Medical device manufacturers tend to keep their inventory of supplies as lean as possible, because of the capital and storage costs involved. This means that when shocks occur, there may not be enough inventory on hand to compensate.
On top of that, medical device makers usually don't start from raw materials: Instead they buy electronic components, machined parts, chemicals and other materials sourced globally. And the sources for those components and materials are in turn sourcing materials from other suppliers.
The result is a system with multiple tiers of suppliers — and when you multiply the total number of suppliers across all tiers, the results can be stunning.
One very large manufacturer of medical devices was reported as saying that across all of its lines of business, it had more than 100,000 suppliers in Tier 1. And when you add in the Tier 2 and 3 suppliers, the grand total was probably more than a million suppliers.
Now think about the chain reactions that might occur when there's a problem with any one of those suppliers.
It's a little like a string of holiday lights that may fail when a single bulb burns out. As an extreme example, one medical device manufacturer has been quoted as saying their production was once held up for days because they ran short on the ink they needed to label one of their products.
For example, the ongoing global semiconductor shortage has hit medical device makers particularly hard. A surge in demand for consumer electronics as remote workers outfitted their home offices and more students needed laptops, coupled with extreme weather events, labor shortages, shipping problems and the war in Ukraine, have all created a perfect storm.
The situation is extreme enough to have earned nicknames like "chipageddon" and "chipocalypse." And it's not just semiconductors, of course. The factors mentioned above have been enough to disrupt the lines of sourcing for even the most basic parts and raw materials.
For some businesses, these challenges are not only costly and unsustainable — they may be enough to become an existential threat.
Time to Get Proactive
In the wake of all this, there's only one path to survival and growth for medical device manufacturers: getting proactive about supply chain solutions. Instead of reacting to the disruptions after the fact, manufacturers of all kinds need to find ways to shockproof their operations and become more resilient across the board.
So that when one source of supply can’t come through, they’re able to adapt and identify alternatives.
That means thinking more moves ahead on the chess board, and taking advantage of all of the forecasting, visibility, logistics and collaborative capabilities that modern supply chain management technology can deliver.
In fact, manufacturers who embrace AI-enabled supply chain management reportedly have a significant advantage over those who don't, with an ability to reduce logistics costs by 15% while improving inventory levels by 35%, according to McKinsey.
Just for starters, a checklist for forward progress should include:
- Improving resiliency
- Integrating and centralizing data
- Leveraging data and machine learning to make smarter purchasing decisions
- Building in more redundancies to supplier networks
- Achieving better insight into vendors
- Increasing vendor collaboration
- Making use of item tracing functionality for better visibility into the sources and destinations of materials
The good news is that there are tools available to help you realize every item on the checklist above, and more.
Microsoft Dynamics 365 Supply Chain Management integrates every step of your procurement and sourcing. It is designed to give you realtime, up-to-the minute visibility into every step of your supply chain with better communication that helps you maximize vendor performance, optimize the cost and quality of materials, and improve order accuracy.
- Increase resiliency in your supplier networks. Automatically build redundancy for critical supplies to mitigate parts shortages by enabling links to external vendor catalogs and suggestions for alternate products.
- Streamline vendor collaboration by using a single application to collaborate with vendors across procurement processes such as purchase order management, request for quotation (RFQ) bidding, and invoicing with secure portal access.
- Simplify procurement workflows. Streamline purchasing operations with cross-procurement workflows for purchase requisitions, RFQs and trade agreements for direct and indirect purchases.
- Improve cost management. Realize maximum cost savings by automatically applying negotiated pricing based on business-defined purchase policies.
- Make smarter purchasing decisions. Effectively track vendor performance, lead times and quality with embedded purchasing insights using built-in Power BI templates.
Item tracing is a feature of Dynamics 365 Supply Chain Management you may find particularly useful, as well. It's a business intelligence tool that allows manufacturers to trace items such as raw materials or components all the way back to the vendor, as well as forward through the production process. You can keep close tabs on how much of a given item or material you currently have in inventory, where it's stored, where it was purchased, how it's planned to be used and much more.
Extending the above capabilities even further is the new Dynamics 365 Supply Chain Insights, currently in preview. It's engineered to help you harness the power of AI to enable better decision-making through proactive risk mitigation — so you can respond intelligently to shifts in supply and demand with the help of prescriptive analytics, drawing on unified real-time data from data providers, partners, customers and suppliers.
Identify risks early and plan for supply and resource constraints.
And one of the best features of Supply Chain Insights is that it allows you to create a digital twin of your entire supply chain, and then perform what-if simulations — so you can visualize possible scenarios and create contingency plans to successfully navigate them.
Want to learn more about how Columbus can help you master your supply chain with better visibility into vendors and greater redundancies? Get in touch with us today.