The COVID-19 Pandemic can best be described as an unpredicted and unprecedented global catastrophe, which has continually and in some ways, irreversibly, changed the way in which life is lived and business is conducted worldwide. The words agility and resilience have found a new reverence in boardrooms across the world. The Medtech industry is especially affected, owing to the massive surge in demand for products from industry incumbents dealing in diagnostics, and massive declines for others dealing in devices needed for elective procedures.
Companies on either side of the demand spectrum have had to assess their current risks, and anticipate future developments. Previous historical-demand based projection algorithms are no longer relevant. Uncertainty of supply due to the global semiconductor shortage or lack of critical parts due to the dependence on single supplier has forced companies to review their entire supply chain structure. With unpredictable market conditions and haywire supply chains, resilience and agility becomes essential for survival. How Medtech companies can achieve agility through supply chain management and risk mitigation is what we will examine today.
Per Medtechdive.com, from March 24 to April 16, 2020, ophthalmological surgeries in the U.S. declined by 94% compared to pre-pandemic volumes; oncology surgeries dipped 89% and orthopedic procedures dropped by nearly half. Similar drops were seen in the European Union. This decline in elective procedures is related directly to the lockdowns and disruptions brought forth by the pandemic. It translated to a serious decline in top-line sales for medical device manufacturers around the world.
2021 poses different supply chain challenges. At the end of 2020, most supply chains were reactivated, although distribution was still hampered by parts shortages. Pocketed surges of new variants still stress infrastructure, with some relief from vaccinations, distancing norms and hospital supplies in recovery (but not fully recovered).
Opportunities in supply chain disruption
Still, there can be a competitive advantage to supply chain disruption. Medtechdive.com highlights the importance of having a strong supply chain in order to capitalize on opportunities created during turmoil. A resilient supply chain oftentimes can be the difference between a company gaining market share, and losing it to competitors. An example cited is the market opportunity created by the recall of 2 million sleep apnea products and the inability of a rival company to gain full market advantage due to shortages of critical parts.
This is where the pandemic affects global business both indirectly and directly. Indirectly, where a company trying to gain market share has both demand and production capacities, but is constrained by the parts/assemblies, essential to meet said demand. The shortage of electronic parts is triggered by the global shortage of semiconductor components, which in large part can be attributed directly to the pandemic (reliance on a few suppliers) and has affected virtually every industry in the world.
The implications of such supply chain challenges for a company trying to capture market share in the midst of a disrupted supply chain are formidable. Inevitably, competitors will develop capabilities and gain necessary FDA/CE approvals to enter the market. This situation could lead to intense competition, price wars, lower margins, loss of regular customers and lower than predicted top line revenue. Such circumstances can be avoided with a better equipped supply chain and operations geared for tackling uncertainty. Where new products are introduced faster, supply chain visibility isn’t limited to first tier suppliers and manufacturing facilities worldwide can be configured quickly to make the most of any opportunity.
McKinsey examines how Medtech companies can build a more resilient supply chain. We look at their suggestions from a tech vendor’s perspective: relating proposed solutions with the application that forms the basis of digital transformation in any manufacturing focused organization. For us, that is the MES Data platform.
Leadership- Resilience and agility in an uncertain market stem from a company’s ability to successfully identify and mitigate risks, along with the capability of dealing with unexpected disruptions. From a Medtech manufacturer’s perspective, the company leadership must not only identify the digital transformation needs driven in part by the pandemic and resultant disruption, but also identify change as the opportunity to build resilience into the very fabric of the organization.
Risk mitigation is greatly facilitated when supply chain visibility exists. The benefits are many: faster product development and launch, quicker response to customer demand and changes in component supply. Demand surges can be met with rapid line reconfiguration and capacity orchestration, at one or more plants.
How? All of this points towards a modern MES application, which forms the basis of any digital transformation, which in turn enables the risk management-based methodology. Company leadership must be able to assess the status quo, understand gaps in the information flow and operational response mechanisms, then prepare for use-case based digital pilots. MES should be at the very center of this strategy to move towards a better-equipped value chain.
Supply chain and operational readiness- An aspect which directly contributes to a company successfully converting an opportunity in today’s highly competitive marketplace is supply chain and operational readiness. Companies need visibility beyond their first tier suppliers, and look into the secondary and tertiary supplier base as well, to see beyond financials and into the operational capabilities of their supply chain partners.
When a disruption presents a supply challenge or opportunity, it is essential that the manufacturing plant/s be agile, which may entail reconfiguration of manufacturing lines or working with parts which are different from the specification. The entire design and validation cycle may need to be repeated. Operations might also adapt by having several plants make the same product, which means both internal changes, and a potential ripple effect on the supply chain.
The modern MES data platform is an application capable of integrating with higher level applications such as ERP, SCM, WMS and CRM, while also having the ability to access data from process equipment and automation through IoT. This end-to-end connectivity can help the manufacturer/OEM not only get a clear understanding of their operation, but deliver insight into the operation and planning of second or third level suppliers. With visibility into supplier operations, order placement can be dynamic and based on the ability of a supplier to fulfill a given order in a prescribed time frame. Plurality of supply and predictability of parts can be the difference between success and failure in a market often restricted by supply, rather than demand.
MES also allow plants to standardize operations, using Digital Twins and simulation though VR (Virtual Reality)-based applications. Together, Digital Twins and VR can enable quick reconfiguration of any operation. It can supplement process validation requirements posed by regulatory bodies like the US FDA. It results in a quick turnaround, to manufacture whatever product is most needed in the market.
Partnerships matter- In order to have an effective risk mitigation program in place, which is rooted in digital transformation and builds agility into the entire value chain, it is critical for company leadership to engage experts in Industry 4.0 and digital transformation. This allows their team to focus on their core competence–design and manufacture of medical devices.
Many MES applications claim to have Industry 4.0-related functionalities. However, it is important for company leaders to look for a MES which is specifically designed to deliver results for the Medtech industry segment. This is where engaging the right partners and choosing the right application can make all the difference.
The right MES for Medtech takes into consideration the highly regulated nature of the operation. It contains the functionality necessary to maintain oversight and achieve application, product and process validations in the shortest possible time with least possible manual intervention.
The ideal MES delivers quality as a part of the manufacturing process itself, and allows for agility to become a deliverable of the operation. When this happens, the whole supply chain graduates from being reactive to proactive. In some cases, it’s even predictive, through AI/ML-based insights. Engaging MES experts as partners in developing a more resilient value chain is imperative. There are tools available, such as the Gartner Magic Quadrant, to help identify which MES vendor is right for your operational needs.
For the Medtech industry, the pandemic has been an extremely taxing event. For many companies, it’s been a wake-up call to pursue digital transformation at full speed.
2021 is filled with new challenges. Many essential parts are still in short supply. Product demand will continue to increase or decrease as Covid wanes on. In response, safety and regulatory norms are tighter than ever. The need to expedite production while maintaining oversight levels proves to be a never-ending challenge.
As a manufacturer, the MES you choose will essentially decide whether or not your value chain is able to meet the challenges presented by this new transformed marketplace. MES, as the foundation for responsive manufacturing, should be a part of any recovery strategy. Reconfiguring your manufacturing to be agile, to respond to market shifts and supply chain fluctuations is the new baseline for operations. The right MES is the foundation for launching supply chain readiness for Medtech. And that time is now.