Reducing Disruptions Through Risk Management

With economic factors continuing to progress, risk management and planning is becoming increasingly important when it comes to the global supply chain. How can you become better equipped to face supply chain uncertainties?

As 2022 begins and the third year of the COVID-19 pandemic continues, the effects on the global economy and supply chain are as intense as ever. For those of us in the medical device industry, we have been struggling with supply chain issues since the onset of the pandemic and are beginning to recognize the need for additional considerations. Prior to the pandemic, material resourcing decisions were largely based on lowest cost options and fastest manufacturing times. As the second year of the pandemic has illustrated, it has become critically important to understand the geographic risks and limitations of material suppliers. Additionally, understanding the risks and benefits of alternative sourcing to ensure a nimbler supply chain has also become a priority. 2021 saw an unprecedented increase in air freight costs as organizations attempt to prevent interruption of their manufacturing. As the cargo delays continue and shortages become more significant, medical device manufacturers must focus on how to limit the disruptions to their supply chain. The use of risk management tools and planning will play an important role in your organization’s ability to adjust course in the face of supply chain uncertainties.

The Resilient Supply Chain and Shortages Prevention Program (RSCSPP)

The U.S. Food and Drug Administration (FDA) introduced the RSCSPP with the intention of improving the U.S. domestic medical device supply chains by investing money and resources in preventive measures, identifying potential shortfalls of devices, and conducting ongoing surveillance and rapid interventions as needed. The FDA has also requested authority to require manufacturers to develop and share risk management plans and identify alternate suppliers and manufacturing. It is the intention of the RSCSPP to enhance the Center for Devices and Radiological Health’s (CDRH) capacity to enable rapid intervention to prevent and mitigate supply chain interruptions through:

• Proactive regulatory measures and partnerships with industry, health care providers, patients, and others.
• Development and application of state-of-the-art supply chain intelligence for predictive modeling.
• Early signal detection and continuous surveillance.
• Fostering a more resilient domestic supply chain through investments in preventive measures that help to avert shortages before they occur.

Current Supply Chain Considerations

While the FDA is working to address the immediate challenges with the goal of long-term preventive measures, current supply chain considerations should include a focus on identifying the vulnerabilities within your organizational supply chain and establishing mitigation strategies. Supply chain risk management is the process of taking strategic steps to identify, assess and mitigate the risk in your end-to-end supply chain. The use of risk management tools can help your organization establish resiliency. If the COVID-19 pandemic has showed us anything, it is that globalization has its drawbacks.

As we look for ways to enhance Supply Chain stability, the following considerations should be discussed:

• Creating a shorter and more localized supply chain.
• Optimization of Supplier Controls to include second source/back-up providers for critical materials and components.
• Incorporating alternate materials into device design in the event there are shortages of common materials.
• Ensuring broad and continuous communication with key stakeholders and other important parties, so in the event of a potential disruption awareness is consistent.

Risk Management in the Supply Chain

As we adjust to this new normal of an on-going and post-pandemic world filled with other contributing economic factors, focusing on risk management in your supply chain can reduce disruption and delays in the manufacturing process. Through the establishment of a robust supply chain risk management process, your organization can increase process efficiencies and reduce unnecessary and expensive interruptions. ISO 14971 applies risk management directly to medical devices, from design through commercialization. On the other hand, ISO 31000:2018 provides guidelines on managing risk faced by organizations and applies general principles that can assist your organization in identifying specific risks and creating strategies for effective mitigation. The use of these risk management tools can assist in creating a more robust understanding of how the supplier relationships and inventory are managed. The supplier relationship management process helps ensure reliable sourcing and satisfaction of material demand. Ideally, mitigating risks also ensures that the Supply Chain remains resilient, profitable, and stable. Considerations for how to ensure continuous flexibility for both temporary or ongoing changes to conditions should be procedural and able to be enacted whenever the situation demands.

Contact a Partner today to ensure agility within your organization to help establish stability across your Supply Chain.