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Global supply chains continue to feel the strain of a seemingly never-ending array of seismic world events, ranging from the Russian war in Ukraine to the lingering impacts of the pandemic.
Supply chain disruptions are nothing new, but the frequency and severity of recent interruptions are unusual. Orthopedic companies remain optimistic despite the significant challenges they face and insist industry leaders can use adversity as an opportunity to improve their supply chain operations.
Today’s uncertain environment requires orthopedic manufacturers and suppliers to implement system-wide processes to manage the complexities of supply chain management. It also increases the importance of dual sourcing and working collaboratively with internal stakeholders and external customers to ensure that needed resources are always available.
Managing the Unknowns
Some unforeseen events can derail even the most finely tuned supply chain. Howard Levy, Vice President of Global Sourcing at Zimmer Biomet, shared how reverberations from a labor strike in Finland impacted the company’s daily global operations and the creation of product labels. Around the same time, an Eastman machine explosion in a Tennessee plant limited Zimmer Biomet’s PETG supply.
“You can take planning to the next level, but some important factors simply won’t be on your radar,” Levy said.
Still, orthopedic companies can prepare for the inevitable disruptions to expected supply chain performance. Many have diversified the sourcing of commodities from different parts of the world. Establishing a transparent dialogue with suppliers and a commitment to working with specific partners is also important in a tumultuous environment.
Ingo Riedl, Vice President of Supply Chain at Orchid Orthopedic Solutions, said his company has pivoted in response to significant supply chain challenges with a renewed focus on collaboration with raw material and service providers.
In the past, Riedl said, manufacturers could ask for spot quotes in the market or shop among three or four companies for the best price. That flexibility has gone away, and the formality of having supply agreements in place for prioritized capacity has never been more important.
“We’ve committed to many more long-term agreements to make sure that we get on supplier lists,” Riedl said. “We have open dialogues with key suppliers about our demand and how they can help us meet the needs of our customers.”
Scenario planning can help orthopedic companies predict and cope with future supply chain volatility. Tatiana Londono, Senior Director of Integrated Business Planning and Strategic Sourcing at Exactech, said that scenario planning is a valuable tool for evaluation of future risks.
“Our long-term planning now includes addressing various ‘what-if’ scenarios,” she said. “We’re incorporating technology and tools to look forward and make decisions based on the potential risk of various scenarios.”
For example, Exactech is addressing the longer-term risks of raw material shortages — particularly a limited titanium supply — by looking beyond traditional markets. “It’s important to diversify sources,” Londono said. “That involves considering places we haven’t used for sourcing, such as China or Taiwan. We need to change our mindset and evaluate the reasons why we haven’t tapped into these areas before.”
It’s also important to build flexibility in supply chain management at the front end, according to Scott Shankle, Vice President of Operations at MicroPort Orthopedics. “Many companies are experiencing a number of supply chain challenges in recent years, realizing the impact they’ve had on back orders, revenue and disappointed customers,” he said. “Before, supply chain issues were viewed as operations talking points. Now, the whole business is listening. Everyone understands the potential impact of being sole-sourced for components during the product development process.”
Improved Collaboration
Orthopedic manufacturers and suppliers must strive to get the various stakeholders of their organizations –– and their customers –– on the same page.
Riedl said that Orchid is working to improve planning collaboration with its customers to better prepare for volatile market demand and align their respective interests.
During recent meetings with two of Orchid’s customers, Riedl participated in open forum workshops. He talked with the customers about Orchid’s internal processes and heard about the customers’ market demand and implications of their inventory planning.
“If we can collaborate to get a sense of the true market demand, we’ll be more successful in meeting their needs,” he said. “That will help us avoid wasting time building inventory for no reason, or changing inventory levels without first discussing it with our OEM partners.
“In the end, we’re all focused on the goal of helping patients get better.”
Orchid has a sophisticated integrated business planning process that involves monthly staff meetings and quarterly executive meetings to align the efforts of stakeholders across the entire organization — manufacturing, regulatory, quality, commercial, planning and procurement.
“We identify swings in demand, issues that arise and ways in which we can implement lean manufacturing, which is a big initiative for us,” Riedl said.
Efforts to optimize supply chain management often come down to improved communication between manufacturers and suppliers, according to Riedl.
“Collaborating with customers to understand the real market demand is more important than ever,” he said. “Product mixes and demand change. Collaboration is how we engage and understand each other, exchange data and make informed joint decisions.”
Shankle wants to see the industry execute changes more rapidly to address supply constraints.
“We can solve many of the supply chain issues tomorrow, but navigating the testing and approvals needed to implement the necessary changes can be a lengthy and involved process,” he said. “Greater collaboration among OEMs, contract manufacturers, notified bodies and regulators is needed. We’ve got to figure out how to pull the trigger on meaningful solutions.”
Having clear priorities in place to address supply issues is a fundamental leadership tool, according to Shankle. “We must align cross-functional groups to take on new sources of materials and then work through approvals from regulatory and notified bodies,” he said.
The volatility of demand after the pandemic has also made it difficult to gauge true market growth, according to Londono. “Partnering with commercial and marketing organizations allows us to better predict what’s going to happen and incorporate that into our forecasts and what-if scenarios,” she said.
Improving supply chain performance amid continuous uncertainty comes down to visibility and trust, Londono said. “Manufacturers and suppliers need to know they’re in it together — that it’s not simply a transactional relationship,” she added. “That makes a big difference.”
Enhanced Efficiencies and Simplified Processes
Greater time and resources are now dedicated to supply chain sourcing — just to maintain the status quo. How can hard-working, maxed-out teams manage that extra load?
“Look at the foundations of processes and try to make them simpler to increase workforce capacity,” Londono said. “Leadership needs to help their team set priorities and set common goals, so everyone is working on meaningful tasks and driving toward a shared purpose.”
Exactech is working to improve its request for proposal (RFP) process, demand capacity and long-term planning.
“We’re incorporating tools and technology that allow us to look forward and make decisions based on risk in different scenarios,” Londono said. “Resources are constrained. We must make the best use of our resources and anticipate how to react to changes in demand.”
Shankle said that his company is focused on using system-based material requirement planning (MRP) to track supply inventories. “We’re figuring out how to use the system we have in place to become more efficient and accurate to limit self-inflicted wounds in the supply chain,” he said.
Orchid is investing in platforms that help to streamline the device manufacturing process. “Relying on robots to polish parts or adding additive manufacturing are positive ways to produce the right product at the right time and in the right quantity to deliver to customers,” Riedl said. “I believe wholeheartedly in the power of technology.”
It’s Not All Doom and Gloom
Recent global challenges have exposed the chinks in the armor of internal processes related to planning and supply chain management, Shankle said. His company has implemented several actions to address and improve them. “We’re seeing benefits from those efforts every day,” he said. “We can see some light at the end of the tunnel.”
Shankle believes that many orthopedic manufacturers and suppliers have gone through similar internal improvements on all fronts, including the components they buy and the packaging materials they need.
“We’re seeing enhanced collaboration and communication among organizations as a result,” he said. “That’s ultimately improving our ability to get products to customers.”
