An established supply chain strategy enables a firm to deploy associated contingency plans efficiently and effectively even while facing disruption. An effective strategy must continuously be reevaluated and consider geopolitics, economics, natural disasters and more to ensure the firm continues to thrive come what may.
We prepared a list of eight questions to ask when evaluating your medical device supply chain:
Ask “what if” questions about your supply chain, like “what if a key supplier goes offline for a few weeks?” This will help you assess what points in your supply chain could pose threats to your business. Remember that the best supply chain strategy is one you can accomplish. Make your “what if” questions specific, not general; practical, not conceptual. Include elements of the process, technology, organization, control philosophy, and metrics. Think through the details. It’s not enough to say that you want to employ global sourcing, for example; to implement the strategy, you must specify the components, the countries, and the suppliers to carry out your supply chain strategy.
SCM should span all links in the supply chain, from suppliers to logistics providers to distributors to production facilities and warehouses to customers. This entire network should be aligned to achieve the same goals: serving end customers’ needs. Moreover, to the greatest extent possible, the goal of your strategy should be to deliver products that customers want – when they want them and at the right price point.
A top-down Supply Chain Management approach is an initiative endorsed and led by upper management. It is critical to secure buy-in from those at the top who have the revenue goals in mind to ensure that your strategy will yield good results. A Booz | Allen | Hamilton survey found that companies that assign SCM to functional leaders achieve 55 percent less in savings than those whose CEO plays a hands-on role in linking SCM to overall corporate strategy.
Smart trade-offs between cost and service are critical to any SCM plan, as well as for satisfying customer needs. For example, placing an overemphasis on on-demand service can lead to excess inventory and capacity. While this might be good for customers, it can drive up business costs to unacceptable levels. Alternatively, when too much attention is paid to cost, service elements — stock on hand, quality, customer satisfaction, and on-time delivery — can suffer, which in turn can hurt sales. Effective supply chain design should address questions such as what kind of inventory is needed? Where should they be located? Should they be owned, or should they be outsourced? How much stock of any component or product do we need on hand at any time?
It’s common for your business’s different objectives or even different divisions within your business to come into conflict with one another. For example, sales may set an objective based on quarterly revenue targets, regardless of implications for inventory management and storage costs. Manufacturing managers may be entirely focused on cost reduction, while completely disregarding its effects on customer service. With these different perspectives competing against one another, cost, service, and revenue are not optimized. This can weaken your supply chain to such a great degree that it ultimately affects your company’s performance. Open discussion among business units and a management-led initiative to achieve a carefully crafted supply chain strategy is essential to ensure that decisions benefit the company as a whole.
Customers are demanding ever more customized products and services. But customization can add expensive and wasteful complexity to your supply chain if it is not carefully planned for and managed. More part and product configurations mean more suppliers, more inventory, and shorter production run times. Before burdening the supply chain with these costs, assess the value of the additional products or services to your customers and to your company. In some cases, offering customization at all can end up costing more than it’s worth, or become so expensive to offer that few customers can afford it. Complexity can be reined in through effective product architecture and by fully understanding all costs associated with offering customization.
Information technology should not be used to replace broken links in the supply chain. Processes complementing the company’s SCM strategy must be designed first — the right technology infrastructure can support the strategy. Managers may be tempted to eliminate the critical human element and rely only on software to manage the supply chain. But software can’t possibly understand a company’s strategic plan, or intelligently adjust the supply chain when it fails to match customers’ needs. In SCM, there is no substitute for knowledgeable, hands-on managers; technology is there to provide the data needed for good decision-making.
Many SCM initiatives fail because they are constrained by the existing structure of your supply chain. Too often in these cases, the supply chain is tweaked based on a limited short-term perspective, when it needs to be optimized by radically altering practices and processes. Frequent re-examination of the supply chain, with no limits placed on the assessment, is necessary if companies are to ensure that the supply chain strategy remains effective. Economies evolve, markets evolve, and channels evolve, and so the supply chain must evolve as well. What works in one business environment may be unsuccessful in another. Continual adaptation of the supply chain to support frequently changing business realities — particularly new product introductions and new business launches — is a critical step to enduring market leadership.