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As stated by the Supply Chain Council, current economic pressures have had at least one positive effect: companies have taken an intense look at their supply chains, questioning all assumptions and endeavoring to root out inefficiencies.
Roundtable discussions allow OEMs and suppliers to learn from one another rapidly. To that end, BONEZONE queried professionals within OEM companies for thoughts on their biggest challenges in the supply chain.
The responses that follow allow you to see inside the mind of your peers, including price pressures, lead times and beyond. What other challenges remain, that are not addressed here?
Responses came from the following professionals.
Lance Provance (photo not available)
Supply Chain Manager
Arthrex Inc.
Lance Provance is Supply Chain Manager for Arthrex, a provider of sports medicine product development and educational services for orthopaedic surgeons.
Howard Levy
Chief Procurement Officer
Biomet, Inc.
Howard Levy has served as Chief Procurement Officer for Biomet since 2007. In this role, Mr. Levy has responsibility for Biomet’s global strategic sourcing activities for direct and indirect materials across manufacturing sites in North America, Europe and Asia. Prior to joining Biomet, Mr. Levy gained 20+ years of supply experience across diverse industries, including leadership of all global strategic sourcing initiatives at CSX, Navistar, Case New Holland and Ryerson.
Chris Hargett
Procurement Site Manager
DJO Surgical
Chris Hargett is an APICS Certified Supply Chain Professional and has over 15 years of experience in Procurement and Supply Chain management. Chris manages the Procurement and Supply Chain group at DJO Surgical in Austin, Texas.
Bob Weston
Director of Strategic Business Planning
Ortho Development Corp.
Bob has been with Ortho Development for over 16 years and is responsible for planning, procurement, manufacturing, shipping and receiving. He is a graduate of the Teleflex Inc. Two Year Line Management Program and has held a wide variety of cross-functional management assignments in aerospace and medical segments at manufacturing facilities around the globe prior to joining Ortho Development. Mr. Weston holds a B.S. in Business Administration from Franklin Pierce College.
David Finch
Senior Director, Corporate Procurement & Planning
Wright Medical Technology, Inc.
David Finch is Senior Director, Corporate Procurement & Planning at Wright Medical. His past positions in the medical device industry have included Worldwide Director, Supply Chain for Johnson & Johnson and Supply Chain Manager with Becton Dickinson Public Company.
Question #1. What do you see as the biggest challenge facing Sourcing Managers, presently?
Lance Provance, Arthrex: Some of the bigger challenges facing us today revolve around pricing and lead times. Price pressure is always around, but the push for faster lead times is at the front of the line. We also see a big push for supplier inventory programs such as SVI, Kanbans, etc.
Howard Levy, Biomet: Offsetting inflationary commodity pressures with other tools in the sourcing toolbox (e.g., low-cost country sourcing, long-term agreements, global or regional leveraged spends) to drive savings.
Chris Hargett, DJO: Two challenges: keeping inventory in-line with sales based upon the current economic environment, and the potential for patients to delay surgeries. It’s critical that the supply chain proactively create strategies to adapt to the changing demand and leverages its inventory spend appropriately.
Bob Weston, Ortho Development: I’ll give a three-part response. Shorten Time to Market: Think billiards and combination shot, as the process is both external and internal. For a supplier-driven organization such as ours, we need to be good matchmakers. Next: Stability of Key Suppliers. The OEM landscape has changed significantly since the first OMTEC meeting. We expect more changes due to mergers and acquisitions in the future. Another factor to consider is the impact of OEM management changes. Managing transitions is pivotal to navigating dynamic supplier landscapes and selecting the proper procurement path for your organization.
Finally, Flexibility Responsiveness or “Breaking Up is Hard to Do.” Can your existing, long time suppliers adapt rapidly in response to changes taking place in the marketplace? These changes may include resource issues such as skilled workforce, introduction and maintenance of improvement initiatives, i.e. Lean or investment commitment for new technology to stay competitive.
David Finch, Wright Medical: Cost pressure on device manufacturers while faced with significant cost increases in raw materials. This impacts us and our suppliers.
Question #2. Companies continue to face severe price pressure. How does this impact you? How does this impact the Supply Chain?
Lance Provance, Arthrex: The price pressures are always put on us. We are actively engaged in ways to drive cost out of the supply chain through negotiations, supplier consolidation, leveraged buys, redesigns and supplier inventory programs.
Howard Levy, Biomet: Price pressure causes us to work more and more with suppliers on tapping into their ideas on reducing costs, such as suppliers expanding their global breadth by opening up facilities in new locations. We pursue closer supplier relationships/strategic communications at senior levels and a longer supply chain. Continue focus on make/buy.
Chris Hargett, DJO: As a Supply Chain and Procurement Professional, it’s critical to always proactively look for ways to reduce lead times and costs out of the entire supply chain, without jeopardizing quality, no matter what the market is doing. As we all have seen over the last 12 months, commodity pricing continues to fluctuate on an overall unpredictable (and in some cases volatile) commodities marketplace.
It’s important to be looking ahead and securing the key commodities at favorable rates where it makes sense, and continuing to develop sourcing strategies to combat the price pressures in the market place. Again, the key is to be proactive and not reactive to pricing pressure when it hits, because once you’re reacting, the challenge to mitigate the market pressure will be difficult.
Bob Weston, Ortho Development: Domestic vs. global? That is the question. Price pressure is here to stay as orthopaedic procedures become more competitive, while reimbursement rates fall or stabilize. The OEMs are the easiest target to bear the slings and arrows of price pressure. For us, the answer may be expanding internal capabilities and probing global sources for feasibility of true cost savings.
David Finch, Wright Medical: We all have to find ways to reduce costs elsewhere, as there is no opportunity for us to pass on increases. This could include more collaboration with suppliers to maximize their operational efficiency, implementing inter-company Kanban (demand pull systems) and identifying reliable low-cost supply opportunities.
Question #3. What assistance, service or resources are you expecting from your suppliers today that you weren’t expecting 18 months ago?
Lance Provance, Arthrex: We really look at new suppliers and the types of inventory management programs they have. In the competitive landscape, the ability of a supplier to offer quicker lead times through inventory management is a huge plus for us.
Howard Levy, Biomet: Faster turnaround time on selective programs, more vendor managed inventory to offset long lead times (especially on raw materials). We have the expectation that the supplier has a plan to be competitive with low-cost countries, including potential facility expansion.
Chris Hargett, DJO: Over the last 18 months, our key supplier relationships have continued to transform from traditional “supplier relationship” to more of a “partnership.” In order for our Supply Chain to be successful, it’s critical that our key suppliers and DJO Surgical are marching to the same continuous improvement drumbeat as it relates to our end product expectations: meaning, a part meets our quality and regulatory requirements and specifications, and is cost competitive with the shortest lead time possible.
For example, the DJO team has done on-site supplier Kaizen events for the flow of our parts from Purchase Order placement to shipment. In most cases, the “non-value add” activities and/or processes that are uncovered and either reduced or eliminated during the Kaizen event have resulted in the reduction of lead times, reduction of design for manufacturability challenges and assurance that resources are focused and/or allocated appropriately.
Bob Weston, Ortho Development: Got Engineers? Not much changes over time. Three words sum it up best: prototypes, prototypes, prototypes. Also, Instrument & Case Lead Time! Some suppliers have begun to provide current lead time estimates on a monthly basis. This mitigates supply chain surprises, and is beneficial to launch planning. This would reduce the probability of a visit by Mr. Murphy and his extended family when you are a strike away from winning the World Series.
David Finch, Wright Medical: We began implementing the programs and processes mentioned earlier 24 months ago (e.g. implementing inter-company Kanban, identifying reliable low-cost supply opportunities, etc.)
Question #4. What technology, human resource or knowledge-based improvements would be most helpful to you?
Howard Levy, Biomet: Greater and more effective tools to manage and speed the transfer of products to a different internal or supplier facility. Technology that would facilitate not only the transmission of prints, specs, etc., but the knowledge of how to make the part, including clear two-way dialogue across languages.
Chris Hargett, DJO: I really see knowledge-based activities as the most helpful for me and my team. In my opinion, it’s critical to have a solid foundation and understanding of Supply Chain, Procurement and Lean principles and then leverage technology as a means to your target condition.
Bob Weston, Ortho Development: Good to go! At the moment, there are multiple options for improving communication and information. No issues at present.
David Finch, Wright Medical: Breakthrough ways to permanently take cost out, such as end-to-end supply chain LEAN initiatives, near-net tooling design, design for manufacturability from raw material to finished product (not just optimized for one step in the procurement or manufacturing process), simplicity and closer collaboration.
