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A Digitalization Tipping Point for the Medical Manufacturing Supply Chain

Roger Landman, Head of Product Management at SYSPRO Roger Landman SYSPRO - 2.jpeg
Many medical manufacturers are embracing digital transformation as a means to gain agility and efficiency.

The need for digital transformation in medical device manufacturing and the medical supply chain became undeniable during the global COVID-19 pandemic. According to a December 2020 survey of manufacturing leaders from SYSPRO, nearly half (47%) of manufacturers were unable to function due to operational dependence on on-premise systems and 60% were affected by supply chain disruptions.

In response, many medical manufacturers are embracing digital transformation as a means to gain agility and efficiency. This will help them continue to grow in the face of future unexpected disasters and, more importantly, thrive when the economy fully recovers. Digitalization, however, is more than the deployment of systems such as automated equipment monitoring, factory digital twin and real-time asset tracking. Certainly, the Internet of things (IoT) with its sensors, artificial intelligence and machine learning are all powerful technologies, but medical device manufacturers won’t see value from them without a solid, integrated digital foundation already in place.

ERP and Safeguarding the Medical Supply Chain

For medical device manufacturing, the enterprise resource planning (ERP) platform makes up a  large piece of that foundation. Traditionally, organizations think of an ERP as primarily a financial and supply chain management system. But a modern cloud ERP purpose-built for medical device manufacturing can do far more, easily integrating with new, smart factory technologies to provide even more information in real-time and within a richer context.

The race to provide medical-grade oxygen to hospitals during the pandemic is a good example of what a strong digital foundation can do for a company. The record consumption of medical oxygen has caused some hospitals in developing nations to use up their entire supply, resulting in tragedy. Even in the United States, some hospitals have had close calls.

Since medical oxygen makes up just 3% of the $38 billion manufactured oxygen market, one might think that it would be fairly simple to redirect the gas not being used by metal fabricators and auto plants that have slowed operations to hospitals, but it’s not that simple. Medical oxygen must be far more pure than industrial oxygen and the distribution channels are completely different, so retooling from serving chemical plants to hospitals requires investment and meticulous change management.

But it can be done. In just a few months, one manufacturer was able to convert 8,000 industrial oxygen cylinders into medical oxygen cylinders. However, success stories like this don’t happen without meticulous planning and preparation, aided by technology. The  manufacturer could make a rapid changeover precisely because it already had a strong digital foundation with a flexible ERP system that could accommodate rapid changes to their business.

In another example, in 2020, a mid-sized manufacturer of ventilator systems was able to partner with a much larger manufacturer in a different industry to increase its production capacity by a factor of 80, delivering 15 years’ worth of product at its previous pace in less than six months. To accomplish this feat, operations management from both organizations had to collaborate closely to identify efficiencies and processes that could be broken down into pieces that could occur in parallel.

Attaining digital and operational agility

Attaining this kind of agility takes significant preparation and lots of investigation to understand exactly where the organization stands. Once this is complete, the organization can begin its journey to attain digital and operational agility.  First, ensure that the ERP and other foundational systems such as the product lifecycle management (PLM) platform are in place and tightly integrated. Next, IT and business managers should work together to identify the area where the digital transformation will have the largest impact.

Start small, test the concept and prove out the value, and then expand the initiative. Sometimes a company needs redundancy in the supply chain and a rapid means to source and vet alternate suppliers for critical components. Or management doesn’t have good visibility into how products and parts are moving along the supply and distribution chains. Whatever the starting point, it’s critical to ensure that these technologies are integrated into the foundational systems, especially the ERP. Having a single source for reliable business data is the only way management can make rapid, informed decisions.

Finally, remember that digital transformation isn’t just about software and new devices. The culture will need to change as well. If done properly, digital transformation will have a profound impact on internal processes, making them more efficient and, in many cases, automating them completely. And the changes won’t just affect employees — customers and vendors will also need to prepare. Leaders from the very top of the company must communicate early and often how processes will change, the rationale behind those changes, and how these changes will benefit everyone: employees, customers, partners and the company as a whole.

Medical device manufacturers can come out of this crisis stronger than they were when the pandemic began. As long as they ensure they have a strong digital foundation and plan their digital transformation carefully, the industry will be well positioned to not only survive the next disaster, whenever it arrives, but also to grow and thrive when the economy finally recovers.

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