How do you achieve production promises while ensuring quality and efficiency targets?

Jennifer Petrosky, Director of Life Sciences

October 5, 2022

5 Min Read
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Image courtesy of Brain light / Alamy Stock Photo

In most industries, not having a product in stock means the loss of a sale, loss of revenue, the possibility of upsetting a customer or receiving a poor review on social media. For medical device manufacturers, not having the right device at the right place and time – a stockout situation, can put patients at risk. For this reason, medical device companies try to avoid stockouts at all costs. To prevent this from happening, manufacturers have created complex distribution and supply chain models that ensure the right device is delivered on time to the right hospital or care provider. However, as was evident during the past two years of disruption, even a well-designed supply chain model can fail and stockouts will indeed occur. Is it possible to truly plan for every variable that can go wrong? What strategies were tested during the pandemic? What are some of the new insights that have emerged?

Multi-Sourcing and Near Shoring Suppliers

One strategy that has been successfully leveraged over the years by many supply chain leaders is dual sourcing or multi-sourcing. When an issue occurs, changing a product component to include a pre-approved backup supplier can help ensure business continuity and delivery of the device to the patient who needs them. However, revalidating and certifying multiple raw material or component suppliers to support existing product and process specifications requires time and resources. In turn, this should be considered early in the design process given the complex quality tests, verification, and request for one or more regulatory approvals.

In addition, seeking new sources after there’s a stockout or shortage may help serve demand in the short-term but will require additional budget to cover expedited shipping costs unless those back-up suppliers are local to the market you serve. In this case, leveraging on-shore partners, or near-shoring those suppliers closest to the customers can help ensure successful delivery and availability of critical components, on-time and on-budget.

Expanding Supplier Relationships

Supply chain leaders that form strategic relationships and have open and frequent communications with their suppliers and partners seem to navigate supply chain disruptions better than others. Vice versa, the manufacturers that share production requirements and changes in demand on an on-going, or periodic basis allow all parties to better plan, and adapt to changes more quickly. One global life sciences company categorized their suppliers at 3 levels — strategic, commodity, and everyone else in between. Maintaining relationships with all of your suppliers is important, however, in this case, prioritizing the amount of time, the type of information, and frequency of interaction with the different levels of suppliers proved to be beneficial for them.

In another case, a diagnostics manufacturer was able to create a strategic relationship with an important supplier long before the pandemic occurred. Then when the shortage happened they helped the supplier procure the required inventory from a sub-tier supplier in an effort to stockpile two years worth of inventory in anticipation of the increased demand for the testing kits. Once again, everyone benefitted. Leveraging this long-term relationship allowed the supplier to remain in business and in good standing with investors.

Digital Demand Planning & Forecasting

Similar to managing relationships with suppliers, managing relationships with customers and understanding when demands will change can improve production planning and the delivery of critical life-saving products. Today, many medical device companies are leveraging short-term demand forecasts in ERP and planning production at 30-60-90-day increments. While these Just-in-time (JIT) inventory planning efforts have proven effective in the past, today these strategies fall short of anticipating disruptions, and optimizing supply chains for agility, resilience, and efficiency. Going forward, the goal is to expand the forecast timeline even further to a 6-9-12 month horizon and build a robust plan around multiple scenarios — optimistic, realistic, pessimistic — based on multiple known and unknown factors. Leveraging digital demand forecasting solutions allows companies to build a plan around multiple factors allowing them to  adapt their strategy quickly, and pivot the business to keep products moving out the door. This mean that when the business hits a small roadblock, it is able continue operations with minimal disruptions.

Risk Mitigation

Managing the risk of stockout and supply chain capacity is not an exact science. However, new strategies have emerged that help manufacturers focus on what matters most, where potential shortfalls may occur, and measuring the impact of failures and outcomes that emerge as a result of those failures. In other words, you shouldn’t plan for workarounds for every situation but you should develop workarounds and back-up strategies for the areas that are of the highest risk to the business.

One example is semiconductors. In the past, medical device manufacturers didn’t stock a large chip inventory. According to a 2019 AdvaMed survey conducted by Deloitte, 13% of respondents said they did not have a chip inventory at all. However, in a recent poll conducted earlier this year, more than 70% of respondents said they have recently increased their semiconductor inventory levels.

Achieving Production Promises

Regardless of the approach your business chooses, the common thread that leads to success with all of these strategies is maintaining that openness of information and collaboration of players across the supply chain, from manufacturer and suppliers to customers and partners. The days of operational silos are not only costly to the business but burdensome to the operation and impede the ability to deliver products to patients. Providing insight and awareness of delays before they occur can help the organization adjust, make course corrections, and leverage alternative strategies. It’s not a matter of if, but when an issue occurs with a supplier. Will your team be ready to quickly react and execute the alternative strategy? Most importantly, can you keep the business moving forward and deliver on your promise to the customer?

About the Author

Jennifer Petrosky has 20 years of experience in the life sciences and enterprise software industries. She joined QAD in October 2020, as director, Life Sciences Global Marketing. Jennifer earned her BS in chemical engineering from Georgia Institute of Technology, and her MBA at the McColl School of Business at Queens University in Charlotte, NC.

About the Author(s)

Jennifer Petrosky

Director of Life Sciences, QAD Inc.

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