The Narrowing Gap Between Healthcare and Consumer Electronics
Not long ago, few would argue that the healthcare and consumer electronics industries had anything in common. In fact, the two industries in many respects existed as polar inverses of each other. Where one was defined by ever-shortening lifecycles in line with both short consumer buyer cycles and electronic component lifecycles, the other was defined by lifecycles 10, 20, even 30 years in length. Where one was considered, from the component manufacturer side, a high-quantity market with relatively limited profit margins, the other was considered relatively niche with limited suppliers, a limited OEM buyer base, and high profit margins per product (typically offset set by eight-to-10-year service agreements). In both cases, obsolescence was a significant concern, but due to the various market differences, each had their own unique obsolescence management strategy in place to mitigate it.
Today, however, while many of the premium-priced medical devices maintain the traditional extended cycle, the healthcare industry as a whole bears little resemblance to its former self. Most of this change has been on the back of good news, at least from an innovation standpoint; in a recent report published by P&S Intelligence, U.S. healthcare industry is on pace to grow at a CAGR of 6.6 percent growth in the coming years. The primary driver, according to many analysts, is the meteoric rise of the digital health market, which according to Global Market Insights is expected to reach $379 billion in value by 2024, a CAGR of approximately 26 percent.
The implications of the increasing digitization are vast, and go far beyond simple dollars and cents. Robotics and laser technologies are transforming how medical professions provide surgical care; 3D printers are now capable of providing functional organs for patients without waiting years for a qualified donor to pass; and, arguably most importantly, portable digital electronics are now putting many aspects of general care back in the hands of the patient, which has enormous long-term benefits that not only may lower the overall cost of care, but can bring quality healthcare to developing countries where medical professionals may be scarce.
In each of these cases, one can see a growing overlap between the technologies that define the consumer electronics industry and the technology in healthcare industry. Robotics can be adapted for fields far beyond surgery, just as 3D printing can be adopted for creating jewelry and home décor just as easily as it can be used to create an internal organs. Portal electronics, many of which are disposable, single-use devices ranging from inhalers to even tools that allow users to perform simple surgeries, are designed using the same generic, commoditized circuits found in many consumer electronics found in our everyday lives. What was once a highly niche market with limited competition among suppliers has now expanded into, and in fact merged with another market to the point where the two could almost be considered one in the same.
But such a new industry outlook also calls for long-standing healthcare OEMs to learn from their consumer electronics counterparts how they insulate their supply chains from obsolescence-related disruptions. For example, due to the remarkable fast pace of the consumer electronics industry and the escalating demand across multiple industries for the same pool of components and semiconductors, it is not uncommon for an electronic component to be transitioned toward obsolescence before it even reaches the market. Healthcare OEMs must learn to adopt new obsolescence management strategies that prioritize proactively committing to their inventory early in the production process and ensure that it is on hand when it is needed, where it is needed. Healthcare OEMs are not strangers to strategies such as last time buys, but in a more competitive market it is even more imperative to get orders in place as early as possible, long before a PCN is issued — if one is issued at all.
A Partstat Last Time Buy Solution is uniquely positioned to ease this transition for healthcare OEMs by offering an option that not only allows them to bypass all form of obsolescence-based disruption, but do so in a way that preserves all the upfront working capital typically required for such large-scale transactions. Since Partstat has been offering this solution, in fact, it has preserved over $100 million in working capital for their customers. This solution also negates any issues healthcare OEMs might have related to long-term storage by using Partstat’s own ISO-certified infrastructure for as long as the product’s production cycle lasts.
Healthcare is one example, but throughout the electronics landscape there appears to be a growing homogeneity between industries, which are all becoming united through their mutual need for the same electronics resources. The longer this trend continues, the more these industries will consolidate around a single obsolescence management strategy such as the Last Time Buy Solution that allows each to co-exist efficiently and disruption-free.