Supply Chain Management of

Siemens Healthcare

Submitted to:
Prof Maskhur Zafar
Course In charge

Submitted By:
Abhijeet Kumar
Dolly Kotak
Kumar Anshuman
Manish Kumar
Manpreet Kaur
Umashankar Singh

Contents
INTRODUCTION ............................................................................................................................................... 4
INDUSTRY ANALYSIS........................................................................................................................................ 4
Medical Devices Definition ......................................................................................................................... 4
Medical Devices Industry Structure: ........................................................................................................... 4
Medical devices Markets ............................................................................................................................ 5
Indian Medical Device Industry: ..................................................................................................................... 5
MEDICAL EQUIPMENT PRODUCT LIFECYCLE MANAGEMENT ..................................................................... 6
THE QUALITY SYSTEM CYCLE OF MED ........................................................................................................ 7
Automating business processes with product lifecycle management ....................................................... 7
Management Reviews An Industry perspective ........................................................................................... 8
SIEMENS : A big league player of ME&D ...................................................................................................... 10
Supply Chain at Siemens ........................................................................................................................... 10
Global Procurement Management ........................................................................................................... 11
Global procurement & its management. .................................................................................................. 11
SUPPLY CHAIN MANAGEMENT & ITS CORPORATE FUNCTION ................................................................. 13
DOCUMENTATIONS & REGULATIONS ........................................................................................................... 13
Export Control and Foreign Trade Data & Data Regulations. ................................................................... 13
Export Control and Foreign Trade Data .................................................................................................... 14
Supply Chain Security Requirements ........................................................................................................ 15
Export Control Declaration of Siemens..................................................................................................... 15
Documentation Requirements: Medical Equipment/Devices Imports .................................................... 15
Regulation Medical Equipment Market In India ....................................................................................... 16
Import procedure...................................................................................................................................... 16
Procurement by Health care agencies ...................................................................................................... 17
Suppliers and OEM manufacturers ............................................................................................................... 18
Suppliers to Siemens and their suppliers.................................................................................................. 18
Cordys ................................................................................................................................................... 18
CICOIL .................................................................................................................................................... 19
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Key drivers on the basis of the porter`s five forces analysis......................................................................... 20

Barriers to Entry: ....................................................................................................................................... 20
Bargaining power of buyers ...................................................................................................................... 20
Bargaining Power of Suppliers .................................................................................................................. 20
Threat of Substitutes................................................................................................................................. 20
DRIVERS OF SUPPLY CHAIN ....................................................................................................................... 20
1. Inventory: .......................................................................................................................................... 21
2. Transportation/Logistics: .................................................................................................................. 22
3. Facility: .............................................................................................................................................. 22
4. Information: ...................................................................................................................................... 23
Conclusion ..................................................................................................................................................... 24
Reference ...................................................................................................................................................... 25

INTRODUCTION
This project aims to understand the Supply Chain Management in Production and Operations
Management by using an industry. The main objective of the project is to explore the key
aspects involved in managing the Supply Chain Management and ensuring that all processes
involved from acquiring inputs from suppliers to delivering final products to end customers
are executed smoothly within minimum resources.
Supply chain management (SCM) is the management of a network of interconnected
businesses involved in the provision of product and service packages required by the end
customers in a supply chain. SCM spans all movement and storage of raw materials, work-inprocess inventory, and finished goods from point of origin to point of consumption.
We as a team have tried to study the national regulations for the medical equipment
business, procurement and import export of devices across borders. We have assessed the
market for the MED and the market segregation from the perspective of POM. We have
studied the documentation required for the import/export of the devices and the supply chain
mechanism of the Siemens, a big league player of the MED across globe

INDUSTRY ANALYSIS
Medical Devices Definition
Medical devices are defined as any healthcare product that does not achieve its primary
intended purpose by chemical action or by being metabolized. Medical devices include
electro-medical equipment and related software, furniture, supplies and consumables,
orthopedic appliances, prosthetics and diagnostic kits, reagents, and equipment. Medical
devices are generally divided into class I, II and III, based on the level of risk to users/patients,
corresponding to logical risk evaluations conducted by the FDA. Class I devices are the
lowest risk classification and include general controls such as crutches and band aids, while
class II controls are more specialized, such as wheelchairs. Class III devices require premarket approval, as they are known to present hazards requiring clinical demonstration of
safety and effectiveness. Devices in this category include heart valves, catheters,
cardiopulmonary resuscitation (CPR) devices and various implants.

Medical Devices Industry Structure:

Medical devices are generally divided into class I, II and III, based on the level of risk to
users/patients, corresponding to logical risk evaluations conducted by the FDA. Class I
devices are the lowest risk classification and include general controls such as crutches and
band aids, while class II controls are more specialized, such as wheelchairs. Class III devices
require pre-market approval, as they are known to present hazards requiring clinical

demonstration of safety and effectiveness. Devices in this category include heart valves,
catheters, cardiopulmonary resuscitation (CPR) devices and various implants.

Medical devices Markets

The medical devices industry has witnessed a rapid expansion and though the traditional
markets of US, EU and Japan contribute the major chunk of revenues, there has been a rapid
growth in most of the developing markets. The increasing prosperity and income across the
developing countries especially in Asia, easier access to healthcare coupled with the ageing
population, advances in the medical Technology and establishment of public health
insurance has resulted in a phenomenal growth in the medical devices industry. Marked
increases in the average age of U.S. and foreign populations has already influencing the
direction of the medical device industry through the changing health needs of senior citizens
and shifts in thinking on how and where they will be treated. As pressures mount to contain
costs, expensive and/or extended stays in healthcare facilities will be discouraged and
healthcare will be increasingly delivered in alternative settings such as nursing homes,
hospices, and, especially, the patients own home. Home healthcare is one of the fastest
growing segments of the industry, and is branching out into new areas. What used to be
limited to only the lowest technology products is now encompassing a proliferation of high
technology medical devices that are intended to be used by unskilled health care workers or
patients. In addition, demographics and technological advances will continue to increase
demand for advanced medical device products

Indian Medical Device Industry:

India today on account of the rapid economic development, increasing trade liberalization,
growing acceptance for advanced, technological products and an expanding healthcare
segment is a lucrative market for medical devices industry. Most of the big players have
established a permanent base in the country either through R&D facilities, manufacturing or
trading offices. As of 2009 the size of Indian Medical Devices market stood at $2777.9 million
and is expected to reach $6409.9 million by 2013, a CAGR of 23.2% over the period. The
Indian Medical Devices Industry can primarily be divided into the following segments.

Medical Disposables
Surgical Equipment
Diagnostic Equipment
Laboratory Devices and Diagnostics
Dental Equipment
Ophthalmic Equipment

Following are the other key opportunity areas for the Indian Medical devices market
5

Growth in Indian Medical Devices Industry:

Advancement in Research and Development
India Growing as an Outsourcing Hub for Manufacturing:
Growth in Healthcare Expenditure:
Source: MGI India Consumer Model V1

MEDICAL EQUIPMENT PRODUCT LIFECYCLE MANAGEMENT

In the medical device industry, efficiently meeting U.S. Food and Drug Administration (FDA)
requirements is a key to business success. Product lifecycle management (PLM) technology
ensures FDA compliance integrity by providing comprehensive content to support
management decisions across the organization and individual functional groups. By uniting
product information with processes, people, and technology, PLM enables medical device
companies to effectively and economically assure compliance.
The FDA method for evaluating compliance is the Quality System Inspection Technique
(QSIT). As part of the QSIT, the FDA targets six major quality systems that medical device
companies must have in place. The agency also requires that management demonstrate
knowledge of the interrelationships of activities across these systems:

Corrective and preventive action (CAPA)

Design controls

Records, documents, and change controls

6

Material controls

Equipment and facility controls

Production and process controls

THE QUALITY SYSTEM CYCLE OF MED

As part of the QSIT, the FDA targets six major quality systems that medical device companies
must have in place.

Automating business processes with product lifecycle management

Most life sciences companies currently manage quality and address the QSIT requirements
by using a combination of manual, paper-based processes or discrete point solutions for
document authoring and change management, quality event management, program
management, and management reviews. Companies can automate each of the four vital
business processes by implementing PLM, thereby delivering dramatic improvements in
business performance and compliance with QSIT requirements.

Management Reviews An Industry perspective

Most medical device company faces the challenges of a communication disconnect between
the QA and business organizations within the company.
1. The first obstacle is a language barrier between QA and operations. Reports created
by QA are often not in a format or wording that is easily understood by management,
nor are they presented in a compelling way that will call management to action.
Consequently, management has difficulty interpreting the business impact of quality
on the company and prioritizing appropriate resources to resolve quality issues.
2. The second challenge is getting the right information to management. Due to difficulty
in synchronizing with other functional groups and aggregating data from multiple
unconnected systems, QA cannot get the data it needs in a timely fashion. By the time
quality information is presented to senior management, the content is already
outdated. Additionally, the messaging aimed at management is incomplete because a
disproportionate amount of time is spent gathering the information, leaving no time to
analyze the data and make it actionable. As a result, management is reactive instead
of proactive on quality, spending time mitigating risk instead of strategically
leveraging the knowledge to improve the bottom line.
3. The third challenge is the lack of cross-functional communication flow. When QA and
receive/acknowledge processes require cross-functional input with multiple QSIT
systems, it often goes into a black holewith no visibility into status. The disconnect
between groups impacts process performance and compliance integrity during audits.
While manual processes make the problem worse, independent automated quality
solutions that are not synchronized with enterprise systems used by other functional
groups are not the solution either.
The combination of these challenges negatively impacts company performance, market
share, customer satisfaction, and staff morale. To solve the problems, the QA organization
needs to present management with a graphic representation of the financial impact of quality
illustrating the cost of recalls, CAPA, inventory, new product introduction, and knowledge
lost. Having an automated system with a common database for all quality information, QA
will be able to gather, share, and analyze quality data.

In addition, PLM can provide the added advantage of analytics that process quality data and
translate it into actionable information. By providing visibility and insight to people across the
enterprise, PLM helps companies use quality data to make timely decisions that matter to the
business.
To support management reviews, PLM provides

Automated real-time reporting of all enterprise activities

Standard reports for document management, quality events, and projects

Custom dashboards to present critical information faster

Cross-functional analysis of all data in a graphical format

Content synchronization with other enterprise tools such as enterprise resource

planning and manufacturing execution systems

SIEMENS : A big league player of ME&D

With reference to our project we are taking one of the big league player of the industry across
world the other major being the Phillips and GE

Supply Chain at Siemens

The aim of Supply Chain Management is to optimize the value added chain at Siemens
globally in a coordinated manner on the basis of standardized processes. Apart from
contributing value to operating results through savings in procurement, this also includes
quality assurance as well as guaranteeing delivery reliability and dependable, efficient
logistics. All this is tightly intermeshed with the Siemens objective of sustainability.
Until 2009, Supply Chain Management throughout the Group was organized almost
exclusively vertically within the three sectors. When the SCM initiative was launched in April
2009, the idea was to leverage synergy potentials of the company as a whole more
effectively. The objective is to achieve sustained optimization over the long term. Among
other things this includes building close partnerships with suppliers, particularly in growth
markets. The aim here is to establish good cooperation relationships that deliver lasting value
to both parties. The selection process plays a vital role in this. Siemens is looking not just for
the best suppliers, but also for those suppliers most closely living up to Siemens own
objective of sustainability.

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Global Procurement Management

As a global enterprise, Siemens also purchases globally. Currently its purchasing units (on
the corporate level only) purchase goods and services of more than 130 material fields.
Siemens procurement is organized as a network in order to take full advantage of its savings.
These savings can be realized by taking up a joint, centrally coordinated approach within
what basically remains a decentralized organization.
Market Information 3rd Party Purchasing Volume World 2009 (based on location nation) he
Purchasing Volume World contains only 3rd party volume without intercompany purchases.
The 3rd party volume consists of Sectors, Cross-Sector Businesses and Services as well as
Corporate Units and Regional Organization

Global procurement & its management.

Global Value Sourcing and favorable prices are not a passing fad. It is the logical
consequence of developing markets worldwide. Six benefits stand for Global Value Sourcing
and will help keep Siemens one step ahead of the competition
The aim of Supply Chain Management is to optimize the value added chain at Siemens
globally in a coordinated manner on the basis of standardized processes. Apart from
contributing value to operating results through savings in procurement, this also includes
quality assurance as well as guaranteeing delivery reliability and dependable, efficient
logistics. All this is tightly intermeshed with the Siemens objective of sustainability. Until
2009, Supply Chain Management throughout the Group was organized almost exclusively
vertically within the three sectors. When the SCM initiative was launched in April 2009, the
idea was to leverage synergy potentials of the company as a whole more effectively. The
objective is to achieve sustained optimization over the long term. Among other things this
includes building close partnerships with suppliers, particularly in growth markets. The aim
here is to establish good cooperation relationships that deliver lasting value to both parties.
The selection process plays a vital role in this. Siemens is looking not just for the best
suppliers, but also for those suppliers most closely living up to Siemens own objective of
sustainability
The aim of Supply Chain Management is to optimize the value added chain at Siemens
globally in a coordinated manner on the basis of standardized processes. Apart from
contributing value to operating results through savings in procurement, this also includes
quality assurance as well as guaranteeing delivery reliability and dependable, efficient
logistics. All this is tightly intermeshed with the Siemens objective of sustainability. Until
2009, Supply Chain Management throughout the Group was organized almost exclusively
11

vertically within the three sectors. When the SCM initiative was launched in April 2009, the
idea was to leverage synergy potentials of the company as a whole more effectively. The
objective is to achieve sustained optimization over the long term. Among other things this
includes building close partnerships with suppliers, particularly in growth markets. The aim
here is to establish good cooperation relationships that deliver lasting value to both parties.
The selection process plays a vital role in this. Siemens is looking not just for the best
suppliers, but also for those suppliers most closely living up to Siemens own objective of
sustainability.
Working Worldwide for Procurement
As a global enterprise, Siemens also purchases globally. Currently its purchasing units (on
the corporate level only) purchase goods and services of more than 130 material fields.
Siemens procurement is organized as a network in order to take full advantage of its savings.
These savings can be realized by taking up a joint, centrally coordinated approach within
what basically remains a decentralized organization.

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SUPPLY CHAIN MANAGEMENT & ITS CORPORATE FUNCTION

As a cross-sectional function, the Supply Chain Management (SCM) organization mirrors the
structure of Siemens as a whole. Accordingly, Supply Chain Management is made up
of corporate departments as well as of functions in the managerial sectors and in the
Regions.
MANAGEMENT
To highlight the importance of Supply Chain Management, but also to ensure SCM processes
are optimized across the enterprise, Siemens has created a separate seat on the Managing
Board specifically for this purpose. The SCM board reports directly to the Managing Board
member responsible, Barbara Kux. The board is structured into the functions financial
controlling, procurement of direct and indirect materials, strategy and programs, and global
value sourcing. Also parts of the picture are the responsible Chief Procurement Officers
(CPOs) in the sectors and at SIS. In line with the aim of optimizing supply chain management
across the entire enterprise based on integrated quality, logistics and manufacturing
processes, pooled bargaining power and a focused supplier base, the SCM board has
technical managerial authority in all of the companys SCM functions.

DOCUMENTATIONS & REGULATIONS

Siemens and its suppliers are obligated to comply at all times with the legal requirements for
export control and customs, and to ensure their correct and cost-effective implementation.
For this reason, Siemens expects its suppliers to provide export control and foreign trade
data in a professional and timely manner, and to implement appropriate standards for
security in the supply chain in the framework of global customs security programs.
In addition to these basic requirements, further requirements are to be taken into account,
e.g. due to national or product-specific requirements which must be evaluated on a case-bycase basis.

Export Control and Foreign Trade Data & Data Regulations.

X.1 For all Products to be delivered and Services to be provided according to this Agreement
Supplier shall comply with all

13

applicable export control, customs and foreign trade regulations (Foreign Trade
Regulations) and shall obtain all necessary export licenses, unless Buyer or any party other
than Supplier is required to apply for the export licenses pursuant to the applicable Foreign
Trade Regulations.
X.2 Supplier shall advise Buyer in writing as early as possible but not later than [weeks/days
prior to the] the Delivery Date of any information and data required by Buyer to comply with
all Foreign Trade Regulations for the Products and Services applicable in the countries of
export and import as well as re-export in case of resale. In any case Supplier shall provide
Buyer for each Product and Service

the Export Control Classification Number according to the U.S. Commerce Control
List (ECCN) if the Product is subject to the U.S. Export Administration Regulations; and

all applicable export list numbers; and

the statistical commodity code according to the current commodity classification for
foreign trade statistics and the HS (Harmonized System) coding; and

the country of origin (non-preferential origin); and

upon request of Buyer: Suppliers declaration for preferential origin (in case of
European suppliers) or preferential certificates (in case of non-European suppliers)
(Export Control and Foreign Trade Data)

X.3 In case of any alterations to origin and/or characteristics of the Products and Services
and/or to the applicable Foreign Trade Regulations Supplier shall update the Export Control
and Foreign Trade Data as early as possible but not later than [weeks/das prior to] the
Delivery Date. Supplier shall be liable for any expenses and/or damage incurred by Buyer due
to the lack of or inaccuracy of said Export Control and Foreign Trade Data.

Export Control and Foreign Trade Data

Siemens suppliers' undertake on a contractual basis to provide export control and
foreign trade data. Forms are available for providing this required data:

Letter Request for product specific data- Supplier EU

Letter Request for product specific data- Supplier NON-EU

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Supply Chain Security Requirements

Suppliers who are integrated into Siemens' supply chains take measures to guarantee
security in the supply chain in accordance with the requirements of global customs security
programs.
X.1 On the basis of the World Customs Organizations SAFE Framework as well as national
customs security programs aimed at averting dangers from terrorist attacks, Siemens
involves its suppliers in the implementation of sufficient and appropriate standards of supply
chain security.
In this context, Siemens expects the willing cooperation of important participants in its
supply chains, especially materials suppliers and logistics service providers.
X.2 Requirements for goods suppliers and logistics service providers relate to necessary
measures taken in particular in property protection, security of business partners, personnel
and information, and packaging and transport to protect deliveries and services from
unauthorized access. Detailed requirements can be found in the WCOs SAFE Framework or
the respective national customs security program.
X.3 The requirements can preferably be met by proof of participation in a national customs
security program (e.g. AEO) or comparable security initiatives. Alternatively, a confirmation
can be provided stating compliance with the required security standards.

Export Control Declaration of Siemens

The export control policy of Siemens prohibits from participating, directly or indirectly, in the
development, manufacturing and distribution of weapons of mass destruction and missiles
capable of delivering these weapons. All legal and internal measures are implemented in the
Export Control and Customs Guidelines. These measures, in addition to German, European
and U.S. regulations, also include other company internal restrictions concerning the above
mentioned end-uses. Therefore, for each order, regardless of the country of destination,
screening is completed for criteria contained on the EU and German "Export list" and the U.S.
"Commerce Control List" including end-use and end-destination related restrictions, and if the
required authorization is not obtained, then the order must be cancelled.

Documentation Requirements: Medical Equipment/Devices Imports

For the purchase of medical equipment/devices the government authorizes the government
owned and private hospitals to issue global tenders. These tenders are permitted even if a
product is manufactured domestically. Most of the government tenders follow two parts:
technical bid and commercial bid. All the government tenders are time consuming as public
hospitals often have extensive bureaucratic structures and decisions are sometimes hard to
reach. Generally the government decides on the lowest bidder. The registration requirement
and the standard procedure to import medical devices into India.

15

Regulation Medical Equipment Market In India

Presently, the Indian market for medical devices is largely unregulated. Medical devices are
freely imported into India. The purchaser (whether it is a government hospital, a private
hospital or a doctor) evaluates the quality of the product being purchased. Normally, the FDA
and CE approved products are preferred because of their better quality and performance.
But, India being a price sensitive market, low priced medical devices find a big market.To
ensure the quality of healthcare service, the Government of India is in the process of
developing regulations for medical devices. According to industry contacts and the Ministry
of Health officials, a notification is expected that would bring a select group of medical
devices under the regulatory framework

Import procedure
The standard operating procedure for importing medical equipment/devices into India
consists of the following steps. The U.S. exporter provides the proforma invoice stating the
offer price, which is inclusive of the insurance and freight cost. On reaching an agreement on
the mode of payment, which can be a letter of credit or wire transfer of funds; the Indian
importer places the order for the product. The exporter either ships the consignment or uses
the airfreight. At the port of entry the importer or its customs clearing agent is responsible to
clear the goods for home consumption after the payment of duties.
The following documents are required along with the bill of entry.

Signed invoice
Packing list
Bill of Lading or Delivery Order/Airway Bill
GATT declaration form duly filled in
Importers/Clearing House (agents) declaration
License wherever necessary
Letter of Credit/Bank Draft/wherever necessary
Insurance document
Import license
Industrial License, if required
Test report in case of chemicals
Catalogue, Technical write up, Literature in case of machineries, spares or chemicals
as may be applicable
Separately split up value of spares, components machineries
Certificate of Origin, if preferential rate of duty is claimed

All imported goods are required to be examined for verification of correctness of the
description given in the bill of entry. However, only a part of the consignment is selected on a
random basis and examined. After the assessment of the duty liability, the importer has to
deposit the duty calculated with the treasury or the nominated banks, and then seek delivery
of the goods from the Custodians.
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Procurement by Health care agencies

Problems that effective procurement could avoid

Policy/planning:

Resulting waste you could save

lack of standardization
purchase of sophisticated equipment for
which operating and maintenance staff have
no skills

30-50% additional cost for

extra spare parts and extra
maintenance workload
20-40% of equipment remains
underutilized or unused

Procurement:

impact on equipment and buildings during

installation, unforeseen at the initial tender
stage
inability to correctly specify and foresee
total needs when tendering and procuring
equipment

Training:

extra modifications or
additions required for 10-30%
of equipment
10-30% additional unplanned
costs

loss of 30-80% of the

potential lifetime of
equipment

25-35% of equipment out of

service

improper use of equipment by operating

and maintenance staff

Operation and maintenance:

excessive equipment down-time due to

absence of preventive maintenance,
inability to repair, and lack of spare parts

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Suppliers and OEM manufacturers

The concern with medical suppliers and vendors has grown in significance in recent years.
From tainted heparin, to melamine used as an ingredient in pet food and toothpaste, to
unknown ingredients introduced into medical supplies through ghost suppliers and vendors,
the resulting patient deaths, crippling injuries and acute patient trauma have grown in
complexity. We have witnessed extraordinary ignorance and carelessness regarding the
nations medical supply chain. In most of these instances, unidentified foreign material has
been introduced into the supply chain without manufacturers and consumers being aware of
it. Further, incoming inspection often is weak and lacking in sufficient depth to detect alien
material in time to stop the product from reaching the market

Suppliers to Siemens and their suppliers

Cordys
Cordys improves core logistics processes for Siemens Healthcare
The Cordys solution at Siemens Healthcare automates key logistics processes as part of the
global material logistic process. The material logistics comprises supply chain solutions over
the whole product life cycle within the business unit UPTIME Services. It enables spare parts
to be delivered to customers fast and efficiently, in more than 98 percent worldwide within 24
hours.
The Cordys solution automates the following processes:

critical parts deliveries

returns of spare parts

customer feedback

The solution also provides the tools for continuous process improvement in order to
maintain Siemens high levels of customer satisfaction and high quality standards throughout
the global logistics network.
Suppliers to cordys
Nibana Solutions
Nibana Solutions is one of the first companies globally, to deliver integrated Manufacturing
18

centric Enterprise wide Business Process Applications and Dashboards (for effective
decisions) using world class BPM, SOA, SaaS and Cloud technologies.
CSC
CSC is a global leader in providing technology-enabled solutions and services through three
primary lines of business. These include Business Solutions & Services, Global Outsourcing
Services and the Public Sector.
"Cordys Business Operations Platform allows organizations to change and innovate the way
they do business with notable new speed and greater flexibility. This is a key business
requirement in the current economic climate. These new solution elements provide a range
of tools for business transformation and directly support our enterprise-wide cloud strategy.
CSC and Cordys share a common purpose of strong business ethics, innovation and
entrepreneurial spirit"

CICOIL
Cicoil Silicone Flat Cable and Cable Assemblies are used in a wide variety of medical
applications, including automated medical equipment, medical robotics, testing equipment,
and also human medical devices like hearing aids.
Customers
Cicoil supplies cables and cable assemblies to many leading medical equipment and device
manufacturers, including the following:

GE Medical

Siemens Medical

Sleep Apnea Device Manufacturers

Robotic Lab Testing Equipment Manufacturers

Hearing Device Manufacturers

Pharmacy Robot Manufacturer

CICOIL suppliers
DIGI-KEY

Raytheon Integrated Defense Systems

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Key drivers on the basis of the porter`s five forces analysis

Barriers to Entry:
The Medical Industry typically has high barriers to entry in the form of high research and
development expenditures, regulatory restrictions, and legal obstacles

Bargaining power of buyers

Medical devices Market is primarily a Business to Business market and prices are primarily
driven by buyer-supplier negotiations. Due to the price discrimination there is also lack of
transparency among the market players as far as prices are concerned. This results in a
predominance of the bargaining ability of the buyer in determining the price and the
subsequent profitability for the supplier.

Bargaining Power of Suppliers

Powerful suppliers capture more of the value for themselves by charging higher prices,
limiting quality or services, or shifting costs to industry participants. In case of Medical
devices, the supplier group is highly focused on the medical industry and most of times on
supplying for a particular product. Manufacturers tend to cluster in certain locations,
depending on specialization.

Threat of Substitutes
The medical device Industry tends to evolve in fits and starts rather than in a slow, gradual
fashion. Thus, a particular device market tends to chug along till it is replaced by a game
changing technology that revolutionizes the market.. So, in general because of the lack of
gradual and continuous innovation, the threat of substitutes is very low.
Competitive Strategy Supply Chain Strategy Efficiency Responsiveness Facilities Inventory
Transportation Information Supply chain structure Cross Functional Drivers Sourcing Pricing
Logistical Drivers.

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DRIVERS OF SUPPLY CHAIN

1. Inventory:

Inventory "stockage" exists in all supply chains because of a mismatch between supply and
demand. Mismatches are often intentional, such as the case when cost effectiveness dictates
batch sizes or when future demand is unclear and immediate customer delivery is required.
The spread of inventory throughout the supply chain includes raw materials, work in process,
and finished goods by suppliers, manufacturers/repairers, distributors, and retailers.
Inventory also has a significant impact on the material flow time of a supply chain. A major
conclusion for those who manage inventory is that decreasing inventory (without increasing
cost or decreasing responsiveness to the customer) can provide a significant flow time
advantage in performance in the supply chain.
Inventory also plays a significant role in a supply chain's ability to support a firm's competitive
strategy. If a business requires a very high level of responsiveness, the company can use
inventory to achieve this responsiveness by locating large stocks of inventory close to the
customer. In a pull or just-in-time environment, suppliers may elect to locate inventories
within a customer's stockroom with scheduled shipments on an hourly or minute-by-minute
basis. An extreme case is a supplier co-locating their specialized manufacturing within the
factory of their customer, providing instant responsiveness to the customer's demand.
Conversely, a business
21

can also use inventory to become more efficient by decreasing inventory through centralized
stocking. The tradeoff is efficiency versus responsiveness.
A supply chain manager must make routine decisions to create a more responsive and more
efficient supply chain. These decisions typically focus on decreasing procurement, repair or
delivery cycle inventory, safety inventory, and seasonal inventory.
2. Transportation/Logistics:
Transportation moves the product between different locations in a supply chain and
significantly affects both responsiveness and efficiency.
Quicker methods (modes of transport, different amounts) increase supply chain
responsiveness but decrease efficiency.
The type of transportation can also affect inventory and facility location. For example,
international transactions are the current commercial trend, but the supply chain manager
must plan for travel time and customs processing.
Transportation is prominent in a company's competitive strategy when considering customer
need. If a firm's competitive strategy targets a customer that demands high responsiveness
and that customer is willing to pay for this level, then they can use transportation as a driver
for increasing supply chain responsiveness.
The fundamental trade-off for transportation is cost (efficiency) versus speed
(responsiveness). A transportation cost analysis must consider the effects of speed on
inventory required.
A number of decisions have to be taken in designing a supply chain regarding
transportation like:
Route and Network selection: Network is a set of facilities or destinations which can
be used for transportation of goods. Route is a specific selection of facilities or
destinations through which goods move.
Own transport or outsourced transport

3. Facility:
A facility is a place where inventory is stored, manufactured or assembled. Hence facilities
can be categorised into production facilities and storage facilities.
Process: A collection of interrelated:
the process steps must relate to each other
interrelationship is through sequence and flow...the completion of one step leads to
(flows into) the initiation of the next step
also interrelated by dealing with the same work item
steps related by being traceable back to the same initiation event
Capacity: Efficiency and Effectiveness for capacity:
Capacity efficiency minimal excess capacity with the ability to produce only what is
required
Capacity effectiveness large amounts of excess capacity which can handle wide
swings in demand
Layout: Efficiency and Effectiveness for layout:
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Operational layout efficiency product focus design allows the facility to become
highly efficient at producing one single product, increasing efficiency
Operational layout effectiveness functional focus design allows the facility to
perform a specific function on many different types of products, increasing
effectiveness
Location: Efficiency and Effectiveness for location:
Location efficiency centralize the location to gain economies of scale, which
increases efficiency
Location effectiveness decentralize the locations to be closer to the customers,
which increases effectiveness

Whatever the function, decisions regarding location, capacity, and flexibility of facilities
significantly affect supply chain performance. For example, a company can increase
responsiveness by setting up warehouses near its customers instead of creating only one
remote stock facility. This usually decreases cost while increasing responsiveness. Since
facilities are a key driver of supply chain performance, factors such as location, capacity,
manufacture/repair methodology, and warehousing methodology also affect supply chain
performance by way of the facilities component.
4. Information:
Even though information does not have a physical presence, it is still a major supply chain
driver. Information deeply affects every part of the supply chain in several ways.
Information serves as the connection between the supply chain's various stages, allowing
them to coordinate their actions and bring about many of the benefits of maximizing total
supply chain profitability. Information is also crucial to the daily operations of each stage in a
supply chain, such as the case for production scheduling, order status, and inventory status.
A growing trend is the importance of information and information systems in balancing
responsiveness versus efficiency. The tremendous growth of information technology as a
functional discipline and a science is testimony to the impact that information has on the
effective and efficient operation of a business.
Similar to all other drivers, businesses must trade-off between efficiency and responsiveness
when trying to include more supply chain information.
A key decision regarding information is determining what information is most valuable in
decreasing cost and increasing responsiveness within a supply chain. This decision depends
on the supply chain structure and market segments served. For example, some companies
target customers who require costly customized products. These companies might find that
an investment in information helps them to respond more quickly to their customers' needs.
Issues related to information:
Push process information and pull process information
Coordination and information sharing across various facilities in the supply chain
Forecasting
Aggregate planning
Enabling technologies
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So the key drivers for the industry that comes out above discussion are evaluated as follows
in the metric below for demand uncertainty and can be met by POM.

Conclusion

India is a relatively small market but one of the fastest growing.

Siemens Med India is market leader in most segments.

Broad market coverage and competitive product lines allow them to take advantage
of future growth opportunities in India.

Siemens Med India is an integral part of our worldwide cost .

Optimization strategy. Siemens generates a substantial share of our cost advantages

from LCC in India.

Competitive advantage for continuous profitable growth.

Value added in India and exports from India continue to grow.

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Reference

http://www.siemens.co.in

http://www.technicalprospects.com

http://www.medical.siemens.com/webapp

http://www.siemens.com/

http://www.cordys.com/

Supply Chain Management by (5th Edition) By Sunil Chopra & Peter Meindl

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