From stringent regulation compliance to calls for cost cutting, market pressures are forcing medical device manufacturers to re-examine core processes throughout plant operations and value supply chains.
While many of the market pressures bombarding the medical device industry pose serious threats, some pressures contain kernels of opportunistic optimism. For example, recent spikes in demand may cause planning and scheduling turmoil for manufacturers, but they also indicate growth.
Cynical industry pundits are increasingly cautioning that the increased demand may be short-term or nearing the zenith point. However, population statistics show that the baby boomer generation is sliding past retirement age and into the geriatric care stage, when prolonged hospital stays and chronic conditions mean intensive medical needs. This is likely to continue driving increased demand for the medical device industry through the end of the decade, at least. As care providers, facilities, and support industries rush to make the most of the opportunity, the mad dash does not often allow sufficient time for careful planning and fact-based business plans.
An adequate information technology (IT) infrastructure is one of the most overlooked prerequisites. Without the appropriate end-to-end business systems, the surge in orders may fail to provide a corresponding surge in profits. Growth must be managed with care, planning, and data-driven attention to details. A modern enterprise resource planning (ERP) system with deep analytics helps managers anticipate, plan, and maintain optimal inventory levels, no matter how fast the changing market demands.
Volatility of demand can certainly cause plant managers to experience a range of emotions. One day, the increased sales orders evoke euphoria. The next day, the reality of thin margins, stock-outs, gaps in the supply chain, and bottlenecks in production trigger loud C-level groans.
Demand must be well managed and controlled or it can unleash havoc on the organization, disrupting long-standing processes and disturbing the equilibrium of long-term accounts. As the shift to new expectations and reactive measures rock the established process flows, the ripples can cause instability in even the most loyal customer accounts.
This is a serious risk, especially in an industry where account relationships and reliability form the framework of repeat sales.
Well managed, this burst of demand can be channeled into a sustainable upward growth pattern. The key to this highly controlled transformation is an IT infrastructure that has elasticity and ability to expand as needed.
Managing growth, yielding gains
Ways that information technology (IT) solutions can profitably manage growth:
Increase agility: More than decreasing cycle times and increasing end-to-end throughput, it requires a change in mind-set, a focus, and desire to be proactive, rather than responsive. It starts with initial program management, identifying early-stage opportunities and quickly responding with products and services.
Improve collaboration: Taking advantage of fully integrated solutions that allow for real-time collaboration and data sharing – including CAD diagrams and 3D images – allows manufacturers to work more closely with customers, colleagues, and suppliers.
Keep pace with complexity in mass manufacturing: Advanced ERP solutions can monitor and manage production demands, component versions, regulation compliance, and certification requirements.
Keep an eye on the entire product lifecycle: Product lifecycle management (PLM) solutions track and manage product introductions and new design releases by guiding workflows and capturing complex configurations and specifications. Solutions also help analyze costs and establish pricing guidelines – critical for achieving return on investment (ROI).
Monitor the extended supply chain: Manage worldwide raw materials sources and the global distribution network for compliance, holding suppliers accountable for their roles in meeting compressed timetables and high quality expectations.
Analyze profitability: Analytical tools monitor costs and resources, minimize waste, and calculate true costs. Realistic cost-to-produce models can be calculated and used to set goals, and prices, for customers.
Control volatility of demand spikes
Medical device manufacturers – highly dependent on product innovations and quality control measures – already have learned that software solutions can be used to alleviate particular pain points. But, leveraging an end-to-end strategy to manage growth is still a tactic that remains untapped by many manufacturers, especially mid-sized organizations.
Today’s modern ERP solutions offer many benefits of particular interest to the medical device industry.
For example, an ERP solution can help track and project customer-buying trends, making it possible to predict the raw materials that will be necessary to keep operations running on schedule. Having the right materials in the right place at the right time means no costly delays due to stock-outs.
A firm grasp on the use of resources also helps procurement strategies. Purchasing agents can negotiate terms with suppliers and contractors to obtain best prices, minimize waste, and ensure timely delivery.
However, when needs spike, manufacturers may also turn to an extended network of global suppliers and sub-contractors to keep up with an accelerated pace. An advanced ERP can help manage this complexity, ensuring that the added overhead expenses are calculated into the margin analysis and quotes given to customers reflect the actual costs.
Full visibility into production cycles and the complete value supply chain is another way IT solutions assist medical device companies in monitoring the heightened pace of growth, ensuring that strict quality standards and regulation mandates are met. Although speed is gaining rank as the top priority for many manufacturers, the basic adherence to quality standards cannot be pushed aside in the race to increase throughput and expand production lines.
Medical device companies also are stepping up to the challenge of increased demand and increased competition from start-ups eager to enter this growth market by adding new products. Modern product lifecycle management (PLM) software makes this innovation process easier.
By tracking and guiding the steps, from engineering concepts to prototype testing, quoting, pricing and releases to the market, modern PLM solutions help medical device companies achieve best-practice workflows, protect intellectual property, and capture the new specifications and design elements with precision.
Product configuration management solutions, integrated CAD systems, 3D printing for prototypes, and collaborative tools to facilitate sharing of ideas with customers and colleagues are other ways software solutions help companies fully engage in this medical device 3.0 world. Now, it is easier than ever to implement engineer-to-order (ETO) and made-to-order (MTO) business models. Software solutions help with the complex scheduling processes, parts, and people to manage short production runs.
Infor Industrial Manufacturing
Manufacturers in the medical device and instrument industry need to comply with government regulations, which add cost and risk to their business. They must maintain strict quality management and detailed product documentation to meet customer specifications and regulatory requirements. Special production techniques, materials, and packaging for medical products force companies to keep stringent control over engineering and shop floor operations.
With a single system, a company can track the movement of materials and parts from receipt to shipping and ensure that products meet or exceed the standards required by customers and by regulatory agencies.
Infor Industrial Manufacturing can help companies within the medical device and instrument industry improve their production and profitability with features such as:
Understanding market needs
Medical device manufacturers face extreme pressures around patent and intellectual property issues, product liability, rapid product obsolescence, and competition from alternative products, making solutions to help manage product lifecycles valuable, especially when they seamlessly integrate to the overall ERP solution and tie to bottom-line reporting. While innovation is the lifeblood of the medical device industry, it is also a potential drain on profitability. Care must be taken to monitor and analyze the market need, market price, and return on investment (ROI) of research.
Analytics found in today’s modern ERP solutions allow cost-conscious executives to ask the hard questions. Without this scrutiny, eagerness to be first to market with life-saving advances may overshadow the reality of profit and loss. Although medical advances are important and valued, business reality dictates that medical device manufacturers must also be profitable to serve their customers – and ultimately patients.
This pragmatic approach to the growing demand is the difference between a short-lived boom and long-term growth. IT solutions can help medical device companies make the most of the recent growth opportunities. As aging baby boomers continue to required additional medical attention, the growth period is likely to continue. By updating IT infrastructures now, medical device manufacturers will be able to ride the wave of opportunity into the next decade.
About the author: Mark Humphlett is an industry and solution strategy director at Infor and can be reached at 646.336.1700 or firstname.lastname@example.org.