Supply Chain Readiness for 2022: Re-Assessing and Rebuilding your Suppliers
In 2020, 85 percent of global supply chains experienced reduced operations and 6 percent shut down entirely.1 Companies reported losses of between 6 percent and 20 percent that may have caused up to $4 trillion in lost revenues.2 In addition, supply chain leaders faced more than their share of challenges in 2021 with port congestion, trade conflicts, and labor shortages. Optimizing supply chains and adopting digital transformation moving into 2022 is now an imperative.
If supply chain leaders are still seeking and managing suppliers within the context of a pre-COVID-19 world, however, they’re most likely behind. The COVID-19 pandemic may prove to have been the tipping point needed to encourage medical device companies to rethink engineering design, supply chain strategy, suppliers, risk, quality, and workforce. In 2022, supply chain leaders should be more than ready to leverage new digital transformation technologies so they strengthen their processes and innovate their way out of repeating last year’s supply chain woes.
Businesses need to be prepared for a continuation of rapid and major shifts that are forcing organizations to become more agile than ever before. Integrating and automating platforms and services will need to be the norm. The need to create, manage, and understand supplier data is paramount and will only grow in significance.
While it’s important to be agile, it’s equally important to understand how to manage risks properly and leverage experience and insights to make informed decisions that impact suppliers and the supply chain. With the right data and automation to improve operational efficiencies, companies can leverage the time and resources gained from these improvements and reallocate them to focus on developing a more resilient supply chain.
To accomplish this task, manufacturers and suppliers need to be integrated, both with access to the latest information, working toward a shared mission to deliver results, and stay ahead of competitors. The more mature a company’s supply chain and risk management processes are, the better the company fares when a disruption occurs. The development, management, and maturity of supplier relationships is critical in achieving the immediate needs of the business.
In 2020, there was some progress from manufacturers trying to improve their supplier relationships with 60 percent of companies anticipating supplier quality digital transformation projects in the next one to three years.3 In addition, 78 percent of companies stated they would focus on supplier visibility and performance monitoring as a top priority in their digital transformation journey. Only 22 percent, however, saw improving on-boarding as a priority. We have to ask ourselves: Were our suppliers really prepared and trained to work collaboratively with us during the pandemic?
In 2022, these priorities have changed. Raising the quality and resiliency of suppliers turned to operational fears in the latter half of 2021 with growing concerns of raw material shortages and workforce availability. Today’s top priority is supplier selection and rationalization.4 Although reasonable due to the situation, manufacturers have once again become reactive.
Too often manufacturers select suppliers solely based on cost and rate suppliers based on on-time delivery. While these metrics will always be key considerations, there are many other factors that will affect supplier relationships over the long term. Manufacturers need to analyze suppliers’ strengths and weaknesses, paying careful attention to the external environment, and factor in anything that could affect a company’s engagement with them over the long term. But for some companies with many suppliers, this can be a daunting task, especially if digital transformation is not available. Supplier quality significantly relies on having the right supplier relationships in place. It may be more beneficial for a business to nurture fewer, highly beneficial relationships in the supply chain than play the field. Today, having solid relationships offers more benefits than relying on supplier agreements.
So, what to do in 2022? Procurement’s first task in the new year should be to reassess and fully map their supply chain into the appropriate “new” quality and risk tiers. Many will find duplicate providers or those with a history as poor performers or too risky that are no longer needed. Others will discover their supply chain isn’t as diversified as they originally thought. CEOs and decision-makers will need to balance between what they did in the past and embracing new ideas and processes. Consumer behavior and customer mindsets have changed as well; therefore, supply chain leaders will have to collaborate with frontline and customer-facing teams to redesign their supply chains.
Re-onboarding suppliers with embedded risk management processes will be key, but more will need to be done. Companies should also consider adding a training program about how to deal with disruptions, establishing a quality rating system, creating new programs with collaboration among multiple departments and suppliers, and adopting technology to gain visibility and awareness throughout the supply chain. If performed correctly, all these steps will help organizations have a powerful lever for more agility, resilience, and quality in their supply chains.
As businesses address the shortcomings of 2021 going into 2022, it’s equally important to understand how to continually manage risks properly and leverage past experiences and insights to make informed decisions not just for now, but to help in the “new normal.” Companies need to shore up supplier quality and equip their workforce with the right digital technologies. The key aspects of supplier risk management, performance visibility, and collaboration are a must to take medical device manufacturers from reactive to proactive and predictive. That means smart organizations are not letting today’s crisis go to waste, but are seizing the insights gained and applying it to fix current issues or prepare for the next challenge.
So how can you ensure you’re leveraging learnings from the COVID-19 pandemic to future-proof your supply chain? Following are seven steps to follow to lay a strong foundation.
Step #1: Figure out your next step
Step #2: Re-establish your supplier criteria
Step #3: Conduct initial assessments
Step #4: Plan for audits and verifications
Step #5: Reboarding
Step #6: Mitigate deficiencies
Step #7: Continuously Improve
Step #1: Figure Out Your Next Step
Before you start analyzing your supply chain, you’ll need a clear game plan to tackle the “next normal.” The ﬁrst step is to understand what’s next for your organization. In an article published in McKinsey Quarterly titled, “The future is not what it used to be: Thoughts on the shape of the next normal,” McKinsey highlighted two critical points to consider from a supply chain perspective. First, “distance is back,” referring to more significant border restrictions on trade, higher preference for local sourcing, and possibly renewed resistance to globalization. The second point is how consumer behavior and sector attractiveness may have wholly altered industry structures.5
To navigate the new landscape, you’ll need to adopt a collaborative approach, looping in key leaders from across the organization—including frontline and consumer-facing teams—to help understand and clearly define supply side needs.
Step #2: Identify Old Suppliers to Re-Board and New Suppliers to On-Board
Once you have clear answers to the “What’s next?” question and what’s needed from the supply chain to get there, it is important to divide this list up into short-term and medium-term requirements.
The next step is to identify and prioritize suppliers to re-board. New suppliers may need to replace high-risk suppliers that demonstrated an inadequate crisis response. Keep in mind the re-boarding process is not only about performance indicators and metrics, but also about the effectiveness and ease of communication and collaborative effort with other key stakeholders.
Once your suppliers are grouped, information gathering, audit, and supplier veriﬁcation can be customized as per your speciﬁc business needs.
Step #3: Initial Assessment
When it comes to supplier assessment, having the right technology can go a long way in improving the process. Leveraging digital technologies can help automate the assessment process and make it seamless.
Supplier Interaction: Supplier interaction workflows define and execute re-boarding actions to help initiate and guide the overall process. Communication: Built-in email templates simplify supplier communications and supplier portals streamline collaboration on tasks such as deviations, supplier corrective action requests (SCARs), and audits.
Survey Response: With an intuitive survey response process, supplier readiness information is captured through customizable surveys. Phone calls and e-mail-based assessment processes won’t work because they’re not collaborative or visible across the organization. Capturing data in an integrated supplier management solution ensures data rolls up to key stakeholders across the organization. It should integrate with the rest of a QMS platform, where modules like CAPA or Change Management will come in handy.
Step #4: Audit and Verification
Once the assessment is accomplished, you’ll have a better understanding of which suppliers are ready to be re-boarded and which ones need to be replaced. But that isn’t enough.
Are the suppliers truly ready? Are they set in terms of the capacity, downstream supply network, and wellness of their people? What about regulatory or government restrictions? What about logistics and shipping?
This is why an audit is vital to answer all these questions and verify suppliers are up to your organization’s standard. Supplier readiness helps to accurately capture all this information through an auditing checklist tool that can be modiﬁed based on the risk levels of each supplier.
Step #5: Re-Boarding
After the audits are complete, suppliers that pass the verification processes can be re-boarded:
Supplier Profile: This is where all relevant information about suppliers should be kept, from supplier approval status to readiness and compliance scores including all communication that has taken place pre-crisis, crisis re-boarding activities, and any post-re-boarding activities—all in one location.
Supplier Portal and Documentation Management: Through a supplier portal, suppliers can easily receive any requests or tasks from the manufacturer including request for information, SCARs, and documentation requests (i.e., safety policy, insurance certiﬁcates, and return to work permits). Suppliers can keep track of the actions assigned to them and can respond to communications, including any audit ﬁndings, CAPA actions, change requests, etc., without a plethora of emails.
The key here is to think of this as a system of engagement rather than a system of record. This means that while the supplier portals serve as a single source of truth for all key supplier metrics and data, it is also designed for collaboration and teamwork.
Step #6: Deficiency Mitigation
It is paramount to have a system and process in place to track and enable ﬁxing any deﬁciencies in the system. Risk assessment needs to be included throughout the supplier readiness assessment process. The risk proﬁle of the supplier is initially captured during the on-boarding process and then again in the re-boarding process. The risk can be assessed for each ﬁnding discovered during the assessment and audit, with corrective or preventive actions (CAPA) initiated to mitigate the risk.
It is also essential for supply chain leaders to understand both the knowns and unknowns in their ecosystem. As enterprises return to the new normal, there may be several unexpected roadblocks that arise in the form of regulatory documentation, downstream supply chain challenges, or even ﬁnancial instabilities.
Step #7: Continuous Improvement
With the supplier list refreshed and properly updated, the key to long-term success is continuous improvement.
If the pandemic has taught us anything, it’s having a proactive approach is vital to adapting to the changing landscape. Technologies such as supplier management solutions help manage supply chains more efficiently by streamlining close collaboration between a company and its suppliers. More importantly, it enables a reactive approach to supply chain management by providing the data necessary to make smarter decisions and continuously improve processes.
Supply Chain Readiness Through Four Lenses
To drive a collaborative, automated, data-driven process for a supply chain and rebuild it, CEOs and supply chain leaders must reexamine their supply chain data through four broad lenses—location, supplier quality and resilience, people, and new ideas and processes—and keep a close eye on key supplier metrics.
Lens 1: Location—While a supplier may be ready, it is essential to consider location: city, state/province, country, and perhaps even an area within a city. It is essential to track this to keep in mind other factors driving your supply chain requirements. It could be a new company philosophy around buying local or even a need to identify suppliers in different geographies in case there is a concentration of critical supply processes in a single location.
Lens 2: Quality and Resilience—The second lens positions resilience as an essential parameter. It is crucial to look at suppliers—both old and new—in terms of quality and their ability to meet a firm’s quality excellence goals, manufacturing and service capacity, and, most importantly, ﬁnancial stability.
Lens 3: People—An often-overlooked aspect in supplier qualiﬁcation is the human factor. It is imperative to help suppliers think about their people in terms of safety and wellness. You will also have to focus on training and upskilling your own workforce and get them ready for the new normal where more automation may be applied.
Lens 4: New Ideas and Processes—The most resilient companies are reinventing and innovating for customers. They are launching new product lines, changing business models, and altering the way they work. More employees are remote, and your supplier readiness process must keep in mind all these emerging thoughts and ideas. It is critical to build a new kind of supply chain, one that is agile, flexible, and, at the same time, robust.
Companies will need to enlist technology as a driver—not just the enabler. Being digital used to be an ambition. Now it’s an imperative for survival.
“Diverse sourcing and digitization will be the key to building stronger, smarter supply chains and ensuring a lasting recovery.” –World Economic Forum6
Article source: Medical Product Sourcing