Long lead times remain a frustrating challenge for many orthopedic companies. Extended time to manufacture and deliver product means that customers, profits, plans and personnel are negatively impacted. One can debate the reasons for varying lead times—demand exceeds capacity, not enough people to run machines, etc.—but at the end of the day, people make things happen.
The lengths of lead times reflect decisions made by people and relationships forged between device companies and their suppliers. People and planning were dominant themes during James Kwan’s OMTEC 2019 session on ways to handle long lead times. Mr. Kwan is Vice President of Operations at Innovasis and Owner and Principal of OPM Consulting.
To validate his thoughts on lead times, Kwan executed a 30-person survey of 15 OEMs, 10 contract manufacturers and five other subjects, including private equity and venture capital professionals. The resonating survey responses indicated that smarter conversations lead to more efficient planning and better collaboration, which ultimately diminishes lead times.
“Demand is high,” Kwan said. “But capacity is out there. If you have a good relationship with your suppliers, they'll tell you when they have capacity opening up, and then you can start directing some of your volume there. Effective planning minimizes the capacity constraints. If you don't have good planning and you’re making all knee-jerk reactions, then you are going to run into trouble. In a true partnership, lead time challenges can be solved.”
As you work your way out of long lead time situations or seek to prevent them in the future, consider these reminders from Kwan.
Provide Transparent Forecasts
You’ve heard this many times: the more accurate the forecast you provide to key partners, the more visibility you’ll have for open capacity and the greater your chances of getting products in the hands of surgeons on time.
Kwan’s survey respondents noted that forecasting collaboration is a top area for improvement, as well as a top best practice for device companies and contract manufacturers.
While you may choose not to be transparent with all of your suppliers, it’s important to collaborate with the ones that make your high-volume products. Consider: What comes after the current PO? What products are you launching next year?
Improve Internal Communication
Of course, accurate forecasting means that you have solid lines of communication with colleagues inside your company.
Integrated planning is a best practice that can help you stay on timeline, Kwan said. Delays in R&D and regulatory processes need to be shared with operations and supply chain teams.
“I’ve been part of big companies. The left hand doesn’t always know what the right hand is doing,” he said. “The better leadership and communication exists in any organization so that everyone knows what is going on and what the priorities are, the more successful you’ll be at managing lead times.”
Take responsibility of your actions, and know how your decisions ultimately impact the rest of the chain. Kwan used the example of preparing to reward a PO to a supplier. You know for weeks that it’s coming. The contract is finalized. Now you need two weeks to have your senior executives sign the contract. That’s multiple weeks added to your lead time.
“You really need tight decision support systems,” Kwan said.
Choose Suppliers that Fit Your Needed Capability
Every company has a list of core competencies in which they excel. Kwan noted that device companies must understand their suppliers’ stellar capabilities, and implored contract manufacturers not to say yes to every request.
“Focus on what you are good at,” Kwan said. “Say, ‘You know what? We’d love to do that for you. We have some capability here, but it’s not in our wheelhouse.’ ”
If it’s not in your wheelhouse, he said, you can bet that there will be disappointment from a customer.
Similarly, Kwan said that suppliers should speak up when they notice that their device company customer recommends a mandate that the supplier can’t meet. If it’s not physically possible for you to hold tolerances with the manufacturing capabilities you have on site, don’t agree to them.
These conversations can be difficult, but they will control lead times.
Things happen. But to the best of your ability, honor your commitments or at least vocalize issues as soon as possible. As a contract manufacturer, if you say eight weeks, don’t wait until week eight to tell your customer that it’s going to be 10 weeks, Kwan said. Device companies must also honor their volume commitments.
“My perspective is to be honest about your capabilities and lead times if you are a contract manufacturer,” Kwan said. “Do a thorough PO review. When we send out our RFQ and the supplier doesn’t ask us questions, I get highly suspicious. Do you even know what we want? If they put it on the machine one or two weeks later, and then call us with questions on the print and tolerance, it’s too late. That conversation should have been had early on. Good contract reviews solve problems early.”
All of these recommendations are basic tenets of good relationships, but Kwan maintains that lead times can be controlled through true partnership, including strong communication and planning, between device companies and suppliers. (More from Kwan on process improvement approaches can be gleaned from his presentation.)
One of Kwan’s last comments was a lesson in how companies can grow together.
“When I was at a previous company, we were growing at a 25% compounded rate. With our key suppliers we talked about adding machines, we talked about expansions—everything was coordinated and aligned,” Kwan said. “As we were growing, we knew that volume was going to this particular supplier. If you can do that, it makes a big difference.”
Hal Conick is an ORTHOWORLD® Contributor.