Medical device employee stressed by purchase order details

Ordering your inventory is a critical step in a medical device manufacturer’s process. Not only is it how you get your inventory, it’s also where all of the foundational data for that inventory is created, and where the value of this inventory hits the books. This can be a bit complex when there are multiple departments, handoffs, and systems used to govern this data. Looking for a better way? Here are some things to think about:

  1. The Purchase Order: This is the most critical piece of the ordering. It’s how the manufacturer knows what to build. This artifact orders the creation of your product and directs the activities required to build it. You’re probably already using some sort of financial system like Xero or Quickbooks (check out our premium integrations) to do it, but are you sure they’re set up correctly? The critical piece here is that the PO contains all relevant information (such as reference document numbers, manufacturer instructions, etc.). If a correction needs to be made, is it easy to revise and send a new PO? The version control and retention of this document is key, so that the origins of the device can always be referenced in audit scenarios. This is why, if you’re building your POs manually or they are disconnected from your inventory management, you’ll want to understand closely how inventory information is recorded and stored.
  1. Inventory Management: Are your purchase orders connected to your inventory system? Are you able to create inventory as it is received? If not, how are you guaranteeing that inventory is created with the correct product information in your inventory system? If the process doesn’t create inventory as items are received, then it involves yet another inventory creation process, another handoff, and an opportunity for failure or bottlenecks. Ideally, inventory is created  in your inventory management system as it is physically received. Any inventory creation workflow should also include checks to ensure the items are created with the correct critical product information, such as Unique Device Identifiers, serial numbers, and expiration dates.
  1.  Inventory Cost: How are you tracking inventory cost as items are received? If you’re ordering an item for the first time, calculating the cost of the finished goods may be more manageable. However, if you are ordering an item repeatedly you may need to average those variable costs, depending on the costing method you employ. Regardless, if your financial and inventory systems are not integrated, then you may need to build a step into your process to recalculate and update your inventory cost to ensure the value is correct on the books.
  1. Rework: Sometimes, designs are improved and updated, and you may want to make revisions to the devices already in your inventory. If this is the case, you have a number of new elements to manage:
    1. Tracking the location of the inventory that has been shipped to the manufacturer to be reworked.
    2. Costs will need to be recalculated to include the value-added work that was performed on these devices. Was the cost on the purchase order the final cost of the item or the added cost? These are questions you should be thinking about when the inventory is received again.
    3. Did the item number or lot number change? The items likely at least have a new lot number, if not you should consider if it is warranted. However, if a new item number has been created for these items under the new design, then the old inventory will need to be removed from your inventory system to convert to the new product information.

Ordering may seem like a no-brainer.it happens in any industry with inventory, but in practice this is one of the most critical steps in the process. This is where you define the product for the first time and instruct the manufacturer how to build it. This will control how much you receive and how it’s stored on your books. It is a requirement for any medical device company to define early on, to ensure inventory is received and created smoothly and the company is poised to respond flexibly to market demand as it grows.