Medtech companies’ focus on supply chain resiliency and mitigating supply chain risk has increased over the last few years as the pandemic triggered extended lead times, delays, and rising costs. Executives must now be able to pivot quickly to changing conditions, and they want to be in control of their ability to successfully serve customers. In reviewing options to meet these objectives, the critical importance of enterprise resource planning (ERP) and related manufacturing and supply chain technologies has risen to the top.
Taking Control of the Customer Experience
One way to take control of manufacturing and the supply chain as well as build resiliency into the customer experience is by focusing on expanding manufacturing and reshoring manufacturing closer to customers. Reshoring Initiative data show the combination of reshoring and foreign direct investment (FDI)-related job announcements last year reached record high levels—a trend that is expected to continue. As companies reshore, there is a significant emphasis on automation, robotics, 3D printing/additive manufacturing, and other supply chain technologies to reduce costs, minimize hard-to-find talent, increase quality, and keep abreast of customer requirements.
Nearshoring also remains popular for companies that want to improve customer performance by moving manufacturing closer to customers. Mexican exports, for example, rose 5.8% to $52.9 billion in May 2023, the second highest reading on record, according to Bloomberg. Mexico is also automating, digitizing, and employing advanced manufacturing methods. Case in point: Global automotive technology firm Luminar announced in April the build-out and ramp up of a new highly automated, high-volume manufacturing facility in Monterrey, Mexico. Moreover, Nuevo León Gov. Samuel García, said at the World Economic Forum in January that an “advanced manufacturing platform” would soon be launched in the state to focus on process digitization and automation.
Besides supporting reshoring and nearshoring initiatives, medtech firms also are interested in deploying advanced manufacturing techniques to augment their competitiveness. With skyrocketing inflation, manufacturers are paying more for materials, components, labor, and freight. In addition, the cost of capital has increased significantly, further decreasing margins, and limiting cash flow. Thus, manufacturers are searching for opportunities to increase efficiencies, automate repetitive processes, utilize robots, and embrace digitization as much as possible to decrease costs, increase margins, and better control customer pricing.
To grow their business, manufacturers are focusing on providing customers with a superior experience. In the current Amazon-impacted business environment, customers expect rapid deliveries, 24/7 service, and quick responsiveness—elements that once were considered forward-thinking and innovative but have now become essential. To stand out from the crowd, companies must go beyond these fundamentals and offer a differentiated or personalized customer experience. Thus, using a modern ERP system is essential to success because it will support these basic needs and augment them with such related technologies as customer relationship management, order fulfillment visibility, warehouse management system, transportation management system (TMS), e-commerce, advanced forecasting and planning, artificial intelligence, and predictive analytics.
A healthcare products manufacturer that distributed products throughout the United States wanted to improve their service levels, lead times, and inventory levels across its various facilities for customers. The manufacturer accomplished this goal by rolling out a vendor managed inventory system with suppliers and set aggressive scorecard metrics. The manufacturer used an ERP system to connect to its key customer’s demand and inventory data, and developed a forecasting and replenishment planning system. Hence, the manufacturer was able to establish an efficient system to maximize service levels for its customer while minimizing inventory levels and costs by utilizing business intelligence reporting to identify forecast exceptions and advanced planning functionality to proactively manage service levels. The software provided visibility into key customers’ distribution centers so the manufacturer could decide how to reallocate inventory to improve service while reducing inventory. Additionally, by integrating the replenishment orders to its customers’ locations with ERP and TMS systems, the manufacturer maximized multiple-stop truckloads and route in an optimal sequence to minimize freight costs.
Manufacturing and Supply Chain Technologies
There are numerous manufacturing and supply chain technologies that yield a substantial return on investment. 3D printing is providing a distinct advantage to manufacturers interested in providing quick prototypes to customers, and it is being used in several medical and industrial applications. According to G2 and Oxford Performance Materials, more than 75% of American patients with damaged skulls from disease or trauma received implants made by Oxford Performance Materials’ 3D printer. GlobalData predicts that customization, lower production costs, and quick turnarounds will drive the medical 3D printing market’s growth. Such benefits, along with the sector’s 23% compound annual growth rate (IndustryArc data), is prompting smart manufacturers to increasingly pursue clinical trials for 3D-printed products.
Augmented reality (AR), virtual reality (VR), and digital twins (a digital representation of an intended or real-world physical product, system or process) are some of the promising technologies in manufacturing and supply chain circles. They are particularly valuable in the current business environment as companies grapple with limited high-skilled resources, cost management concerns, and delivering a superior customer experience. AR/VR is used to train employees on ways to use and maintain equipment, about trials and simulations responsibilities, in collaborative product design, and in remote monitoring and factory audits. Digital twins can be used to evaluate “what if” scenarios to optimize the plant floor or data sets. An engineer-to-order manufacturer, for example, can utilize a digital twin to evaluate capacity with various configuration forecast models to stay ahead of customer requirements and result in a more efficient and responsive supply chain.
The Metaverse can bring together customers’ wants and needs. In essence, it can accelerate the SIOP (Sales Inventory Operations Planning) process. In a metaverse collaborative room, retailers and their suppliers (or any set of customers, consumers, and suppliers) can meet virtually to review sales forecasts, projected production plans, and possible supplier limitations that could affect manufacturing volume. They can also visualize an immersive supply chain network map, see where inventory is, identify issues, and model possible alternatives.
The internet of things (IoT) and artificial intelligence (AI) are transforming the supply chain as well. As ERP systems, machines, and vehicles capture data with IoT, AI will learn how to predict breakdowns and recommend predictive maintenance plans, making preventative plans obsolete. Forklifts and autonomous vehicles will capture many signals and provide alerts to prevent impending safety incidents, and advanced planning systems will utilize machine and operational performance data to predict run rates and provide insights on how to minimize usage.
Robots are bringing a new level of efficiency and repetitiveness to manufacturing. Industrial manufacturers are using welding robots to produce parts around the clock to minimize labor costs, quality issues, and injuries. Similarly, an aerospace manufacturer developed a robot that could produce on second and third shift with lights-out manufacturing a complex process to address a critical shop bottleneck. The aerospace firm quickly alleviated past due orders and got in front of its customer’s needs.
Manufacturers are also pursuing visibility across the supply chain so that customers can check status around-the-clock and supply chain partners can gain visibility and respond to changing conditions. Thus, digitizing information in the supply chain is a priority. This can range from simple concepts of barcoding/ RFID, lot tracing, and electronic data interchange to complex and collaborative topics such as customer portals, supply chain control towers, and port optimizers. Taken a step further, companies are investing heavily in blockchain to gain an immutable ledger of product and financial transactions across the supply chain.
The Bottom Line
Smart executives will leverage ERP systems as well as manufacturing and supply chain technologies to create a customer service edge. Equally important, they will automate, digitize, and turn data into insights to help their organizations become forward-thinking, resilient, efficient, cost effective, and predictable. Since only these uniquely positioned, innovative manufacturers that can scale up or down rapidly will be prepared for the change and volatility in the global supply chain, they will have the unique opportunity to leapfrog the competition, capture market share profitably, and be in the position to thrive for decades to come.
Lisa Anderson is founder and president of LMA Consulting Group Inc., a consulting firm specializing in manufacturing strategy and end-to-end supply chain transformation that maximizes the customer experience and enables profitable, scalable, dramatic business growth. She is president of the Inland Empire Chapter of APICS, the leading trade organization of supply chain management. Anderson recently released Future-Proofing Manufacturing and the Supply Chain Post COVID-19 as an e-book.
Originally published in MPO November/December issue.