The pandemic has exposed supply chain vulnerabilities and forced us to revise old strategies. What once worked now no longer does. Resilience and flexibility are the magic words we should now capitalize on in our business. To start well organized into the new year, we share 3 solid strategies for making your supply chain more resilient as a small medical device company without making big investments in expensive supply chain technologies.
Risks For Supply Chain Disruptions Are Increasing
Material shortages, transportation difficulties, delivery delays, and price increases are the 4 buzzwords we have heard plenty of during the last months.
COVID-19 not only made people sick, it also made our supply chains sick. Lockdowns and border controls led to container congestion at ports, long waiting times were the result. At the same time, the demand for medical devices increased significantly.
The toxic combination of material shortages, long delivery times, and increased demand presented the MedTech industry with particularly significant challenges. In the process, companies have learned a lot about their supply chains, as the pandemic exposed vulnerabilities in supply chain infrastructure and performance [1], [2].
While the pandemic is slowly subsiding, new challenges are already awaiting - wars, natural disasters, cyber-attacks, or delivery delays due to unforeseen events, such as the blockade of the Suez Canal in March 2021.
A recent study puts the impact of these risks in figures: Modeling potential scenarios over a 10-year period, McKinsey estimates that the average MedTech company could lose about 38% of annual revenue due to supply chain shocks [3].
The FDA Responds To The Supply Chain Problem
In 2020, the Food and Drug Administration (FDA) was given legislative authority for the first time to prepare for, prevent, and deal with medical device supply chain disruptions. It allowed FDA to gather information from manufacturers about supply chain challenges to prevent and mitigate critical bottlenecks. The FDA also expects to get the authority to require manufacturers to develop and submit risk management plans and to establish alternative suppliers and production facilities [4].
Considering the increasing sources of risk in an international supply chain and the fact that the FDA plans to require risk management plans from manufacturers are two good reasons to take precautions in advance.
3 Ways To Make Your Supply Chain More Resilient As a Small Medical Device Company
While nowadays, there are many ways to optimize the supply chain, e.g., with IoT sensors or AI technology, SMEs often don’t have the resources to implement such comprehensive and complex systems. Therefore, we have evaluated 3 strategies to make your supply chain more resilient, especially for MedTech-SMEs.
1. Ensure Transparency Along The Supply Chain
It may sound banal and straightforward, but it is the fundamental prerequisite for good strategies: get an overview of the status quo. Go through the supply chain step by step and ask yourself where risks lurk and how you would manage them. A good overview clarifies the current processes and reveals potential sources of risk.
The following questions may be helpful:
How many suppliers for which components do we have?
What are the strengths and weaknesses of these suppliers?
Where are potential sources of threats (e.g., material bottlenecks, transport routes, political and economic situation, cultural differences, communication difficulties, exchange rate fluctuations, dependency on a single source or single region)?
What are the consequences of supplier failure for the rest of the supply chain?
How do we react to failures, and what alternatives do we have?
How do we deal with fluctuations in demand?
How can we improve the flow of information along the supply chain?
Do our suppliers have all documents required by the MDR 2017/745? (Feel free to use our Checklist for Supplier Compliance)
2. Develop a Plan B: Secure Your Medical Device Supply Chain
In the medical device industry, it is ordinary to depend on a single supplier. While this has proven beneficial in reducing costs at higher volumes, it lacks resilience. If you want to make your supply chain more resilient, it is essential to look for alternative suppliers [2].
If suppliers are affected by a crisis or cease operations, this can lead to a delay in materials needed for the final production of a device. Therefore, finding additional sources, you can utilize quickly is crucial if the existing supplier base cannot deliver. This way, you create temporary capacity and can continue to supply your customers. Also, if demand increases, you have an additional source of materials.
The story of one of our customers confirms how important alternative suppliers are.
Like many MedTech companies, our client relied on one supplier only for many years. However, when the crisis hit, the supplier had to deal with material shortages and could not deliver the parts.
What followed was chaos - he had to shut down production temporarily, could not employ staff, and could not supply end customers.
In cases like these, an alternative supplier comes in handy. However, if you don’t have one yet, finding a new supplier in this situation would take too much time. First, you need to find one, and second, ensure that the quality meets your requirements AND that the supplier complies with the new Medical Device Regulation.
Certainly not an easy task. Especially when you need your resources right now to meet the ever-approaching MDR certification deadline.
So how did our client get out of this mess?
By making use of our exclusive network of MDR-compliant suppliers. Through this vast network, our client received samples after only 10 days. Just within 2.5 months, everything was set up - from samples to mass production in large quantities (approx. 260,000 pieces per month).
In this case, quick action was possible due to an existing network. We have already audited the supplier in advance, so we can guarantee the quality and provide all necessary documents immediately.
However, it makes perfect sense to be prepared for this situation before the possible failure of a supplier.
3. Give Priority To Quality
A further strategy to make supply chains more functional and resilient is shifting from a price-based model to a value-based one. Instead of looking at cost as the leading procurement priority, focus on technologies and materials that deliver the best possible patient outcomes [2],[5].
Stable processes and documentation according to regulations are critical to this effort.
Yes, the cost is important, of course. However, we may remember our ultimate goal: deliver safe medical devices on time to save patients' lives.
Safety should be the be-all and end-all in everything we do, also in supply chain strategy.
Hence, when looking for alternative sources, the focus should be on quality rather than price. Making sure your suppliers fulfill all requirements demanded by the MDR (see Checklist for Supplier Compliance) and can provide a solid supply stream will avoid problems afterward and allow for greater reliability with less risk in the supply chain.
If you want to optimize your supply chain and look for alternative suppliers, please feel free to reach out. A strong network is here to support you. Contact us at office@sifo-medical.com.
References
[1] “2022: Supply chains will face many challenges this year | World Economic Forum.” https://www.weforum.org/agenda/2022/01/challenges-supply-chains-covid19-2022 (accessed Nov. 21, 2022).
[2] “Why MedTech Companies are Still Struggling with their Supply Chains and How to Alleviate Long-term Risks - iData Research.” https://idataresearch.com/why-medtech-companies-are-still-struggling-with-their-supply-chains-and-how-to-alleviate-long-term-risks/ (accessed Nov. 21, 2022).
[3] “Making medical-devices supply chains more resilient | McKinsey.” https://www.mckinsey.com/capabilities/operations/our-insights/the-resilience-imperative-for-medtech-supply-chains (accessed Nov. 21, 2022).
[4] Fda, “FDA FACT SHEET MITIGATING AND PREVENTING MEDICAL DEVICE SHORTAGES AND PRIORITIZING PUBLIC HEALTH.”
[5] “DRIVING VALUE-BASED HEALTHCARE IN EUROPE MEAT and Value-based Procurement”, doi: 10.1056/NEJMp1011024#t=article.