The medical device market is expected to grow by almost $178 billion from 2023 to 2027 according to Technavio. Moreover, a Fortune Business Insights Analysis estimates the market to reach $799 billion by 2030. With such significant growth, manufacturing and supply chains must scale and mitigate risk to ensure supplies to customers and patients.
For the past few decades, the medical device industry’s manufacturing base has been spread around the world. However, the pandemic exposed the heightened risk associated with this strategy, so proactive companies have started to focus more on regional manufacturing. For example, large companies are starting to embrace the approach of producing goods in Asia for Asia, producing goods in Europe for Europe, and so on. This has led to growth in regional manufacturing in Mexico, Costa Rica, Puerto Rico, and U.S. medical device hubs like Minnesota to support North America’s markets. These manufacturing hubs will have to scale rapidly to support the region’s sales forecasts.
Scaling Manufacturing
One of the largest global challenges in recent years has been the labor shortage. Those with access to a high-skilled talent pool will be able to scale and meet medtech’s growing demands, leaving the rest to struggle to meet customer needs, let alone scale to meet projections. According to a study by Deloitte and The Manufacturing Institute, 2 million jobs could go unfilled in the sector by 2030. Such a staggering shortfall is prompting proactive companies to focus on building scale.
The same study by Deloitte and The Manufacturing Institute also revealed that 77% of manufacturers expect to experience ongoing difficulties attracting and retaining manufacturing employees. This statistic is not surprising, as the labor participation rate is still lower than it was before the pandemic. According to the Bureau of Labor Statistics, the rate is currently almost 1% below the pre-pandemic rate with 2 million less employees available. To succeed in the next decade and meet these aggressive growth targets, smart companies must stand above the crowd.
The standout companies are attracting employees with strong yet caring cultures, progressive training and mentoring programs, and clear opportunities for advancement. In addition—although counter intuitive—the most attractive organizations to workers have strong performance management programs and expect continuous improvement and advancement. For example, a medical products manufacturer struggled to meet customer demand following major changes (due to a merger and implementation of a new ERP system). The company’s new CEO surrounded himself with workers who could successfully fulfill their job functions rather than those who only appeared capable of doing their jobs. The chief executive also rolled out a performance management system with 90-day performance conversations accompanied by employee rating and ranking that was attached to performance-based pay. As the company rewarded their people for positive results, its bottom line improved as well.
Creative Strategies
Tried and true strategies to find and retain people are no longer sufficient. Creative strategies will be required to succeed for decades to come. According to CBS News, the U.S. population is rapidly approaching “peak 65”—younger baby boomers are expected this year to initiate the biggest wave of retirements in U.S. history. Gen X (a.k.a., the “middle child” generation) has far fewer people, but early retirement has been gaining steam among members of this cohort. With fewer people available, proactive companies must utilize creative strategies: convincing retirees to work part-time, hiring veterans, and training high school and/or community college students for manufacturing work. Hard and fast college degree requirements will fall by the wayside.
Utilizing ERP and Related Technologies
Proactive companies will need to upgrade to a modern enterprise resource planning (ERP) system and related technologies such as CRM (customer relationship management) and e-commerce systems. To automate repetitive tasks and better support ongoing operations, smart executives are upgrading their ERP system to use the latest technologies to support their teams. ERP systems will support the end-to-end order fulfillment process from taking customer orders, purchasing materials, and producing products to shipping and invoicing orders. Modern ERP systems provide enhanced visibility to order status throughout the order fulfillment cycle, thereby eliminating the need for significant manual intervention.
For example, a healthcare products manufacturer employed multiple people to track down an order status to satisfy concerned customers. A few months later, the manufacturer rolled out advanced planning capabilities in its ERP system. The decision was worthwhile—workers no longer had to run to the production floor and call shipping companies to track down orders; instead, the customer service representative could look up the order status in real time while speaking by phone to the customer, thereby providing improved service with fewer frustrated resources.
Automation and Advanced Technologies
In addition to upgrading their ERP, proactive companies are taking a leap forward in scaling their business by introducing automation and advanced technologies. Industrial robots are performing repetitive tasks on the floor and working around the clock. An equipment manufacturer, for instance, found a way to reduce the bottleneck in its production process from 13 hours to 20 minutes while simultaneously improving manufacturing quality. And more importantly, they reallocated three people to another bottleneck operation within the facility to better support revenue growth plans.
Artificial intelligence also is relieving humans of repetitive tasks while improving both quality and safety. Predictive maintenance can help companies best optimize resources by determining specific focus areas rather than adhering to typical preventative maintenance schedules. Predictive analytics helps identify topics that must be addressed, enabling companies to avoid reviewing reports and analyzing metrics to determine the best path forward. 3D printing is another advanced technology that allows manufacturers and distributors to print on demand instead of producing, storing, and transporting products for no reason as demand patterns change.
Advanced Processes
In addition to people and technology, smart companies are upgrading their business planning processes to better support profitable growth and scaling operations. SIOP (Sales Inventory Operations Planning) processes forecast customer demand and revenue growth by region, product line, and/or customer, and provides insights into the best ways to scale operations and most optimally fulfill those plans.
Case in point: a medical products manufacturer expected aggressive growth by re-launching its core product line. The firm utilized a SIOP process to better forecast sales for its top customer by distribution center and for its business by region and product line. Through its advanced planning and forecasting system, the company improved customer service and reallocated products by customer distribution center as needed to support last-minute client changes. This particular organization won supplier of the year for its number one customer for two consecutive years by eliminating stockouts and growing the business while minimizing inventory levels. Furthermore, this company reallocated production among its manufacturing facilities to optimize production schedules and mitigate risks, and it reduced logistics costs by 20% by optimizing freight and improving transportation planning efficiencies while supporting significant revenue growth. In addition, the firm was able to proactively work with suppliers, provide forecasts, and agree upon contracts and innovations required to support growth goals.
As medtech grows, the successful companies will scale and mitigate risks throughout their manufacturing operations and end-to-end supply chain. Proactive executives are focused on transitioning to a regional source of supply to mitigate heightened risks and working on talent strategies to stand above the crowd and meet customer demand. Smart companies are supporting their talent by upgrading their ERP systems, rolling out advanced technologies, and upgrading business processes.
Originally published on MPO on June 4, 2024