In terms of high-value goods, it doesn’t get much more precious than the drugs and devices that support human health.
From my seat on the board of the National Association of Manufacturers (NAM), I’ve heard leaders from the health sector emphasize the greater mission behind everything they do: when shaping every strategy, including decisions around their supply chain, these manufacturers keep patient outcomes as their North Star. After all, a shortage of stitches due to a factory shutdown or a spoiled load of medicines due to a faulty refrigerated truck would have tangible, and potentially tragic, costs.
Against this high-stakes backdrop, the industry is in the midst of a supply chain inflection point. The pandemic rallied the industry like never before, with companies like Pfizer re-engineering their entire manufacturing and shipping process to 10x their dosage capacity, practically overnight. It was nothing less than a modern manufacturing feat.
On the other hand, the pandemic also shed a harsh light on vulnerabilities that exist across health supply chains, from manufacturing all the way to delivery. Enlightened (and battle-hardened) manufacturers are now treating major disruptions as commonplace, and preparing accordingly with a focus on proactive resilience.
Perhaps the best way to mitigate major disruption is through digital transformation. Without data and digital technologies — for example, smart manufacturing, Internet of Things (IoT) assets in a factory, tracking and visibility technology, temperature control technology, and more — the successes of the pandemic would never have been possible.
Medical manufacturers know this, and digital transformation is currently a major focus for the industry. The leaders I’ve spoken with are implementing various updates to their systems and processes, including the (measured) adoption of artificial intelligence (AI).
Where are these manufacturers directing their digital transformation efforts? Here are just a few primary focus areas.
First and foremost, the industry is using technology to increase resilience, leveraging comprehensive, high-quality data and real-time visibility to optimize day-to-day operations and assess various risks.
For example, leadership at a leading medical device and pharma manufacturer recently identified and mitigated a potentially huge risk to the company and to the people who rely on their products. The company realized that it manufactures 70% of all the medical stitches in the entire world in a single plant. If that plant had gone down, surgeries worldwide would have ground to a halt within twelve weeks. Despite the cost, the company put patient outcomes first and rushed to build a twin plant — and thereby build resilience into its supply chain.
In terms of AI, the industry is optimistic about it — and, in fact, has been engaging with it since long before the recent explosion in generative AI. From drug discovery in the lab to smart machines in the factory, manufacturers have used AI and machine learning for years in the pursuit of safer conditions and higher-quality products. Today, leaders are focused on ensuring the narrative and understanding around manufacturing AI is clear: these capabilities are meant to enhance human skills, not take away blue-collar jobs. Trust and respect among their workforce are paramount.
AI can also be used to help these leaders gain a better handle on their supply base. Every company knows its tier-one suppliers, but gaining an understanding of tiers two, three, and beyond remains a challenge. Being more digitally driven in this focus area can drive significant impacts on supplier network transparency, choice, and resilience. And because AI can analyze vast sums of data instantaneously, including information about suppliers, these technologies will serve as a powerful accelerant in this effort.
Beyond just mapping a supplier network, digitization can also help companies realize tremendous benefits from the data that lives within that network. Technology can never replace strong human relationships, but it can strengthen them by providing all supply chain stakeholders with a ‘single source of the truth’ to guide decision-making or dispute resolution.
As digitization increases in this industry, expect trusted data sharing to increase, as well.
I have thoroughly enjoyed spending time with medical device manufacturers, pharmaceutical giants, and other health industry leaders, learning about the challenges they face and the solutions they’re pursuing. I would only offer two pieces of advice for their continued focus: Digitize for decisions, not just for analytics. And don’t forget the proven practices that have gotten you this far.
First, while data and analytics are fantastic, analytics aren’t solving any problems if they aren’t driving decision-making. Here’s an example from the pandemic: When ports were shutting down around the world, the companies that had actionable data and analytics were much more likely to get their goods on the last ship or the last plane out of town. Data matters, but it’s how you harness it and engage that really counts — to inform smart decisions and capture valuable opportunities.
Second, American manufacturing has been a powerhouse since long before the computer came on the scene. It has a long history of focusing on continuous improvement principles, such as Lean Six Sigma. During their pursuit of digitization, health industry leaders should not stray away from these tried-and-true techniques. We know that one algorithm or one solution is not going to solve any problem entirely; companies need good people, good processes, and good technology, all coming together to drive the best outcomes.
By continuing to follow their proven guideposts — and putting patient outcomes first — manufacturers can realize greater resilience and long-lasting gains in their digital transformation.
