Health-care providers face extraordinary cost pressures today, due in large part to declining reimbursements for services. As a result, they are seeking opportunities to reduce costs without diminishing the quality of patient care. Medical devices are prime targets for these cost-cutting measures, and health-care providers are asking manufacturers for significant price reductions. What can manufacturers do to meet those demands?
They can start by eliminating significant waste and inefficiencies in the medical-device supply chain. To do this, medical-device manufacturers will have to make seven key improvements in their supply chains. The first three are operational improvements, and the last four are "cultural" shifts in how manufacturers and logistics service providers think about the medical-device supply chain.
On the operational side, the supply chain needs to be more streamlined, reducing the number of touch points so that there is less product handling. Next, there needs to be more transparency, so companies can better track products as they travel from the manufacturing plant to the patient; this will require a significant investment in technology in order to see a product's entire path through the supply chain. Third, companies will need to provide more resources for compliance to meet growing regulatory requirements. Deep expertise in health-care logistics is key to staying ahead of increasingly complex and critical regulatory changes—changes that are happening very quickly. In just the last five years, for example, our third-party logistics (3PL) business has seen a 300 percent increase in regulatory inspections of medical warehouses.
The next four adjustments relate to changing the culture of the medical-device supply chain so it will be better aligned to meet the new and growing challenges in health care. To begin with, the supply chain must be more flexible in its network design, to create new solutions that accommodate the growing shift in care from the hospital to more cost-effective locations, including patients' homes. Next, supply chain decisions must be more insightful, making better use of technology to establish clear demand signals that optimize inventory levels. Supply chain partners should be more collaborative, working together to create more effective shared warehousing and transportation strategies. Finally, all organizations in the medical-device supply chain need to be more nimble to manage the constant change in product complexity, regulatory compliance, transportation, warehousing, and points of care.
Implementing any one of these improvements will be difficult, and combining all seven into a cohesive strategy will be extremely challenging. But it is possible, and indeed will be essential to success in the new and fast-changing world of health-care delivery.
A three-part prescription
To implement the operational improvements mentioned earlier, creating new efficiencies and cost savings, medical-device manufacturers will need to take three actions.
1. Consolidate freight across manufacturers to improve efficiency. Based on our experience, approximately 65 percent of freight in health care today is transported via less-than-truckload (LTL) services. While the remaining 35 percent is transported as full truckloads (FTL), the trucks themselves are rarely full to capacity. In our experience, trucks typically operate about three-quarters full. Manufacturers that ship in truckloads do gain some time and cost savings compared to LTL, but significantly less than would be achieved if the trucks were running at full capacity. The most effective way to run at full capacity is to combine shipments from multiple manufacturers whose products are bound for the same destinations.
In addition to greater efficiency and cost savings, consolidation offers other important benefits. Because there are fewer product touches than in a traditional LTL approach, there's less opportunity for potential damage and claims, resulting in fewer shortages and losses. Plus, driving full trucks reduces transportation's impact on the environment. Fewer aggregate miles are driven, requiring less fuel and lowering greenhouse gas emissions.
2. Take advantage of multitenant warehouses to further improve efficiency. Traditionally, the warehousing of medical devices has been fraught with waste and inefficiency. In essence, each manufacturer creates its own supply chain infrastructure, building warehouses that typically have excess capacity from the start. These warehouses may only be 60-70 percent full at any given time, yet 100 percent of the infrastructure cost has to be maintained.
In fact, I have seen two manufacturers located side-by-side in the same industrial park, each with half-full warehouses. I've also seen a manufacturer with two full warehouses situated just a few miles apart. Neither scenario has ever made sense. In today's environment of relentless cost pressures, it's unsustainable.
As with transportation, the answer for warehousing is consolidation—in this case, combining inventory from multiple manufacturers in the same, shared facility. Doing so eliminates redundant expenses. This is especially important when it comes to the highest-cost services in health-care logistics, such as regulatory expertise. Medical-device regulations change constantly; rather than maintain their own experts, manufacturers that store products in the same facilities can share the regulatory costs with others. The same holds true for information technology (IT), which is another critical and high-cost function that manufacturers can share when they utilize a common warehousing infrastructure.
3. Eliminate excess inventory. Inefficient transportation and warehousing both lead to a common problem in health care: too much inventory sitting on the shelves instead of taking care of patients. Stories abound of nurses who hoard supplies on the hospital floors to make sure they never run out. Now magnify that to the warehouse level, and it becomes clear just how big the excess inventory challenge really is.
No wonder low inventory turns are a chronic problem in health care. For comparison, consider inventory turn rates in industries where supply chains operate far more efficiently. In consumer electronics, for example, the average inventory turn is 44. In the automotive industry, it's 10, and in consumer packaged goods, six. But in medical devices, the average inventory turn is just over two.
It's no surprise that maintaining excess inventory is rampant in health care. After all, patients' lives depend on these products, so health-care providers require high fill rates.
But there's a better way to achieve the necessary level of inventory availability than carrying the needless costs of hoarding products. It starts by creating full visibility and tracking of products, from one end of the supply chain to the other. In order to be able to take meaningful action based on your field inventory data, it is critical to get visibility at point of use. Finally, it's essential to build a warehousing and transportation infrastructure that can quickly act on this data, always maintaining the most efficient levels of inventory and then being ready to deliver products quickly, efficiently, safely, and cost-effectively to the point of care.
Driving success by the numbers
Building efficient supply chains can help medical-device makers save a significant amount of money in the changing world of health care. For example, by implementing best practices such as those outlined in this article, our company helped one medical-device manufacturer save more than US $2 million in transportation costs and $250,000 in regulatory costs in just 24 months. Another manufacturer achieved a total cost reduction of $550,000 over a 16-month period—with near-zero freight claims, a 5 percent decrease in transit times, and a reduction of variability within its supply chain.
For medical-device makers, achieving such dramatic cost improvements will not be easy. They will have to undertake the operational changes—becoming more streamlined, gaining more transparency, and focusing more resources on compliance—discussed earlier, as well as make the cultural improvements—becoming more flexible, more insightful, more collaborative, and more nimble—required to support those operational changes.
In the long term, it will be well worth the effort. As medical-device manufacturers come under increasing pressure from health-care providers to reduce costs, the supply chain can become a greater, more reliable source of new efficiencies and savings. Just as important: Improving health-care logistics can be a key not only to lowering costs, but also to improving the care of patients. Dollars saved today in the health-care supply chain can be redirected to research and development to improve or develop new medical devices tomorrow.
The launch is based on “Amazon Nova,” the company’s new generation of foundation models, the company said in a blog post. Data scientists use foundation models (FMs) to develop machine learning (ML) platforms more quickly than starting from scratch, allowing them to create artificial intelligence applications capable of performing a wide variety of general tasks, since they were trained on a broad spectrum of generalized data, Amazon says.
The new models are integrated with Amazon Bedrock, a managed service that makes FMs from AI companies and Amazon available for use through a single API. Using Amazon Bedrock, customers can experiment with and evaluate Amazon Nova models, as well as other FMs, to determine the best model for an application.
Calling the launch “the next step in our AI journey,” the company says Amazon Nova has the ability to process text, image, and video as prompts, so customers can use Amazon Nova-powered generative AI applications to understand videos, charts, and documents, or to generate videos and other multimedia content.
“Inside Amazon, we have about 1,000 Gen AI applications in motion, and we’ve had a bird’s-eye view of what application builders are still grappling with,” Rohit Prasad, SVP of Amazon Artificial General Intelligence, said in a release. “Our new Amazon Nova models are intended to help with these challenges for internal and external builders, and provide compelling intelligence and content generation while also delivering meaningful progress on latency, cost-effectiveness, customization, information grounding, and agentic capabilities.”
The new Amazon Nova models available in Amazon Bedrock include:
Amazon Nova Micro, a text-only model that delivers the lowest latency responses at very low cost.
Amazon Nova Lite, a very low-cost multimodal model that is lightning fast for processing image, video, and text inputs.
Amazon Nova Pro, a highly capable multimodal model with the best combination of accuracy, speed, and cost for a wide range of tasks.
Amazon Nova Premier, the most capable of Amazon’s multimodal models for complex reasoning tasks and for use as the best teacher for distilling custom models
Amazon Nova Canvas, a state-of-the-art image generation model.
Amazon Nova Reel, a state-of-the-art video generation model that can transform a single image input into a brief video with the prompt: dolly forward.
Economic activity in the logistics industry expanded in November, continuing a steady growth pattern that began earlier this year and signaling a return to seasonality after several years of fluctuating conditions, according to the latest Logistics Managers’ Index report (LMI), released today.
The November LMI registered 58.4, down slightly from October’s reading of 58.9, which was the highest level in two years. The LMI is a monthly gauge of business conditions across warehousing and logistics markets; a reading above 50 indicates growth and a reading below 50 indicates contraction.
“The overall index has been very consistent in the past three months, with readings of 58.6, 58.9, and 58.4,” LMI analyst Zac Rogers, associate professor of supply chain management at Colorado State University, wrote in the November LMI report. “This plateau is slightly higher than a similar plateau of consistency earlier in the year when May to August saw four readings between 55.3 and 56.4. Seasonally speaking, it is consistent that this later year run of readings would be the highest all year.”
Separately, Rogers said the end-of-year growth reflects the return to a healthy holiday peak, which started when inventory levels expanded in late summer and early fall as retailers began stocking up to meet consumer demand. Pandemic-driven shifts in consumer buying behavior, inflation, and economic uncertainty contributed to volatile peak season conditions over the past four years, with the LMI swinging from record-high growth in late 2020 and 2021 to slower growth in 2022 and contraction in 2023.
“The LMI contracted at this time a year ago, so basically [there was] no peak season,” Rogers said, citing inflation as a drag on demand. “To have a normal November … [really] for the first time in five years, justifies what we’ve seen all these companies doing—building up inventory in a sustainable, seasonal way.
“Based on what we’re seeing, a lot of supply chains called it right and were ready for healthy holiday season, so far.”
The LMI has remained in the mid to high 50s range since January—with the exception of April, when the index dipped to 52.9—signaling strong and consistent demand for warehousing and transportation services.
The LMI is a monthly survey of logistics managers from across the country. It tracks industry growth overall and across eight areas: inventory levels and costs; warehousing capacity, utilization, and prices; and transportation capacity, utilization, and prices. The report is released monthly by researchers from Arizona State University, Colorado State University, Rochester Institute of Technology, Rutgers University, and the University of Nevada, Reno, in conjunction with the Council of Supply Chain Management Professionals (CSCMP).
Specifically, 48% of respondents identified rising tariffs and trade barriers as their top concern, followed by supply chain disruptions at 45% and geopolitical instability at 41%. Moreover, tariffs and trade barriers ranked as the priority issue regardless of company size, as respondents at companies with less than 250 employees, 251-500, 501-1,000, 1,001-50,000 and 50,000+ employees all cited it as the most significant issue they are currently facing.
“Evolving tariffs and trade policies are one of a number of complex issues requiring organizations to build more resilience into their supply chains through compliance, technology and strategic planning,” Jackson Wood, Director, Industry Strategy at Descartes, said in a release. “With the potential for the incoming U.S. administration to impose new and additional tariffs on a wide variety of goods and countries of origin, U.S. importers may need to significantly re-engineer their sourcing strategies to mitigate potentially higher costs.”
Grocers and retailers are struggling to get their systems back online just before the winter holiday peak, following a software hack that hit the supply chain software provider Blue Yonder this week.
The ransomware attack is snarling inventory distribution patterns because of its impact on systems such as the employee scheduling system for coffee stalwart Starbucks, according to a published report. Scottsdale, Arizona-based Blue Yonder provides a wide range of supply chain software, including warehouse management system (WMS), transportation management system (TMS), order management and commerce, network and control tower, returns management, and others.
Blue Yonder today acknowledged the disruptions, saying they were the result of a ransomware incident affecting its managed services hosted environment. The company has established a dedicated cybersecurity incident update webpage to communicate its recovery progress, but it had not been updated for nearly two days as of Tuesday afternoon. “Since learning of the incident, the Blue Yonder team has been working diligently together with external cybersecurity firms to make progress in their recovery process. We have implemented several defensive and forensic protocols,” a Blue Yonder spokesperson said in an email.
The timing of the attack suggests that hackers may have targeted Blue Yonder in a calculated attack based on the upcoming Thanksgiving break, since many U.S. organizations downsize their security staffing on holidays and weekends, according to a statement from Dan Lattimer, VP of Semperis, a New Jersey-based computer and network security firm.
“While details on the specifics of the Blue Yonder attack are scant, it is yet another reminder how damaging supply chain disruptions become when suppliers are taken offline. Kudos to Blue Yonder for dealing with this cyberattack head on but we still don’t know how far reaching the business disruptions will be in the UK, U.S. and other countries,” Lattimer said. “Now is time for organizations to fight back against threat actors. Deciding whether or not to pay a ransom is a personal decision that each company has to make, but paying emboldens threat actors and throws more fuel onto an already burning inferno. Simply, it doesn’t pay-to-pay,” he said.
The incident closely followed an unrelated cybersecurity issue at the grocery giant Ahold Delhaize, which has been recovering from impacts to the Stop & Shop chain that it across the U.S. Northeast region. In a statement apologizing to customers for the inconvenience of the cybersecurity issue, Netherlands-based Ahold Delhaize said its top priority is the security of its customers, associates and partners, and that the company’s internal IT security staff was working with external cybersecurity experts and law enforcement to speed recovery. “Our teams are taking steps to assess and mitigate the issue. This includes taking some systems offline to help protect them. This issue and subsequent mitigating actions have affected certain Ahold Delhaize USA brands and services including a number of pharmacies and certain e-commerce operations,” the company said.
Editor's note:This article was revised on November 27 to indicate that the cybersecurity issue at Ahold Delhaize was unrelated to the Blue Yonder hack.
The new funding brings Amazon's total investment in Anthropic to $8 billion, while maintaining the e-commerce giant’s position as a minority investor, according to Anthropic. The partnership was launched in 2023, when Amazon invested its first $4 billion round in the firm.
Anthropic’s “Claude” family of AI assistant models is available on AWS’s Amazon Bedrock, which is a cloud-based managed service that lets companies build specialized generative AI applications by choosing from an array of foundation models (FMs) developed by AI providers like AI21 Labs, Anthropic, Cohere, Meta, Mistral AI, Stability AI, and Amazon itself.
According to Amazon, tens of thousands of customers, from startups to enterprises and government institutions, are currently running their generative AI workloads using Anthropic’s models in the AWS cloud. Those GenAI tools are powering tasks such as customer service chatbots, coding assistants, translation applications, drug discovery, engineering design, and complex business processes.
"The response from AWS customers who are developing generative AI applications powered by Anthropic in Amazon Bedrock has been remarkable," Matt Garman, AWS CEO, said in a release. "By continuing to deploy Anthropic models in Amazon Bedrock and collaborating with Anthropic on the development of our custom Trainium chips, we’ll keep pushing the boundaries of what customers can achieve with generative AI technologies. We’ve been impressed by Anthropic’s pace of innovation and commitment to responsible development of generative AI, and look forward to deepening our collaboration."