As healthcare systems across the world battle the COVID-19 pandemic, a clear highlight has been the need for a more agile and efficient supply chain in healthcare and allied industries. And, the automotive industry, with one of the most complex supply chains across industries, could hold some crucial lessons for the healthcare sector. Even before, taking a cue from this industry, the healthcare sector adopted the idea of economies of scale to lower the cost of care. So, Birender Siwach, Head Purchasing, Continental Automotive India shares a few insights from his experience in the automotive industry which could hold true for the healthcare sector as well as it strives to fortify its supply chain to withstand disruptions and crises in future, in an interaction with Lakshmipriya Nair
Drawing from your experience from the automotive industry, what are the three most important steps that companies should consider to smoothen and de-risk their supply chain, regardless of the industry they are in?
The automotive supply chain is considered as one of the most robust supply chains across industries. It is a fast-evolving, lean, and efficient model that has seen continuous improvement over decades, covering various stakeholders. Though the supply chain of the automotive industry is remarkably different from other sectors, there are strategies and solutions which other industries can learn from it such as:
Automation: The automotive industry is much ahead in automation and has reaped huge benefits due to this. Drawing from this, companies should adopt at least a significant degree of automation to reduce physical labour or even processes. An automated supply chain system helps in attaining time advantage to a great extent while reducing the operational costs and improve the quality of outcomes.
Agility: Supply chain agility is how fast our supply chain can respond to changing customer demands, changing market or business environments, and changes in the environment itself. Over the years, the automotive industry has adopted agility to a great extent to manage its tight-window schedules. Much like the automotive industry, many industries run on tight window schedules. Having agile systems in place simplifies the processes and helps manage demands.
How has digitalisation and Industry 4.0 made it possible to create value chains that lessen waste and tackle disruptions?
Industry 4.0 positively impacts the three pillars of the concept of sustainability (economic, environmental, and social), also known as the Triple Bottom Line. To give you an example of one of the initiatives that we have taken at Continental’s Bangalore Plant, as part of our sustainability initiatives, 60 per cent of the product packaging derived from the Bangalore plant can be reclaimed. This has helped the plant to recycle 1.19 of 1.28 tons of waste generated in 2018.
Other than this, digitalisation and Industry 4.0 has also led us to agility that enables us to manage disruptions and risks. Agility in supply chains cannot be brought without adopting a collaborative approach with our global suppliers and service providers, and this is precisely what we have been doing. The basis for successful cooperation between business partners is communication. Information sharing, which needs to be automated to the greatest extent possible, is as essential as having the designated key contacts available when needed. Adopting these practices allows Continental to address any problems to the responsible contact whenever necessary quickly. Continental decided to use the Supply on Business Directory as a sustainable data source for key contacts to our suppliers to provide and request group-oriented information. We also work through Electronic Data Interchange, Advanced Shipping Notification, and our Transport Order Management Systems tool to bring in agility and visibility in our supply chains.
What can the healthcare sector learn from the automotive industry in terms of supply chain management? Are there any parallels between the automotive supply chain and the healthcare supply chain?
The automotive supply chain is complex and different from the other industries, primarily given the number of stakeholders involved, the new disruptive trends, availability of raw materials that require global coordination, and timelines. The healthcare sector has to overcome many challenges to establish itself as a market leader with a great supply chain management system. The sector can take a lot of inspiration from the automobile industry to improve its processes. Focusing on becoming a lean industry would result in huge profit and process improvements. To survive in this fast-changing complex business environment, upskilling of the team members through online learning modules drive business process excellence in the supply chain. Other than this, there are several strategies and technology solutions that the healthcare industry can adopt for the smooth functioning of processes and managing the supply chain.
Lean SCM: Relying on a single supply-chain process for products with varied characteristics creates inefficiencies. Much like other industries, a lean supply chain in healthcare can segment the product base by product characteristics based on products and customer requirements to develop a transportation plan that reflects current market realities. The automotive industry has already implemented lean SCM and has achieved up to 80 per cent of its operational target by adopting this model.
Local supply chain: Localised supply chains in the healthcare industry can benefit it in many ways: flexibility, greater control, cost reduction, and can also help in generating more revenue. The use of third-party logistic partners can also help optimise the supply chain.
Demand and inventory management: Raw materials account for one of the most significant expenses in the healthcare sector. This requires a lean, agile inventory management system that ensures the required material is available at the shortest possible notice, without wasting any resources. The use of ERP systems, integrated across countries or regions, would help retrieve information on the press of a button. This also helps in the complete integration of demand management starting from the source of the demand, considering required stakeholders, and triggers an automatic discharge of orders through to the downward chain. Any change in requirements at hospitals can reflect the entire chain immediately, ensuring accurate maintenance of lead times, BOM accuracy, delivery condition allow the manufacturer to respond to demand change in a short time with precise information.
Any other crucial elements that the healthcare supply chain must integrate to optimise its potential?
One of the things that come to mind is collaboration. Coming from an automotive background, I have witnessed how collaboration with peer companies has helped in bringing a lot of technologies to reality. Similarly, cross-company collaboration processes can provide the healthcare industry with an upper hand on technology utilisation. Currently, the healthcare sector lags in utilising IT and new technologies in automation including the office works and inventory monitoring.
What are the common mistakes that occur in supply chain management but can cause huge adverse impacts? How can they be mitigated?
Lack of transparency: Transparency in the supply chain helps in managing the complex, global supply chains. It provides end to end information to the partners and stakeholders and reduces business risks. The lack of transparency disrupts supply chains, especially during a crisis. The best way to address this is by automating the information sharing processes as much as possible.
Ignoring supply chain data: Big data is essential at every stage of business. From marketing analytics to inventory quantities to profit margins, all information is vital. However, supply chain data is sometimes ignored as insignificant. Companies must make sure that they are utilizing supply chain data appropriately to make wiser business decisions.
No-risk management planning: Pre-planning can help in managing the supply chain disruptions. Having a risk plan ready in advance can help in running the business smoothly.
Too many partners: To find out the right balance is important. Having too many contractors, too many suppliers, too many delivery companies introduce more complexities than the reduction of risk.
Any other message for the healthcare sector?
In my opinion, the healthcare industries do not have much complexity or tier stages before the products reach the consumer. Hence, it would be easier to improve overall supply chain efficiencies. But the bottom line is, the focus should be to integrate and automate the complete planning process, right from consumer demand to the raw material supplier, where the information can be conveyed back and forth with full transparency and higher speed.