Supply Chain 4.0: The Path to Building Resiliency in the Supply Chain

Manufacturers have been faced with a set of new challenges in the wake of the COVID-19 pandemic, forcing them to reevaluate supply chain management for the unpredictable. Now is the time to leverage technology to achieve and maintain a resilient supply chain. Organizations also need to understand the impact of current suppliers, trends, and how to reduce complexity. 

Let’s consider the challenges facing the industry today and the tools available to improve supply chain management. 

Top Industry Challenges
Device manufacturers bear the responsibility for the safety and effectiveness of finished devices. Therefore, not meeting FDA regulations can cause enforcement actions, including recalls. The FDA has the authority to inspect component manufacturers, but they rely on the finished device manufacturer to ensure it meets specifications. 

The pandemic has drastically affected the business environment, forcing companies to rethink their supplier management process and supply chain responsiveness. Industries continue to face challenges such as end-to-end collaboration, managing risk, single sourcing products, visualization, benchmarking, and standardization.

In addition, the increased prices and regulatory challenges have led the biotechnology, pharmaceutical, and medical device industries to outsource manufacturing and packaging services, increasing the risk and complexity of the supply chain (thousands of part numbers, hundreds of suppliers, and multiple global locations). By failing to establish a robust supplier management program, companies expose themselves to significant compliance issues (voluntary or mandated recall), service deficiencies, financial consequences, and damaged reputations. 

Supply Chain 4.0 can help alleviate these challenges and improve the way organizations manage suppliers.

The Impact and Benefits of Supply Chain 4.0
The ongoing suitability of components and services to customers depends on the quality of the product or services received by suppliers. Managing Supply Chain 4.0 is a way to be proactive with all value chain partners and their extended supplier network. Companies struggle to synchronize and integrate data into their supplier processes. When visibility increases, it provides an opportunity to build collaborative relationships with suppliers and supports innovation, speed-to-market, and competitive differentiation. 

Supply Chain 4.0 provides real-time data and transparency that enhances collaboration with suppliers. This vision of a complete partner ecosystem will establish real-time communication and data sharing to identify issues early and proactively prevent quality issues from entering the supply chain. While there is no “one-size-fits-all approach” to Supply Chain 4.0, benefits to digitalization include end-to-end collaboration, implementing best practices, shortened cycle time, benchmarking, and standardized processes.

Supplier Quality Management Best Practices
Ultimately, a manufacturer will have to keep accurate records of every aspect of relationships with suppliers, including transactions and communications. It must also implement best practices.

These include:

• Selection and Evaluation Process: Manufacturers must forge relationships with suppliers that are trustworthy and can deliver materials and components. Suppliers will be selected and evaluated through industry-standard criteria.
• Supplier Audits: Identify any nonconformances before the finished product is affected and work with the supplier on corrective actions.
• Supplier Scorecards: Evaluate suppliers on metrics to determine the supplier’s quality and performance over time.
• Supplier Risk Files: Determine the impact of a supplier’s materials on the quality of the finished product. Those that are more heavily influential should be more closely monitored, and there should be mitigation actions in place to offset these risks.

Most of the time, the manufacturer is already doing these best practices to ensure FDA compliance and quality assurance. However, the documentation that contains all the data measured in relation to supplier quality and specifications is often spread out in a manual system through different file systems and spreadsheets—which can lead to greater inaccuracies, duplicate evaluation processes, ineffective or slow communications, and lost reporting.

Benefits for a medical device company when building a supplier audit process include the opportunity to create a consistent format. This is valuable when different auditing groups such as accounting, IT systems, HR, engineering, or materials need to provide input and have access to shared supplier information. This streamlines all audits with multiple suppliers by eliminating duplication of effort and variability of outcome.

Audit steps and reporting formats require a uniform and consistent appearance, making the audit process easier, faster, and more efficient. Audits help identify and correct minor issues before major issues develop, leading to proactive resolution. For this reason, an integrated digital supplier management system is crucial to ensure there is a closed-loop supplier process in place.

Effectively Managing Supply Chain Risk
A supplier risk management program will provide visibility to suppliers and products. Using risk management for your supplies can drive direct, measurable value, help meet compliance, strengthen supplier relations, increase visibility, and avoid preventable risk. Risk efforts should be implemented on all (new and old, small and large) suppliers relating to the QMS to help determine vulnerabilities. Risk efforts should include understanding all supplier tiers, which consist of:

• Tier 1 suppliers: Partners that an organization directly conducts business with.
• Tier 2 suppliers: Where Tier 1 suppliers get their materials.
• Tier 3 suppliers: Suppliers that provide materials in raw form.

In analyzing possible risks, organizations should develop an action plan. It is critical to utilize cross-functional teams to help identify risk. This could include IT, quality assurance, regulatory authorities, and engineering and logistics teams. 

The Case for Managing Suppliers with a Digital QMS
Collaboration is essential for quality, enables greater efficiency, and results in higher profitability. However, many supply chain partners have their own methods for managing quality events, which are often siloed. These systems may include anything from old-fashioned paper processes to Excel spreadsheets or home-grown applications.

But whatever systems and communication channels organizations use, these solutions have one thing in common—difficulty in sharing information, leading to a breakdown in communication.

When communicating to suppliers, organizations with legacy systems must manually communicate any change notifications to suppliers. Since this takes place outside the QMS, a spreadsheet for tracking is used, increasing the risk of human error and providing no visibility into the process along the way. The manual steps lead to quality data in various locations, no audit trail, and proves to be labor-intensive.

Empowering the Supplier Network with Technology
Collaboration across the supply chain supports quick access to business information for better decision-making. Furthermore, all the quality data for the supply chain is in one place. From an operational perspective, this means the information needed for short-term planning and decision-making is readily available, and known to be both current and reliable. If disputes arise, there is always a single source of truth.

From a longer-term planning perspective, it allows manufacturers to be proactive instead of reactive when it comes to quality. They can easily evaluate and rank their suppliers according to a variety of quality criteria such as deviations, cycle times, and other metrics, as well as proactively address potential problems.

The benefits of the collaborative approach aren’t limited to manufacturers. Suppliers also gain business benefits when taking this approach. Communication is streamlined so suppliers can ensure they supply all the necessary information the first time. Collaboration enables suppliers to be aware of their performance (based on the data access permissions they’ve been granted) and also learn from the broader community in areas such as problem resolution and best practices.

Take Supplier Quality to the Next Level
The complexity of the global supply chain poses significant risks. Even though companies understand the vulnerabilities and the importance of mitigation actions, it is still difficult to know until they can accurately quantify the monetary impact. Therefore, companies need to capitalize on opportunities and minimize risk. 

Supply Chain 4.0 technology embodies preparation and resilience by continuously monitoring overall efficiency to meet product requirements, production demands, and maintain an effective quality management system. Supplier management includes the actions taken to improve supplier capabilities and performance for products and services. Companies must also build control and quality into the assessment and selection of suppliers. There is a balance between supplier control, manufacturer control, and acceptance activities; it is essential to set expectations for suppliers and maintain open communication. 

With thousands of suppliers and tens of thousands of products, managing the supply chain can be overwhelming. Applying Supply Chain 4.0 technology streamlines the process. Supply Chain 4.0 management embodies preparation and resilience by continuously monitoring overall efficiency to meet product requirements, production demands, and help to maintain an effective QMS. The result is more effective collaboration with the supply chain along with greater productivity, reduced cost, and yield improvement in product quality. 

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Zillery A. Fortner is the product marketing manager of Life Sciences at Sparta Systems, a Honeywell company. She earned a bachelor’s degree in health science from South University.   Fortner has 20 years of experience in the medical device arena related to quality assurance, regulatory affairs, and JACHO. She served 10 years in the military as a certified surgical technician. Fortner is an active member of ASQ and AAMI.