Manufacturers are dealing with a number of pandemic-driven inventory challenges. Demand spikes, supplier issues, site shutdowns and the heavy reliance on Excel for factory operations management have caused critical shortages and missed customer deliveries.
These challenges pose an even greater risk to the medical device manufacturing industry since companies in this sector play an essential role in healthcare delivery. A shortage of just one critical part can bring production to a halt and create damaging effects throughout the entire healthcare ecosystem. Shortages and supplier delivery issues are common challenges that can ultimately negatively impact patient care.
President Biden’s executive order on U.S. supply chains shined a spotlight on these very risks.1 The order is designed to identify points of vulnerability within critical global supply chains and ensure backup supply and plans are in place to avoid shortages. Medical device manufacturers that comply with the order will optimize strategies and tactics to proactively respond to supply chain issues before they become problematic.
Lean systems that give total visibility into supply chain and factory operations can mitigate the severity of these issues. This means embracing digital transformation and empowering teams with tools that drive efficiency and improve processes, while creating total visibility, actionability and standardized best practice workflows. Doing so enables teams to quickly prioritize daily supply chain actions, tackle urgent issues before they impede production, and ultimately enable your supply chain team to perform at an entirely new level.
COVID Accelerated the Need for Transformation
Before the pandemic, the U.S. medical device industry was on the verge of major transformation. The market was poised to reach $800 billion by 2030.2
Even with this growth, COVID brought new challenges. U.S. healthcare systems routinely reported substantial personal protective equipment (PPE) shortages, which negatively affected their ability to keep doctors, nurses, and staff safe while keeping up with the increasing amounts of patients they needed to properly care for in overcrowded hospitals.3
The PPE supply chain was upended as large spikes in global demand and reduced production in China left major distributors unable to fill orders. This caused three-to-six-month delays in getting precious PPE into the hands of healthcare workers.
Some supply chain professionals were split on whether going too lean was responsible for issues like PPE shortages in the first place.4 I disagree. With waste now more abundant than ever, Lean thinking creates the opportunity to evolve to solve complex challenges head on. To ensure business continuity as we move beyond the health crisis, medical device manufacturers should embrace a new model that balances Lean practices with visibility, accountability, and actionability in the factory—where disruptions and opportunities first come to life.
Embracing Lean Thinking
While COVID-19 has caused an exceptional level of disruption, it is not the only threat to the medical device supply chain– according to McKinsey, other sources of disruptions (e.g., natural disasters and cybersecurity breaches) and financially fragile suppliers could cause medical technology companies to lose approximately 38% of one year’s earnings within a 10-year period.5
Although the medical device industry has invested substantially in ERP/MRP systems, planning solutions, business intelligence tools, and other technologies to solve these issues, factory operations management solutions have been left out of the equation. The tools traditionally used to manage supply chain decisions in the factory have not kept up with the new complexities ushered in by supplier globalization, increasing product customization in the factory, and a global pandemic that massively upended production everywhere. Because of this, most teams are still reliant on home-grown solutions or manual, error-prone spreadsheets, and as a result, they are always in a constant state of “firefighting” since any unforeseen event can create disruption and negatively impact customer delivery.
To achieve complete visibility into all their systems in one place, manufacturers can use lean thinking to streamline data synchronization and activities to right-size inventory across all site locations. In an industry where waste is imminent, Lean empowers manufacturers to find efficiencies through automation, Cloud-based connectivity, and standardized best-practice processes. Lean thinking is built into the daily lives of manufacturing leaders to identify the value-adding activities so they can work smarter while achieving better business results.
What Can Lean Do for You?
With lean thinking, achieving zero inventory is not the goal. Instead, it’s about optimizing inventory levels and being able to scale and adjust on the fly to make the best business decisions possible. This includes using a combination of demand-driven (pull) replenishment with advanced analytics linked to ERP and MRP systems. These tools do more than just statically display numbers. They simplify the daily work of key decision-makers and prioritize the value-add activities to reduce excess inventory and prevent shortages.
Deploying tools built around lean processes will improve factory management challenges in weeks, rather than the months, because it reduces reliance on spreadsheets and incorporates algorithms and workflows based on established best practices. A lean practice creates more efficient ways to consolidate, harmonize and analyze disparate inventory and demand data while at the same time establishing common KPIs across sites and ERP systems. This allows medical device manufacturers to get a global view of supply and demand data and optimize inventory across single sites and multi-site networks, share inventory information and collaborate with suppliers faster, and standardize procurement processes with built-in workflows so teams know what to do, every time.
Embracing lean thinking is the key to navigating the steady state of uncertainty that will remain a reality. When medical device manufacturers use Lean systems to improve factory operations management, they will see all of their information in one place, right-size inventory in each location, and enable cross-site visibility. The result will be a connection of optimized factories that offer even more power than that of the typical “smart” factory.
- Executive Order on America’s Supply Chains. (February 24, 2021). The White House.
- Medical devices 2030: Making a power play to avoid the commodity trap. (January 2018). KPMG’s Global Strategy Group.
- Mehrotra, P., et al. May 12, 2020). Personal Protective Equipment Shortages During COVID-19 – Supply Chain-Related Causes and Mitigation Strategies. JAMA Network.
- Leonard, M. (September 29, 2020). Were supply chains too lean during the pandemic? A survey shows an industry divided. Supply Chain Dive.
- Behnam, M., et al. (December 18, 2020). The Resilience Imperative for MedTech Supply Chains. McKinsey & Company.