MedTech Supply Chains: Lessons Learned from the COVID-19 Pandemic

The COVID-19 pandemic is causing the electronic industry worldwide to suffer supply chain setbacks, has disrupted manufacturing and production, and has led to the shutdown of certain suppliers. Shortages have created a new set of challenges for manufacturers. Many product shipments have been delayed due to the inability to fill customer orders.

These issues, unfortunately, are not isolated to one area. They are being felt worldwide.

It has been nearly a month since a cargo ship was freed from blocking the Suez Canal. However, the ripple effects are still being felt in supply chains around the world. With shipping containers scarce, freight costs have soared. Prices have gone up despite much slower delivery due to port congestion all over the globe. According to recent surveys of global manufacturers, the strain on supply chains over the last year has extended delivery times to levels not seen in over 20 years of available data. Shipping is taking as much as three-times as normal in some instances.

Applying pressure to a system reveals a lot about its true capabilities and resilience. The pandemic has ratcheted up pressure on several fronts at once, in the form of extreme demand spikes for COVID-19-related products, extreme demand drops for certain unrelated products, sudden raw-material and parts-supply disruptions, and an urgent need to protect workforces against the risk of infection. Events such as the COVID-19 pandemic, characterized as high-impact and hard-to-predict, could apply pressure in any one of these areas. However, the effects of these pressures are exponentially higher in medtech, whose supply chains are global and need to meet regulatory requirements.

Vulnerabilities can be found along the entire value chain.

• Planning
  

  End-to-end supply-chain visibility is priceless, but rare. Many companies now face increased exposure in their planning processes because their forecasting algorithms rely too heavily on historical demand.

• Sourcing
  

  Medtech manufacturers rarely have strong visibility into their supply chains past the immediate supply base. And even for these tier-1 suppliers, few companies monitor a holistic set of factors, including ones with strong predictive capability. Most lack the latest intelligence about the financial resiliency of their tier-1 supply base, and even fewer have visibility into tier-2 and -3 suppliers. That gap could be particularly costly now because some small- and medium-enterprise suppliers may lack liquidity to outlast the current challenges. Furthermore, too many companies rely on sole-source suppliers for critical components or select finished goods.

• Production
  

  Medtech supply chains typically have been optimized for stability, with the aim of assuring regulatory compliance; technology transfers and new-product qualifications are rightfully thoughtful and deliberate. Differing regulatory requirements and approvals make for high levels of product and SKU fragmentation across regions, limiting the ability to distribute products (and components) where most urgently needed—and, in some cases, constraining production acceleration as well.

• Delivering
  

  Logistics systems have been particularly challenged as closed borders, physical-distancing restrictions, and stay-at-home orders reduced the workforce’s capacity to keep goods moving, both nationally and internationally. More generally, logistics systems are susceptible to external shocks on global supply sources, whether due to external events such as natural disasters or changes in trade policy. Individual companies can be even more exposed when they depend on a single source of transportation, such as air freight.

Nevertheless, as the next normal takes hold, “we didn’t know what we didn’t know,” can be replaced with “we know now what we didn’t know before.” Understanding vulnerabilities is arguably more important - and more achievable - than trying to predict disruptions. With this understanding comes the resiliency that is essential for medtech supply chains.

Sanbor Medical specializes in contract manufacturing exclusively for the electronic medical device industry, and utilizes a global supply chain to identify and correct any vulnerabilities before they become a disruption.