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Digital transformation: A tipping point for medical device manufacturers

After a report from SYSPRO detailed business resilience during the COVID-19 pandemic, and highlighted the need for digital transformation, Roger Landman, head of product management, spoke to Med-Tech Innovation News to highlight how it could help medical device manufacturers.

First of all, give us a brief overview of your report. What should medical device manufacturers take from it?

SYSPRO polled manufacturers and distributors to understand how they modified their business processes to address the changes brought on by COVID-19. The majority were struggling due to the pandemic. For example:

On the other side of the coin, two-third of businesses said that they could ultimately operate effectively based upon digital initiatives that they had undertaken. 

There are a couple of significant points that the medical device manufacturers should consider:

1) Competition is now not only manufacturing plant against manufacturing plant, but supply chain against supply chain. Those organisations that went offshore to manufacture at a lower cost but did not consider their supply chain were left behind. Many manufacturers are now looking at alternative sourcing strategies including a dual supply. There is a caveat for the medical devices industry, because certain components are very specialised and there may be only one or two suppliers globally. Supply standards agreements should be put in place to protect the supply.

2) Companies that had already some sort of digital initiative in place success were much more successful weathering the pandemic than those who did not, underscoring the importance of digitalisation.

What kind of digital foundation do medical device manufacturers need in place to reap the rewards of new technologies?

ERP is the natural digital foundation, provided that it can integrate all of the data sources that the organisation requires to manage the business processes, and a modern ERP already offers all of the key modules required to do so.  

Note, ERP needs to be able to collect all of the data and use some form of analytics to interrogate and develop management information for the organisation. It must also have the capacity and ability to scale up data collection so the business can keep up-to-date with the latest trends in the industry. This will require careful design and planning during implementation. 

There has been a trend for some time to a more digitised set-up in the supply chain, has that been accelerated due to the pandemic?

Yes, it has, but it had already begun long before the pandemic hit.

Digitisation simply means making all of the information digital, but the biggest benefit lies in processing this data to inform and facilitate improvements to business processes. The more information and insights that you have about your supply chain, the better you can manage your organisation.  

I think the crucial issue here is that those with a digitised supply chain can leverage the visibility that they have of their supply chain due to it being digitised and turn this into a competitive advantage. The pandemic simply highlighted the necessity of the digitisation and consequently has driven more and more businesses to investigate and implement digitisation strategies.

How can firms gain increased agility and efficiency as a result of digitisation?

To help understand the question, we need to agree on the definitions - 

Agility is your willingness and ability to change. 

Efficiency is the reduction in the amount of wasted resources are used to produce a given number of goods or services (output). Economic efficiency results from the optimisation of resource-use to best serve an economy.

With this in mind, digitalisation and analytics support the ability to change because it makes relevant information available in real time to support rapid decisions. The willingness to change is the real problem here. That’s not really something digitalisation addresses — it’s a leadership issue.

Efficiency is far more obvious. The digitisation of critical information, especially for planning, enables far more accurate and timely information. The more accurate the plan and the information available about plant capacity, the later the organisation can release raw materials to complete the plan.  

Overproduction leads to additional waste and hides the need for improvement. It occurs when production exceeds customer requirements, which leads to high levels of inventory which, as you will see, hides many of the problem-areas within your organisation. The goal, therefore, should be to only make what is required when it is required. Digitalisation paired with analytics can provide the information and insight required to make the right decisions to meet demand without overshooting it.

How much investment is required from the sector, and individual firms, to bring themselves up to scratch in this area?

This is a very controversial topic. Some organisations will spend a huge amount of money and digitise every potential source of data to ensure that they have it in case they need it. Arguably, this falls into the category of waste of “excessive inventory.” The opposing side of the spectrum is the organisations that are content with what they have.

I lean towards the situation of “just enough.” Rather than follow the market blindly and spend huge amounts of money on information that is not business critical, I advocate digitisation of the key areas of the business whose failure would cause significant problems and losses.  

Anything else you’d like to add?

Digital transformation can be a very expensive exercise. Plan your digital strategy carefully and focus on areas of the business that will make the most difference. The implementation should occur in phases: pick one area, implement and ensure that it is delivering the expected outcome.

Start simple and small and focus on the implementation. Once the organisation sees success, allow the initiatives to grow.

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