Contract manufacturing
profound knowledge of synergies between production processes and technology. He is currently working with five start-ups, some of which he co-owns.
He is, for example, co-founder of Lung Healing
Technologies Inc, which is commercialising patents by the chief of thoracic surgery at Northwestern that monitor the CO2
and O2 in a chest drain. He
also co-founded Ignis, which has developed and evaluated a business plan with a local hospital and surgeon for generic knees and hips. For Dodd, there are many key components to the supply chain excellence that contract manufacturers in the medical device sector should consider. He places particular emphasis on analytics, believing that you cannot manage what you cannot measure.
Dodd compares the lack of operational excellence in the medical device industry to the high levels seen in the automotive industry.
“You learn about operational excellence in the car industry, for example, where margins are much smaller,” he adds. “Contract manufacturers often do car manufacturing, too, but they like medical devices because the margins are higher.” Dodd points out that the difference between the medical device industry and other sectors is the greater emphasis on efficiency in the high-volume car manufacturing sector, for instance, compared to many low-volume orders for medical devices.
“Inventory turns of two or three are pretty common in medical devices, but in other industries you would be out of business with that kind of stat.”
“Also, this industry has a higher regulatory burden, so there is a lot more paperwork,” Dodd continues. “The quality has to be good, but it is not built in through the supply chain as it is in the automotive industry. Everything comes down to inspection. Everything has to be measured from every angle, but in automotive the manufacturing process itself is measured, looking for when the line is going out of control.” By contrast, Dodd argues that in the medical device industry, the focus is often placed on the end product at the expense of the process required to create it. “In medical devices, there is a sense that people don’t care how you build it, only how it measures up at the end,” he says. “QA needs to be strict for something you put in the body, but that process is wasteful and there is no evidence that it produces higher quality.”
A keen eye on manufacturing Based in Illinois, Dodd has held numerous operational excellence positions with high-ranking medical device companies and has developed a
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“The criteria I use to judge operational excellence are 75% lean manufacturing and six sigma principles to instil agility, and 25% sales and operation planning to give a forward-looking dimension,” he remarks. “The supply chain must respond to the customer and lead times mean you need careful planning.”
Inventory turnover – or inventory turn – is a key metric for any improvement in the manufacturing cycle. It compares the number of units sold to the number of units on hand to give an indication of how well a company is managing inventory and generating sales from it. It is a vital component of effective supply chain management in many industries, but it is a measure by which the medical device sector often performs poorly. “Inventory turns of two or three are pretty common in medical devices, but in other industries you would be out of business with that kind of stat,” Dodd explains. “It represents how long an item sits in your inventory. What is done with medical devices could not be done with cars.” “A lot of inventory means a lot of problems,” he adds. “Inventory is a key metric, so is quality. But cost and margins are so good in the medical device sector – if you sell straight to a hospital the margin can be 80% and potentially 40% for contract manufacturers – that there is little incentive to change.” Despite the barriers to change, however, the industry is being dragged in the wake of best practices elsewhere and it seems that the dynamics of the supply chain are starting to change. Reducing inventory can help to reduce overhead costs and, therefore, improve profitability. That is a benefit that few would shun.
Introducing systems that provide a real-time and accurate overview of inventory is an essential starting point to create efficiencies in even the most complex supply chains. It enables more detailed
Medical Device Developments /
www.nsmedicaldevices.com
Jenson/
Shutterstock.com
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