Medical Devices vs. Consumer Electronics: Why Are Their Life Cycles so Different?

Trends in today’s manufacturing industry have long indicated that product life cycles are lengthening against the electronic components required to assemble them, but nowhere is this conflict more pronounced than in the healthcare industry.

The average life cycle for consumer electronics, such as smartphones or tablets, is conservatively about 18 months. While supporting a consumer product for any length of time comes with a degree of challenge for the OEM supply chain, it can reasonably be expected that OCMs will be able to provide the proper electronic components — or at least suitable alternatives — for that length of time.

OEMs that provide lifesaving devices such as ultrasound scanners or hemodialysis machines do not have such a luxury. Many such devices are expected to be supported for at least ten years — usually more. Against a competitive marketplace that can rarely maintain production of an electronic component for longer than 5-7 years, a comprehensive obsolescence management strategy is necessary for the respective OEM to not just make a profit, but to survive long enough to create another product.

Understanding why the life cycle of medical devices has become so extensive is a long and complex story, but it can be simplified by focusing on three basic factors:

1. Certification Requirements – While a smartphone or similar consumer electronic device can be updated rather painlessly, medical devices face a much stiffer path. In addition to the high costs and long development times associated with introducing a new product, any change related to a medical device must undergo a strict evaluation and FDA certification process related to risk and performance. This includes notifying the FDA of the intention to modify the product design, investing in third-party testing, and potentially even implementing new packaging procedures.

2. Training Investments – Consumer electronics are by and large designed with a learning curve suitable for nearly any age bracket, including children. Medical devices, by contrast, are meant to be used by professionals who have spent years, even decades, diligently learning their craft. Once such an individual has spent so much time becoming comfortable using one device, it can be a lot to ask of them to suddenly start from the beginning without seeing a significant drop-off in the quality of care provided to patients. As a result, medical professionals tend to avoid upgrading their technology until absolutely necessary. In the medical field, the old adage “if it ain’t broke, don’t fix it” is taken to the extreme.

3. Low Production Volumes – Obviously, the smartphone market has a wide built-in consumer base that can always be counted on to purchase products. If one group decides against upgrading Day One, there are two or three others that will gladly comply. The medical field is naturally much, much smaller, limited only to professionals within that market. OEMs need to carefully account for this not only in their sales projections, but also in their projections for critical OCM components. If a low-volume product underperforms, there is a much greater probability that the OCM will transition those components toward obsolescence in favor of producing something with significantly higher earning potential.

Regardless of how the medical industry has reached this point, OEMs that choose to operate in this marketplace must be prepared to cope with the harsh realities before them. The best way to mitigate the risk associated with obsolescence, without question, is to implement last time buys for the critical electronic inventory necessary to support such extended product life cycles. Unfortunately, this also means sacrificing years of working capital to accumulate such expansive inventory at one time.

This is precisely the type of dilemma that a Partstat Last Time Buy Solution was designed to avoid.

Instead of having OEMs produce up to ten years of working capital upfront, Partstat will purchase all necessary LTB inventory on our customer’s behalf. Then, on a schedule determined by the customer, we will distribute it anywhere in the world as needed. If the LTB inventory needs to be stored and carefully distributed over a 10-year period, then that equates to ten years’ worth of usable capital the OEM can keep on their books. Add in that our Last Time Buy Solution has been proven to save OEMs an average of 42 percent on annual carrying costs, the fit could not be better for manufacturers in the healthcare industry.

If this sounds exactly like what your supply chain has been missing, we’d love to talk to you!