The supply chain shortages immediately caused by COVID have only gotten better for some components and some industries. In some cases components not of concern have gone out of stock. In other cases shortages continue. What to do?
- Consider alternative suppliers: More than half of our most recent survey respondents said they previously relied on a single source for 75% of their chip supply. All of them are now pursuing alternative sources.
- Evolve broker relationships: In the past, medtech manufacturers had little need for brokers. Now, nearly one-third of respondents said they have reached out to brokers as an alternate source of supply. Some companies have turned to brokers because they don’t have any other way to acquire the semiconductors they need for their products. Additionally, brokers can provide safeguards against counterfeits, which has become more of a challenge since our first survey.
- Increase inventory: In the past, medical device manufacturers usually didn’t stock a large chip inventory. For example, 13% of respondents said they did not have a chip inventory prior to the pandemic. That has since changed. More than 70% of respondents said they have recently increased their semiconductor inventory levels.
- Focus on agility: Building speed and flexibility into component substitutions—through planning, manufacturing, and regulatory processes—could make it easier for manufacturers to switch to alternate suppliers when needed. Many companies are revalidating components to increase sourcing options even though the process can be cumbersome.
- Use digitization to enhance supply chain visibility: There are typically multiple tiers between a medtech company and the chip manufacturers. Since our 2021 survey, most companies have increased their multi-tier visibility. Increased visibility can help medtech companies identify issues more quickly, which can mitigate risk. Digitization of the supply chain can provide visibility from the suppliers all the way to the customer and help enable a quicker response. Advanced analytics could enhance the ability to be more proactive in every step of the supply chain.
Where does this leave start-ups? Simultaneously better and worse off than an established company:
- Identify and purchase critical components early in the design process and potentially at risk
- Identify and engage your ECM early in the design process so they can help manage procurement early
- Consider designing in multiple SMD pad arrays for alternative components if space allows
- Make sure supply chain is a regular topic in program review meetings
The consensus seems to be that things should be back to normal in 2024 and metal prices are already coming down – fingers crossed!