localization for target audiences that vary in culture, region or language.”

Localization in terms of the user interface as well as outputted documentation and external integrations needs to be supported, which means multiple languages; different number, date, and time formats; and multiple currencies and units of measure. There is also the added complexity that the information can be shared among multiple parties and each party expects it to be presented to them in their preferred format and language.

Taming the Beast
In summary, a European TMS must have the flexibility to handle a diverse landscape that includes many more unique carrier-, country- and user-specific requirements than that of a US-based TMS. This complexity includes a broad range of connectivity to carriers and customs, differing rate structures and international shipping and usage requirements. Couple that with changing regulations and ongoing carrier merger and acquisition activity at any given time and you can see how shipment execution is a different beast to tame across the pond.

Paul Murphy is the VP Product Management for Precision Software, a division of QAD Inc. and has over 15 years experience in the Supply Chain Management Industry.  Murphy joined Precision Software in 1996 as a Software Engineer and was one of the key members of the team that developed the first iteration of the PRECISION solution.  He has held various roles in Product Development, Services and Product Management.  Prior to the acquisition of Precision by QAD, Murphy was the CIO at Precision and a member of the Board of Directors.  Murphy graduated with a B.Sc. in Computing Science from the University of Ulster.

Jack Moloney is a VP Development for Precision Software, a division of QAD Inc. and has over 10 years experience in the Supply Chain Management Industry.  Jack joined Precision Software in 1998 as a Software Engineer and subsequently lead the design and development of the company’s parcel carrier integrations.  He has also worked on the design/development of the PRECISION solution’s Routing Guide, Freight Management, and SOA integration. Moloney graduated with a B.Sc. in Computer Applications from Dublin City University.

Copyright © 2020 Logistics Viewpoints, ARC Advisory Group. All rights reserved • Design by

Archives