Supply Chain Strategizing at the MPO Summit

The COVID-19 pandemic has been one of the most globally challenging and disruptive events of the past century, but it taught the world many valuable lessons—namely, the criticality of human contact and communication.
 
Companies learned the importance of resiliency, preparedness, and partnership as they devised survival strategies during the virus’s rampage. “It’s about partnership. What we’re coming out of this [pandemic] with is we can’t just hope things go well…we need a plan—a partnership…”
 
That profession—courtesy of Joshua Chaidez, vice president, Global Supply Chain, at Intuitive Surgical—was just one of numerous insights shared during the MPO Summit held last month in Austin, Texas. The two-day supply chain-centric event examined the medtech industry’s current struggles with supply and demand, and discussed best practices for managing the challenges brought forth by the global pandemic. It also offered solutions for sidestepping future supply chain challenges from unforeseen events.
 
“Looking around the corner is always a challenge,” said CincyMED President David Mabie, who hosted a panel discussion on reworking the supply chain equation.
 
Mabie’s panel members recounted the strategies they have employed to ensure supply chain continuity. Flex Health Solutions, for example, exercises alternate sourcing, while Zimmer Biomet Holdings Inc. reduced its dependence on single-source suppliers. “It’s not necessarily something totally new that we’re doing,” said Ozzie Murillo, senior director of Global Supply Chain and Advanced Sourcing at Flex Health Solutions.
 
The panel discussion moderated by Oleksy Enterprises and SCHAIN101 Founder/CEO Chris Oleksy reinforced the value of partnerships and preparedness in keeping medical supplies flowing during unanticipated interruptions. The lack of such planning has beget year-long lead times for hard-to-get items like packaging materials and computer chips, the panelists noted.
 
“Right now, we are experiencing some of the longest lead times I’ve seen in my career,” stated Terry Lubben, senior vice president of Operations at Treace Medical Concepts, which designs, manufactures, and markets foot and ankle surgical devices and biologics. “We’re placing orders for 2023 and finding out we can’t get those orders because of the lead times and they’re now talking about 2024. It’s very hard to predict where you’re going to be and how much [supply] you’re going to need a year or a year and a half out.”
 
The lead times are just as bad—if not worse—for computer chips. Life Science Outsourcing CEO John Nino mentioned a 52-week wait for custom integrated circuits at the pandemic’s start, and noted that many medtech manufacturers are competing with automakers for the limited chip supply.
 
The Summit’s second day consisted of a third supply chain-focused panel discussion as well as a working luncheon hosted by Oleksy.
 
The third panel examined the pros and cons of nearshoring and was moderated by MedWorld Advisors Managing Director David Sheppard. Discussions focused mostly on regional nearshoring, where companies support a specific geographic location from that area (i.e., manufacturing for China in China).
 
“We are seeing folks nearshoring for the regions. If you add up all the costs, it makes a lot more sense to support a region from [within] that region,” explained Lisa Anderson, founder/president of LMA Consulting Group Inc. “We are seeing this apply to all industries, including medtech.”
 
Carlos Wong, managing director of Costa Rica’s Coyol Free Zone, said he’s noticed more companies setting up shop closer to home in the last five years. The costs and risks involved in establishing operations in China (i.e., shipping issues, economic concerns, political tensions) are causing medical device makers to avoid the region. 
 
Although establishing manufacturing roots closer to the U.S. (or Mexico, Costa Rica, Dominican Republic) might make sense economically, companies must ensure their final choice is the most logical from an operational standpoint.
 
“You have to think about capabilities, and geopolitical situations,” Flexan President Tony Gonzalez advised. “Think about what makes sense to put where. There are clusters worldwide that specialize in one area or two. As we think about driving costs down, we consider offshore options but also about keeping some knowledge in areas where they reside today.”
 
Oleksy’s working lunch provided Summit attendees with a deep dive on supply chain best practices. He began by reinforcing the need for companies to plan, citing the frequency and size of unpredictable events (George Floyd murder and subsequent protests, Hurricanes Ida and Ian, Russia’s invasion of Ukraine). He then provided an outline companies can follow to improve their preparedness for the next supply chain disruption.
 
“As a society, we don’t plan. If you don’t plan, the rest is history. This is a cultural problem in a lot of companies and it doesn’t matter the size,” he said.
 
The companies most successful at preparedness will be those employing supply chain “artists”—experts who have both the scientific knowledge and the intuition to make the right choices.
 
“There are some good scientists in the supply chain world, but they don’t necessarily have the intuitiveness,” he told Summit attendees. “There’s a difference when you see people that have the art necessary to move the organization forward. It’s the art and the ability to apply the science. Eliminating single sourcing? That’s an art. Every organization has to have an expert, and that expert should be a master of the art, science and the traits required to succeed.”