Minimize Your Supply Chain Disruptions To Achieve Supply Chain Resiliency
Your guide to strengthen your approach
Chapters
Managing your supply chain is no easy task, and the impact of your decisions are critical to the success of your product. A great product with poor supply chain support will not succeed. We have created this guide to provide you with insights about how to build a relationship with your CM to ensure supply chain resiliency.
Chapter 1: How To Prevent Supply Chain Disruptions Due To Global Material Shortages
On 13 August, a prisoner was released on parole after having served just over half of his 30-month sentence. In spite of being convicted for bribes and embezzlement amounting to tens of millions of dollars, Lee Jae-yong has now been asked to return to work. Among other reasons, this controversial decision was made in hopes that Lee, heir to Samsung Electronics, will help alleviate the world’s semi-conductor shortage woes.
How Disease and Disasters Weakened Supply
The global supply chain has taken a battering over the past 20 months, curtailing the availability of critical components and materials, from semi-conductors to plastics. Consider the timeline that only includes headlining events:
February 2020 – Present
Wuhan, China, an industrial powerhouse within “The World’s Factory” became the site of the world’s first Covid-19 (then still unnamed) lockdown. The virus swept over the globe, and continues to slow or suspend businesses, delay port operations, decimate inventory stocks and drive up prices.
August 2020
Hurricane Laura hit Louisiana and Texas, forcing closure of numerous petrochemical factories and reducing the country’s production of polythene and polyethylene by nearly 15%.
February 2021
North America was struck by a powerful winter storm. Damage to some petrochemical factories was such that it was estimated it would take half a year to fully recover.
March 2021
Container ship, The Ever Given, blocked the Suez canal for nearly a week, delaying hundreds of other vessels and causing “one of the biggest traffic jams in shipping history”.
Facing Ongoing and Recurring Crises
For now, massive disruptions to the supply chain are the new normal. Sure, the grounding of a massive cargo ship is unlikely to be a recurring event, but we have yet to see the end of issues caused Covid-19. Though it is thought that Europe and the Americas have pulled through the worst of the pandemic, the virus is now ravaging South and South-east Asia, home to nine of the world’s top ten low-cost manufacturing countries.
In addition, weather events caused by the climate crisis are only expected to worsen. This year, more above-normal activity is predicted during the Atlantic hurricane season. It is not out of the question that leading polymer producers in the United States will again have to declare forces majeures and forfeit on or delay deliveries.
Shouting in a Storm… and Better Strategies for Managing Supply Shortages
There is no silver bullet solution to instantly wipe away the disruption caused by global materials shortages. However, there are several strategies which, combined, help you minimize risk and keep your supply chain integrity. Which are you implementing?
Fighting for your share
While this is the go-to action for many manufacturers, for most of them it will mean a lot of effort with minimal results. Can you make your voice heard above that of hundreds of thousands of competitors? Remember these include mega-manufacturers with enough buying power to push their way to the head of the line.
Spot buying
Sometimes lots are put up for sale. How quickly can you evaluate and grasp these rare, sudden and fleeting opportunities?
Using alternatives
Do you have ready options for components or types of material that become unavailable?
Designing for excellence
Have you examined trends and likely changes to reduce the risk of parts that may be discontinued or, due to demand, become prohibitively expensive?
Back-up material network
You’ve probably listed all kinds of designated suppliers in your Bill of Materials. Beyond this list, do you allow your CM to suggest alternatives closer to the production site who can offer a better, steadier, or more cost-effective stream of materials or materials? Equally as important, can these alternates readily step in if, for example, quarantines, storms or other forces majeures close access to your overseas suppliers?
The more questions you answered with “no”, the less prepared you are for material supply disruptions.
An Easy First Step
What issues have affected your supply chain over the past couple of years? What are your current and future concerns?
Check out our guide below to help you strengthen your approach to managing a supply chain on a tumultuous environment.
Minimize Your Supply Chain Disruptions To Achieve Supply Chain Resiliency
Managing your supply chain is no easy task, and the impact of your decisions are critical to the success of your product. A great product with poor supply chain support will not succeed. We have created this guide to provide you with insights about how to build a relationship with your CM to ensure supply chain resiliency.
Chapter 2: How an Integrated Contract Manufacturer fortifies your supply chain
In its 2020 report, Risk, Resilience and Rebalancing in Global Value Chains, McKinsey Global Institute includes a graph plotting different types of ‘shocks’ and their potential to disrupt value chains around the world. It includes everything from trade disputes to man-made disasters to changes in regulations to financial crises.
On the graph, each shock is assigned a value according to how easy it is to anticipate and the amount of potential costs. At the very top of the cost axis, above ‘global military conflict’ is a plot point marked ‘pandemic’. Estimated to cost tens of trillions of dollars in damages, the only greater economic impact would result from disasters that have not yet occurred, such as a meteoroid strike or the eruption of a supervolcano.
Can your supply chain survive a supervolcano?
Resilience, or the ability to continue operating in spite of unusually tough circumstances, depends on whether your supply chain has been fortified by numerous critical factors. If it has not been inured against poor communication or financial risks, for example, it is on unsteady ground to begin with and will not endure major shake-ups.
The hidden value of integrated contract manufacturers for the medical device sector
The medical device outsourcing market is expected to double from the $52.9 billion it was worth in 2019, to over $100 billion by 2025. Much has been written about the bottom-line benefits of working with a contract manufacturer (CM). However, this article aims to highlight their critical role in building resiliency into your supply chain.
Here are the five hats your fully-integrated CM should wear.
1
The good listener
Your CM has to be, above all else, a good listener because a lapse in communication can have very serious repercussions. Instead of flowing quickly down the supply chain, your device could get stuck and maybe even sent back: back to the drawing board, back to the testing lab, back to the factory.
Listening is only the first step, of course. The next is to ensure your goals and requirements are communicated precisely across the supply chain so everyone – from designers to engineers to project managers – is in alignment.
Your CM will also actively listen to their teams and keep you updated. For utmost transparency, your CM should be as quick to deliver “bad” news as good. Caught early, issues such as design flaws, material shortages or other delays can be addressed before they snowball.
2
The traffic controller
Some manufacturers hold onto the myth that a CM with more global locations will automatically be more responsive to sudden change in demand. In reality, responsiveness and speed depend more on strategic choices than they do on merely having a wide network. Holding components and finished products in spread out warehouses just in case they are needed can become a pricey safety net which you may never even use.
A CM prepared for numerous likely scenarios knows what safety stocks to keep and where to place them in order to expedite production. With a clear plan to direct resources to the right location as needed, you can meet goals despite sudden changes in circumstances, legislation or demand.
3
The super saver
Big revenue doesn’t mean big profits, especially if kinks in your supply chain are leaking money. Your CM won’t let that happen. Best practices will be implemented at every stage of your products’ lifecycle and decisions throughout the chain that are financially effective. This means reducing errors (see “The listener” above) that could result in costly rework, or worse, recalls.
By purging your supply chain from the risk of expensive errors and ensuring it is optimized for efficiencies that fulfill your specific requirements, your CM plugs up costly money leaks and keeps your supply chain nimble.
4
The pro
This hat could just as easily be labelled “the know-it-all” because that is, in essence your integrated CM’s job. You simply cannot risk handing over responsibility to anyone that does not have a full consignment of dedicated end-to-end development and production experts.
Expertise is what ensures everything is done right from the very first step. Your CM’s teams will be able to tell you with absolute confidence when there is a better, faster, more economical option that does not sacrifice on quality. They will have the technical knowledge to recommend the best materials based on mechanical, biomedical and performance properties. They will recognize when systems may not work together and when automation will speed up or delay processes.
5
The track star
It is not enough to know it all. A valuable medical device CM will also have it all: the people, technology, processes, facilities, equipment, certifications… everything necessary to deliver in the highly-regulated medical sector.
Your track star will have evidence of their excellent track record with both customers and regulatory boards. It will prove it has met the strict safety and quality requirements as set by FDA QSR and ISO 13485.
Resiliency is about dealing effectively with disruptions and stressors. In many countries – the US and countries in the EU in particular – continuously enhance regulatory oversight for medical devices. Your track star CM will have a full portfolio of success stories that benefit its customers; from welcoming (because they know they are compliant with) FDA audits to adapting design and production to comply with new regulations.
Riding out disruptions of all shapes and sizes
As a black swan event (an unexpected event with severe repercussions), COVID-19 was especially shattering. However, even pre-pandemic, many supply chains were vulnerable to much smaller disruptions. In good times, but especially in tough times, what you need from an integrated CM is a partner you can trust and one that can help you thrive, even during a pandemic.
That’s one hat that never comes off.
Chapter 3: Causes, Costs and Cures for Unplanned Downtime
Some causes of unplanned downtime are as old as manufacturing itself, while others are very recent. Some of these causes impact highly regulated industries, such as medical device manufacturing, more so than other areas of manufacturing.
Whatever the cause, the damage is considerable. The very nature of manufacturing means that a disruption at any point, large or small, will dramatically affect your entire supply chain.
In this post, we’ll look at the costs and causes of downtime. We will then proceed to lay out effective methods of preventing costly delays by tackling the causes of unplanned downtime.
The Cost
The biggest cost of downtime is measured in lost production time. A loss of production hours cuts into a company’s profitability. Stalled machines and processes also mean operators and other employees can’t work. One study found that 3 percent of manufacturing working days were lost to downtime caused by machine breakdowns.
Not only can lost production affect current orders, but it most certainly could affect future opportunities with both current and future customers. Failure to deliver on time hurts a company’s reputation and puts a crack in the growth plan.
It’s tough to put a dollar amount on the cost for downtime, though one industry estimated that it added up to approximately $22,000 per minute.
Across the board, manufacturers contend with an average 800 hours of downtime every year, resulting in a very hefty price tag.
The Cause
While there are a lot of reasons for unplanned downtime, some of the most common include:
Equipment failures
The very machines that make manufacturing possible are also major causes of unplanned downtime. A full 42 percent of unplanned downtime happens because of asset failure. Sometimes the fault lies with the machine itself but far more often it is the result of misuse or poor monitoring and maintenance regimens.
External disruptions
While the Covid-19 pandemic shook up global manufacturing like few other events in history, it still belongs to a larger group of external forces that can break critical links in the supply chain. Wars, economic downturns, natural disasters, changes in legislation, power outages… any of these can temporarily grind production to a halt.
Cyberattacks
When ransomware infects systems, it captures and holds data hostage until victims pay for its release so work can resume. Even when payment is made, a significant percentage of cybercriminals then request a second ransom and an even larger number never return data access at all. Nearly 80 percent of manufacturers have been targets of a cyberattack. Of these 47 percent resulted in operational downtime.
Contamination
The manufacture of medical devices takes place under highly sanitized conditions. Devices exposed to contaminants may be rendered unusable. When major decontamination is required, access to critical facilities is restricted until a cleanroom environment can be restored.
Non-compliance
Medical device manufacturers are subject to audits and site inspections by regulatory agencies such as the FDA (Food and Drug Administration). Failing an inspection could require shutting down parts of the operation in order to bring them up to standard. At worst, the agency could order an injunction against a manufacturer to stop them from producing or distributing a product. In the most extreme case of “downtime” a company may be barred or its products quarantined.
Lack of agility
An inflexible supply chain is unable to respond quickly to any disruption. Among other things, lack of agility is associated with unclear and ineffective strategies and subpar systems including:
- Inefficient sourcing and procurement
- Lack of an adequate ERP system
- Suboptimal logistics models
- Inaccurate demand forecasts
- Inability to scale workforce on short notice
- Inability to scale demand
- Lack of disruption escalation processes
The more rigid your supply chain, the slower and less coordinated your reaction, the longer the downtime and the higher your costs. It is also why having a thorough business continuity plan and process is so critical.
The Cure
When it comes to preventing unplanned downtime to keep your production up as planned, you have three options:
1
You can implement all precautions and provide oversight yourself.
This requires a huge investment. Not only do you need the right equipment (and ensure that it is all properly used and maintained), you need to find and hire the right people with the right training to implement the right processes and observe the right precautions.
2
You can outsource parts of your supply chain.
While this gives the illusion of filling in gaps in current expertise or capacity, in truth, it means you are left with a fractured overview of your supply chain. This makes it difficult to assess risks of unplanned downtime that can accrue costs and throw off your entire production schedule.
For example, how do you know that someone else’s machines will be in optimal working order for the duration of your project? (Keep in mind that the majority of manufacturers cannot say for certain when their assets are due for maintenance or upgrades. An astounding 75 percent have only a vague idea of when their equipment will reach end of useful life). Have employees been trained and equipped to maintain a sterile environment to prevent contamination-based downtime? As for cyberattacks, it only takes carelessness on the part of one employee from one supplier to potentially expose your entire supply chain to cyberthreats
3
You entrust your supply chain – and downtime prevention – to an end-to-end contract manufacturing partner.
Nothing reflects a stellar record for managing downtime like on-time delivery of compliant, high-quality products. Nothing says preparedness and flexibility like passing nearly a hundred audits per year, all with high ratings. An end-to-end contract manufacturer has all the facilities, processes, people and expertise ready to deliver your product, from design to production to packaging.
This includes downtime-busting assets such as:
- An agile and resilient integrated supply chain able to respond quickly and effectively to disruptions
- Multiple ISO 13485 production facilities which can be leveraged as part of continuity plans if external forces render one location unusable
- Maintenance schedules driven and updated by advanced technologies to ensure all machines are in good working order
- Employees trained to recognise and avoid potential cyberthreats
- Digitally backing-up information, plans and systems so that in case a cyberattack does happen, restoration is swift and production can continue.
- Optimally designed cleanrooms to enable regular cleaning activities without interrupting production
- Staff trained to observe strict cleanroom protocols thereby reducing the introduction of contaminants
- Absolute compliance with all laws and regulations from all countries where it operates or serves, so inspections and audits go smoothly
- Having a robust, multi-faceted business continuity plan
Unplanned downtime is inconvenient and costly. Likewise, preventing unplanned downtime – thereby sticking to a promised schedule and delivering on time – not only saves you money, in the medical device industry it also saves lives. Working with a CM that can reduce downtime tells your customers that they can depend on you, building trust for solid, long-term business relationships.
Chapter 4: Determining What Stage of a Product’s Lifecycle To Bring in a CM Partner
Your contract manufacturing partner can have a dramatic effect on the success (or failure) of your project. While an end-to-end CM can come in at any point of your production cycle, bringing them in at exactly the right time enables you to reap the greatest rewards, including:
Lower overall costs for your project
Expedited testing and production
Accurate yield calculations
High product quality assurance
Lower BOM costs
A future proof design
What is the optimal entry point?
As we will see, the most advantageous time to bring in a CM is as early as possible in the design phase. Specifically, when you have your concept and strategy in place.
Why at the start of the preliminary design phase? Because this is the only time it is easy to make corrections and changes. Think of it as the starting line in a race. Except that in this race, if you fall, you can’t just pick yourself up and keep going. You need to go back to the starting line. The further you’ve gone, the longer the journey back and the longer it takes for you to ultimately reach your destination.
In this race, the ‘fall’ is any critical design failure. If the fall happens during the electrical or mechanical design phase you need to take a step back, but it is nowhere as serious as if the flaw is discovered during your first production run. In a worst-case scenario, the flaw reveals itself when your device has already reached the market. Consider that in 2020 alone, the FDA issued more than 30 medical device recalls. By this point it is way too late to start over.
Involving your CM partner at the optimal stage not only ensures that there are no falls in the race, but that the run itself is as fast and smooth as possible.
So why do some OEM’s still put off bringing in their CM partner until later (sometimes much later) in the process? Interestingly, the four most common objections only look at half the story.
Real concerns based on faulty assumptions
Do any of these sound familiar?
1
We can save on CM fees by bringing them in later.
Not if, when your CM finally does come onboard, they find problems that they could have helped you avoid in the first place. Returning to the starting line means paying twice to get to the same point.
2
We already have a lot of our own people providing input and opinions. Bringing in a CM this early will only add more cooks to the crowded kitchen.
Naturally involving more experts means there will be more voices. Design and development is exactly when you want people asking the right questions and making the right suggestions.
3
We don’t have time to engage a CM right now, our senior managers want us to get started as soon as possible.
What matters more, when the project starts or when it is completed? Your CM partner will be extremely careful to ensure that things are done right. This time investment at the start of the project means everything else will go much faster.
4
Why involve someone else when no one knows our business like we do.
When it comes to concept and strategy, there is definitely no one who understands your market better than you do. Your CM partner’s job is to turn your concept into the quality product you envision, reaching the market without cost overruns, with optimal efficiency.
Delaying the engagement of a CM partner boils down to two things: First, looking at immediate ‘wins’, which actually hide the greater, farther reaching benefits. And second, not really understanding the value that an end-to-end CM partner can bring to the table. Especially if brought to the table at the right time.
What Early CM Involvement Gets You
End-to-end expertise
Much like manufacturing itself, a supply chain is made up of many moving parts working in concert. From world-standard production facilities to high-end technology to teams of dedicated professionals, your end-to-end CM partner has all everything ready and working in unison to design, manufacture and even package your product so it is market-ready.
A single ‘control tower’
Any manufacturing project requires a capable project manager to coordinate between the numerous suppliers, engineers, departments and stakeholders, all with their own priorities. It involves a lot of running back and forth, and the more fragments of your project you outsource to different parties, the more difficult your project manager’s job.
On the other hand, when you hand the reins over to an end-to-end CM partner at the start of the design and development phase, there are experts and processes already under your CM’s umbrella. A dedicated team works closely with your people and known suppliers to ensure everyone is aligned in working toward the big picture.
A design that checks all the boxes
A completed design does not necessarily translate into a manufacturable product. When different engineers are involved in doing their best work within their own silos, all sorts of things can go wrong when it all finally comes together. Mechanical engineers may design a circular device with a diameter of 20cm, while the electrical team has designed a PCB that is 50cm long. Both designs fulfil their own requirements, but cannot possibly work together. Or your BOM includes components that are too tough or expensive to procure. Or the design of the component may mean it is likely to get damaged on a conveyor belt. Or scaling up production will greatly increase your cost per unit.
To ensure that your product can be manufactured, your CM runs a full spectrum of ‘design for excellence’ (DfX), including design for manufacturability. Armed with a profound understanding of manufacturing processes and materials, your CM partner will be able to identify and solve any issues early in the design stage.
Optimizing both product and production
Not only will your contract manufacturing partner identify flaws before they become costly headaches, but they can also recommend ways to lower production costs and increase speed to market.
Take your CM’s expertise in material selection, for instance. There are tens of thousands of types of plastic alone, each with a different set of properties that will affect how durable, light, flexible or easy to clean it is, whether it resists heat, pressure or certain chemicals, whether it bonds with other components, how easily it will be assembled. As early as the design stage, your CM partner will be able to recommend materials that will ensure your device meets all requirements for quality, safety and purpose. Other recommendations your CM might make at the design phase:
- Ways to reduce the number of parts in a device, thereby cutting costs
- Design to simplify assembly & verification
- Design to reduce set-up time
- Design to optimize product reliability
- Ways to future proof your device, for example, by keeping it relevant and useful – or easy to upgrade, when new regulations are introduced or different technologies are accepted.
Growth and innovations
The value of a solid relationship with your contract manufacturing partner extends far beyond your current project. Having someone you trust to make recommendations for better designs, materials and processes opens doors for future projects and innovations. Having a partner who can take care of everything from the design phase, through development and production, gives you the added advantage of getting your innovations to market faster than your competitors.
Chapter 5: How CM-Enabled Transparency Reduces Risk and Improves Your Supply Chain
Communication plays a critical role in any partnership. As you consider the conversations with your contract manufacturing (CM) partner, how can you ensure the best communication strategy to exceed your expectations?
At the very least, you need to tell them your product specs and they need to let you know when your product will be ready for market and how much it will cost. The question is, are you satisfied with the very least?
How big are the greatest communicators?
No two contract manufacturers are created equal. For strength in communication, look for a contract manufacturer committed to building a long-term relationship. Beyond that, consider size. Your ideal CM should be large enough to have all the resources required for world-standard end-to-end manufacturing, but not so large that they sometimes ignore your voice (needs) in favor of louder (bigger) clients.
With the right-fit CM partner, there is no one in the company who is out of bounds to you. You can bring your concerns to anyone from any department and all the way up to senior management. That is, if you need to.
Your CM partner will assign a multi-disciplinary core team dedicated to your projects. Whenever you have technical questions, ask your appointed engineer.
How about questions about orders or logistics? Your planner can handle those. Sharing your goal for the timely and successful delivery of a quality product, every person on this team is proactive in recommending design, process and material improvements, as well as highlighting future opportunities.
Lost in translation
As its name indicates, a global supply chain extends over several countries. If your too-large CM assigns work to whoever is available in different offices, there is a high probability that the “team” members have never worked together before. They don’t know you, they don’t know each other and they are still finding out about your business. That’s a lot of stumbling blocks to communication right there.
With an ideal-fit CM, your team is not just investing in your product, but in your long-term goals. The aim of this partnership is that they will work and grow with you, becoming familiar with your business and understanding what is important to you.
To make communication even easier and to ensure nothing gets missed, your key account manager becomes your point person for information sharing. This is who makes sure everyone involved is aware of their responsibilities, including timeline and deliverables. Your account manager effectively creates short lines of communication between team players.
Can you hear me now?
Speed to market depends on collaboration, which in turn depends on the ongoing exchange of information throughout the entire production lifecycle. Any misunderstanding can cause delays, either in the back-and-forth required to get things right, or worse, moving forward with bad information.
Communication is also key to agility. When there are emergencies, escalations, re-in or re-out requests, new opportunities or anything else that requires a quick strategy change, established open channels of communication enable your dedicated team to react like a well-oiled machine. If your partner is already familiar with your company, product and goals, they can immediately move swiftly to adapt plans of action to new circumstances without consulting too many bureaucratic layers.
Verbal communication is one thing…
The human ear is imperfect. Memory is even more so. What you try to convey and what people hear does not always line up. And even if it does, it may not be remembered correctly or could be forgotten altogether. The solution to this, as every school student learns, is to write things down.
Of course, in manufacturing, it is not anywhere as simple as that. There are specific documents with specific formats to ensure every box is checked and no detail goes unmissed. In the complex world of medical device manufacturing, documentation is even more complicated… and all the more necessary.
From the very start of your CM partner’s involvement, you can rest assured that all process participants can consistently refer to the same, complete and most recent information. Likewise, records of progress, changes and meetings will be meticulously kept and easily accessed. Any misunderstandings about scope, deadlines or responsibilities can be cleared up in as little time as it takes to read written agreements.
Verbal communication is one thing…
The human ear is imperfect. Memory is even more so. What you try to convey and what people hear does not always line up. And even if it does, it may not be remembered correctly or could be forgotten altogether. The solution to this, as every school student learns, is to write things down.
Of course, in manufacturing, it is not anywhere as simple as that. There are specific documents with specific formats to ensure every box is checked and no detail goes unmissed. In the complex world of medical device manufacturing, documentation is even more complicated… and all the more necessary.
From the very start of your CM partner’s involvement, you can rest assured that all process participants can consistently refer to the same, complete and most recent information. Likewise, records of progress, changes and meetings will be meticulously kept and easily accessed. Any misunderstandings about scope, deadlines or responsibilities can be cleared up in as little time as it takes to read written agreements.
Transparency and trust
It is tough to hand over your project to a CM if you believe that means losing control over a big chunk of your supply chain. With document-supported communication, your right-fit CM partner will ensure that all processes are so transparent that you’ll likely have even more visibility over the end-to-end design and production process than most manufacturers have when they do things in-house.
Communication is often the unsung hero of an effective supply chain. A contract manufacturer who takes communication seriously can help you avoid costly errors and delays. They improve product quality and speed to market by ensuring your diverse team is always rowing in the same direction. They protect you from reputational damage and fines that result from shoddy or incomplete documentation. They build trust, work with you to find better alternatives and encourage partnership-driven innovations.
Other Featured Resources
About Providence Enterprise
Providence Enterprise is a Hong Kong medical device contract manufacturer of Class I and II medical devices with manufacturing in China & Vietnam. We specialize in electro-mechanical assemblies and high-volume disposables. We are FDA registered and ISO 13485, ISO 14971, ISO 14001, ISO 27001 certified. Our capabilities include fabricating tooling for silicone rubber and injection molded plastics, clean room injection molding, electronics, clean room assembly, and sterilization.