Supply Chain Challenges in Medical Device Manufacturing

Dive deep into the complex world of medical device supply chains with supply chain executive Simon Hinds. This comprehensive episode of the OnTrack Podcast explores the unique challenges of bringing life sciences products from development to market, including regulatory compliance, global sourcing strategies, and risk management in an increasingly complex geopolitical landscape.

From tier-one to tier-three supplier relationships to the critical importance of traceability in medical manufacturing, Simon shares real-world insights on how companies navigate everything from tariff risks to pandemic-induced disruptions. Learn about the stark differences between pharmaceutical supply chains and other industries like automotive and consumer electronics, and discover why medical device companies face uniquely high barriers to entry when implementing global assembly strategies.

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More Resources:

• Read Simon's Content on the Altium Blog
• Connect with Simon on LinkedIn

Transcript:

Zach Peterson

Hello everyone. Welcome to the Altium On Track podcast. I'm your host, Zach Peterson. Today we're talking with supply chain executive, Simon Hines. You may recognize the name Simon Hines as a frequent contributor to the Altium 365 blog and the Altium blog. So I'm very happy to have Simon here today. Simon, thank you so much for joining us.

Simon Hinds 

Thank you, Zach. Thank you for the opportunity.

Zach Peterson 

Yeah, absolutely. So I've, as people who have been listening for quite a while know, I've been trying to diversify the guest base quite a bit. And so you are the first supply chain executive we've had on the podcast. So I'm very interested to talk to you today. And what I wanted to do first was to maybe if you could have you tell us about your background.

Simon Hinds 

Thank you, Zach. So my name is Simon. I'm actually based in Australia. You wouldn't be able to tell that from my accent, but that's probably a reflection of the supply chain in general. is a globalized industry or discipline. I started my career 20 plus years ago and I've mainly spent my career in life sciences. I've worked for a number of companies, but started on the operations side and then transitioned.

relatively quickly into supply chain. Roles that I've had in supply chain have gone from supply chain IT, kind of in a nascent time when we started integrating beyond kind of insular programs of like having stuff in-house and you're integrating external suppliers and customers into that system. So I was fortunate to be part of that program for an organization for a number of years. And then moving into

operational supply chain. So either on the customer side or the supply side and then just roles of increasing responsibility. I had the opportunity through supply chain and life science to emigrate to Australia from the UK. So I was in the UK doing work globally and then moved out to Australia and started having more of an Asia focus being in this part of the world. And I also then started transitioning more into

strategy and transformation type roles, so taking on some more seniority in supply chain. And again, at a time when the role and importance of supply chain was growing year on year. I then left Life Science as a dedicated industry and moved into management consulting for approximately five years. That gave me the opportunity to expand my career aperture where I was just working and supporting

many different industries, but always with a supply chain or operations lens. That also coincided during the pandemic. So during that period of time kind of intersected my time in consulting, which on one hand can be quite distracting, but on another hand, being a supply chain professional who knows a lot about life sciences and in particular vaccines became quite a valuable position to be in. So

Simon Hinds 

as well as doing some work in that area, also allowed some advisory work to clients who aren't necessarily in life sciences, but needing to understand how vaccine supply chains, and how that would intersect with their supply chains and what lessons they could learn. After my kind of sojourn and consulting, I then returned back to life science in a senior role based here in Australia.

continuing to support the supply of life-saving medicines to patients who need it around the world.

Zach Peterson 

Okay, that is very interesting, especially since you found your way over to Australia and now being a little geographically closer to Asia, I'm sure it's quite interesting overseeing sourcing for a lot of these products. Maybe if you could tell us about some of the processes that are needed to bring life sciences products and I guess also medical products into the market.

Simon Hinds 

Sure, and I'll probably frame this that what I don't work in is research and development. So in life sciences and medical devices, that's an extremely long and elongated processes. There's a lot of regulations, there's clinical trials, there's a lot of stage gates to go through. I probably more focus on when you're at what we would call phase three and you're ready to commercialize. So you've got a product, you know it works, it's past all of the...

quite the rigorous and necessary stage gates to say, right, now we're ready to commercialize this product. Often what happens at this point is we're going from a level of scaling. So you're going from something that's being done either in a lab or in a very small cohort of people to saying, now we need to launch market by market, region by region and really scale.

And this presents a significant challenge, think, particularly in life sciences, because you've got to maintain that high quality while acting at a really quick pace to kind of launch, know, time really matters, particularly when you've got patent expiries in the life science industry and medical devices. So it's very much a coordination and a collaboration between your commercial entities, your manufacturing entities and your

or supply chain entities to make sure that all of these things are coming together at once. The main process that you're concerned about is when is it going to get approved? Because from day one of approval in that market, the clock is ticking, you want to have product on shelf available for patients or consumers literally that day or the next day. if we think of the concertina effect that's happening behind that, so...

If it's a veil, if it's approved to be used in the market on that day, well, you needed to have landed, you know, you needed to be on shelf the day before or ready to go on shelf. That means it needs to have landed in the country at some time before it needs to have passed through customs, et cetera, et cetera, et cetera. So there's an incredible amount of project management that goes on and bringing together all of those different disciplines to know what needs to be true so that on day one.

Simon Hinds 

It's available for somebody to purchase, to get it dispensed or whatever it may be. If we think then from a, yep, of course.

Zach Peterson

If I could just jump in for a second, you're talking about just one individual market here, right? There could be 10 or 20 or 30 markets individually that you are trying to get into.

Simon Hinds 

Yes.

Simon Hinds 

Exactly right. often that there is a tendency to have a lead and lead market often that will be the United States. There's a load of reasons for that. Maybe it's more innovative approach. It's investments that happen. But we also have what's called mutual recognition. So, to your point about 20 markets going live in one day, the best example we could give is the European Union.

You often, so you're allowed parallel importation in the European Union. So what that means is once a drug's approved in one place, you're actually allowed to parallel import it into multiple. So effectively, you're getting 27 countries approved in one day. Now, you may decide to how you're going to supply is going to be, you know, targeting some of the bigger markets and assuming there'll be some distribution. But yeah, they often it's the scaling effect is significant. You start with one market and then a lot of them can come along very, very quickly.

So that level of complexity, it's almost like adding to the power of two or to the power of three degree of complexity. might have these, what seems relatively simple steps to do on a functional basis, but now you've got to scale it very, very quickly and coordinate it across the world. And the best recent example I could give of it is the COVID vaccines. And really the complexity from a supply side of not only having to develop that,

knowing that once one approved, everybody approved and making sure you had these very temperature sensitive, time sensitive and health sensitive medicines available and everybody wants them immediately all at the same time is an incredible supply chain and sourcing challenge.

Zach Peterson 

Yeah, it sounds like it, mean especially when it's related to a global phenomenon that is keeping people stuck at home and I'm sure they're not very happy about it as well.

Simon Hinds

Indeed, that's part of the challenge. I think often we will reference COVID, but that is a one in 100 year event. If I just think of the normal challenges that we come with launching products, it's often the, you've got the complexity of how do I get it into the market, but then you've got a procurement and sourcing challenge of how do I go from one market and I'll use some made up numbers, which might be 10 units to knowing that within three months, I'll have 30 markets and now I'm at thousand units.

So how do I manage my sourcing to make sure I've got a supplier who can not just supply that 10 units, but can go to ramp to a thousand units of a critical part of a critical component over a timeline, which really is also controlled a little bit by regulations. Like you're waiting on a third party, you're waiting on somebody that you can inform and you can educate, but ultimately has decision rights that you don't have.

and you're waiting for that green light and then you have to go very, very fast. So you also need a supply chain behind you that can be as robust and as agile as that, is kind of, it's like the COVID situation, but not at the same scale, but it's still got to have that same discipline, that same muscle of being able to scale really quickly at really short notice.

Zach Peterson

Yeah, I'm not familiar with how that would arise with precursor chemicals, for example, for drugs or medicines or anything like that. But with the electronic side of it, for example, with a medical device, you can only procure so many places that are going to be able to deliver at that quantity very quickly. Would that be correct?

Simon Hinds

Yeah, it's exactly right. And it's where the forecasting element comes into it. So I'm asking for you for a component today of X, but I know as I don't know what I'm going to predict, it's going to be a quantity of Y over this period of time. And then I've got some sensitivity analysis that's saying, no, if everything goes really well, you know, it could actually be at this level. If everything, you know, kind of our median cases at this level and our worst cases. So you're talking about having suppliers

of critical parts, pieces, whether it's chemicals, chips, components that need to be partners with you to be able to deal with scenario one, scenario two, scenario three. And the level of collaboration that's required in those things is extremely high because you've got a best case scenario where everybody's celebrating and you've launched a fantastic product which has done massive units. But you've also got a scenario where

you know, there might be a variable you weren't aware of and you're coming in at a lower volume. So how do you set up supply chains to make sure that they can be resilient enough to cope with all three scenarios, best case, median case, and lowercase? And on top of that, the other complexity is what are you going to communicate to your financial stakeholders, whether that's your shareholders, whether that's your board? How do you communicate these different scenarios so that you're not over committing or under committing on what the potential of your product is going to be?

Zach Peterson 

So speaking on overcommitting or undercommitting, let's say for a PCB manufactured in China. Maybe the PCB for a medical device is going to be manufactured in China. You're going to ship it to an assembler somewhere, and then the actual device and whatever other chemicals or materials go with it are going to end up with the end customer somewhere in Europe. In that scenario, our

Simon Hinds 

Mm-hmm.

Zach Peterson 

the suppliers of those chips and materials and components and PCBs maybe coming from Southeast Asia willing to be agile and kind of grow with you as your volume grows? Or are they all looking for, you know, hard and fast, we need to get, you know, this much volume? Or do they set up like price breaks to where you can, you know, get certain levels of commitment depending on the volume that you actually end up seeing once you get into market?

Simon Hinds 

Yeah, and the terrible answer to that, Zach, is it depends. really does depend. And the reason it depends, it can be situationally dependent. It's also dependent on that supplier-customer relationship. So in a scenario where you are, you know, what is your proportion of their business? If you're, you know, less than a percent or, you know, it's, yes, it's some

Zach Peterson 

Of course, that's the most common engineering answer you'll ever give, right?

Simon Hinds 

growth that they've got, but you're a new customer and you're just adding a certain amount. Quite often you will be at a quite hard price break. It'll be, need a firm commitment. That's what I'll deliver to you. If you give me more, then I'll give you a different price. But ultimately we're going to work on a make to order type arrangement. You place the order, we will deliver it to 90 days, 100 days, whatever it may be. And you can negotiate with us on volume, but ultimately that's what the relationship is.

At the other end of that continuum, you've got a very collaborative, where it's probably a much more symbiotic relationship. And it may be that you're kind of getting into the 30, 40 % of their business or their volume growth. And in that relationship, it can sometimes be a, let's do a make to stock type things. And you're talking about kind of postponement type strategies where we'll make this amount to stock. So we're holding 30 days postponed.

and will agree a kind of obsolescence amount. And what we're doing is we're working really closely, almost on a daily basis on how are we seeing those sales? What are we seeing that pull through any updated information so that that 30 days of postponement inventory is quite dynamic? And it goes from being 100 units to being 200 units to being 300 units. So you're creating a buffer where that supplier is so critical to your supply chain, they're really integrated into it. But again,

Often, and if we use PCBs or the component industry, it's very difficult to be in that situation because of the nature of that industry, the nature of those supply chains, or the nature of the input materials that are required. So you're sitting at either a very hard price break and it's going to be make to order and it is nirvana of being make to stock. it's how do you move your suppliers into that?

if not necessarily make to stock, it's like, do we get it a little bit more fungible than just being a price break? Often it does come with that collaboration. So how much information and how easy is that to share? Now, the balance that you've got with that, if you're in a new product, innovative type space, you're sharing quite confidential information that's quite critical to your business, and it's kind of leaving your universe of who's critical to that.

Simon Hinds 

These are the challenges with every supply chain and every kind of launch we've got to be thinking about. It's as true, it's certainly true in the life science industry where you can quite often be bringing really innovative medicines or innovative devices to market. I'm sure, certainly it's as true as well in the electronics industry where you're bringing innovation of some sort and competitive advantage and you need to use the same supplier that your competitors are using. So you've got to be quite...

conscious of how you're going to manage that. I think the simplest piece on the reality is that growth is good. Southeast Asia is a growth engine for the world's economy. And the one thing they want to be doing, all suppliers, is supplying more and more more. It's kind of they're predicated on growth. So I think it's also this kind of understanding that there is a big desire to grow as well.

Zach Peterson

Well, speaking of importing things from Southeast Asia, of course, talking to a supply chain executive, wouldn't be appropriate to talk to you if we didn't bring up the T word that everyone is talking about, which is, of course, tariffs, because I think we're all having to deal with it and getting whipsawed back and forth about what those tariffs are actually going to be, especially if you're a company selling into the US market, because I'm sure that impacts

not only the financial strategy, but then the sourcing strategy. And one thing that I have found talking to people from different industries is that it's kind of a whack-a-mole. They hear that the tariffs are gonna be one thing on these products coming from one country, so they try to find a source in a different country. And then they're waiting for a trade deal and they're trying to set up another backup source in another country.

that's just with, you know, primarily electronics. it the same kind of approach with, with life sciences?

Simon Hinds

Absolutely, I think is the easiest answer. And I think the Whack-a-Mole analogy is a great one. I think the piece to elevate above it and as a supply chain executive, this has been a constant narrative. And I think the position that myself and many of my peers have taken is probably the most optimal and it's rising it above it a little bit. And kind of the phrasing I give to people getting quite agitated is believe

Zach Peterson

Uh-uh.

Simon Hinds 

and nothing of what you read and only half of what you see. And whereas it's slightly flippant, it's also meant about let's actually act on the realities of what we know today because there is so much information and so much what-if scenarios. Where it comes down from a supply chain, I think the fundamental truth still remains that you need to intimately understand your supply chain at a tier one supplier, tier two supplier, and I think it's now moving down to a tier three supplier.

So what do we mean by that? So tier one is like, who are you directly buying off today? You should know all of those people. You should know which countries they're in. I think that's a pretty obvious thing that you're doing because you're paying invoices. The tier two suppliers, who are they getting them off? Quite often, and particularly in component industries and life science industries, there's a little bit of assembly that can be going as well. You're buying a unit, but that's made up of constituent parts. So there's a bit of how close, what are the critical?

components in your supply chain and do you know what those tier two suppliers are? And again, this comes back to that point of collaboration with key suppliers and how close are you to them? How much are they sharing that information? The tier three suppliers are probably becoming even more critical now. This is often the input materials, the raw materials, whether that's rare earth metals, whether that's active pharmaceutical ingredients and sometimes the precursor chemicals that you've mentioned before, where are they coming from?

Because at each level of that, you're trying to understand what is the risk? What is the tariff risk? What is the importation risk? And ultimately, that has not changed. That hasn't changed from whether it was a tariff risk or an importation risk. You know, we can go back five, six years ago, we talking about Brexit. So Britain leaving the European Union. What's the implication on there? Because there's tariffs coming in on that. I remember a time going back 20 years ago when we talking about China and India as emerging

supply sources and again, there's significant barriers to trade at the time. So you're trying to work out, you if I'm getting active pharmaceutical ingredients from Indo-Pacific, which countries in there have some constraints to trade and how do I have to think about that and what's the risk that it's going to provide? So as much as I can see, well, all of my tier one suppliers are in Europe, for example, and say, well, that's great 20 years ago, but where are they getting their input materials and how are we exposed? And the,

Simon Hinds 

The piece that exposed and I've been around long enough was the bird flu pandemic, for those who remember that, which is about 2005. And that's where Japan and Southeast Asia, so Japan and Korea had a pandemic. It's quite short-lived, they controlled it quite well, but it did have a disruption to supply chains. And 20 years ago when Japan was a really key source of electronic and pharmaceutical supply,

It suddenly triggered this, you know, how exposed are we there? And then how much do we need to diversify or build supply chain resilience in? So as much as we can react to tariffs on a here and now, I would kind of ask, I would counsel that the core principle hasn't changed. Understand your supply chain, understand where it's at, and then go a level and ideally two below that and identify the critical areas where you're exposed because that's the

mechanism. Now, you may do that and say, hey, I've got tier one suppliers that are really at risk here. Great. I think the path becomes very clear. How do I do it versus how do I reduce that risk? But often the people who get caught out on this is they take the tier one and say, I'm fine. Got no issue. And they don't actually look at the tier two and then suddenly they're exposed relatively quickly. And that's what can cause disruption.

Zach Peterson 

So getting exposed through a tier two supplier, that might trigger a, let's say a cost increase that gets passed on to you through another vendor.

Simon Hinds 

Exactly right. And that's part of, so how do you mitigate those costs? And again, we come back to, you know, make to order, make to stock, is there some postponement strategies that can be done? A great example, a live example in Ireland, which is a center of active pharmaceutical ingredient manufacturing, they just had their biggest ever quarter of GDP because what all the factories did was they pushed, they accelerated and pushed six months worth of active pharmaceutical ingredient in

to supply chains, particularly into the US. So ultimately, that's just a postponement strategy. They've just moved that inventory to kind of mitigate what may happen. The reality is, is there has been no tariffs on that supply chain, but they've created a buffer now to give themselves 180 days from the announcement of tariffs to saying, okay, so what do we need to do to diversify or to mitigate against this? really, you know, the assumption will be

when a barrier comes up, it is going to impact your supply chain. So what are the strategies you can put in place to mitigate that now?

Zach Peterson 

So I learned something new here today, which was tier one and tier two and tier three suppliers. I had actually never asked anybody what these terms meant, but now I get it. It sounds like there might be a lot of opportunities for legal trans shipping. We don't want to advocate illegal trans shipping here on this podcast, of course, but it sounds like there's a lot of opportunities for legal trans shipping.

by selecting certain vendors to perform certain assembly or packaging or whatever tasks in a country where there might be a lower tariff instead of a higher tariff. Do those kinds of strategies play a role?

Simon Hinds 

Absolutely

Absolutely. The way I would always advocate it is where's the value at? Because that's ultimately tariffs or taxation or any kind of financial instrument is applied on the value add. And you can look at that as like, am I bringing in? Where am I adding value? How am I transforming that product and that assembly, that item? And where am I doing that? And that is...

That's not a new strategy. It is an existing strategy. How robust it is and how well it's managed is probably the piece to challenge which industries are doing it really well versus industries that are doing it piecemeal. I would argue the pharmaceutical industry does not do it well. The nature of its processes, it's not something can do. So it's probably less matured. When I look at consumer electronics, they do it extremely well.

and the automotive industry does it extremely well. They've thought about this, they've built mature supply chains that look at a, call it an assembly model, where they're looking at what is the most appropriate place to assemble the next part of my kit, of my product, until I get to this final assembly. And really thinking about that, that's again, and if we use that tier one, tier two, tier three supply chains and that kind of concept, it's really playing around with that.

Jenga or Lego bricks. It's like saying, well, okay, these tier threes, can I actually be working with one or two of my tier twos to say, hey, this is where we need to be looking to do this. Do we have that opportunity to do this? And again, my tier twos is there a consolidation that says, hey, actually, I want my tier twos over here so that the tier one supplier, that value add that's happening at that last step is happening in this district or this

Simon Hinds 

this area because it's more optimal for my supply chain.

Zach Peterson 

So you just brought up something interesting, which I would not have expected, of course, not working in life sciences. You mentioned a couple of industries that do this kind of transshipment value add assembly, almost like global assembly line kind of strategy very well, which was automotive and consumer electronics. And I think that makes a lot of sense. But you said the life sciences industry or the pharmaceutical industry is very bad at it. Is it that they've never had to do it and that's why they're bad at it? Or is it?

that the nature and structure of the pharmaceutical industry or life science industry prevents you from doing it well.

Simon Hinds 

I think it's a combination of it. So one is, you know, there's regulations and there's regulations. When you put something for human consumption or it's to go in for human health, the level just, it's exponentially increased on safety, on quality, on compliance. So what that means is the kind of, the barrier to entry is extremely high. So the investment required to have an approved facility

Zach Peterson 

you

Simon Hinds

that can do even assembly, if we want to think of that way, is extremely high. So it's less agile because of the nature of the industry. It's very challenging to set something up. If we were to use an example that people maybe have seen is the latest advancement is modular factories. Now, that means is, and BioNTech and Moderna in particular are leading this, is they will create their factories in a module, in a box in Germany or Canada or wherever.

they will then get that approved in that country because they've created like an inch of a box. They'll then move that box to the different countries. So they've got an approved kind of space, but because it's modular and they can put it on a ship and move it somewhere, they're saying, we're not touching anything inside this box. It's been approved. We're just going to plug the box in somewhere else. Just the concept of having a modular factory that you can move to anywhere in the world. This is new. This is new technology.

how robust it's going to be, we wait to see. that's maybe giving you a tangible example you can grab onto to understand it is pretty difficult to kind of create that environment. And it's only through the new technologies that exist in mRNA, for example, that is so small, the manufacturing, it allows you to do that. The nature of pharmaceutical manufacturing quite often is heavy industry. It's big, it's large factories.

There's a lot of utilities required, whether it's water, gas, electricity, just to keep these envelopes sterile. I'm certain that chip manufacturing is a great example where it's not very agile. There are certain centers in the world, geographic centers, where there's chip manufacturing, because they've had to invest over decades to create the infrastructure to make those components really, really well.

What's then happened is all the other parts around it, the assembly, the components of bringing everything together, that has got more agile and more modular. But we can think of Taiwan, for example, Ireland maybe 20 years ago. But certainly Taiwan today is a center for semiconductor chip manufacturing, but that is the result of decades of investment. So it's probably a good example where you can see there's one part of our supply chains in electronics, which is very much anchored in one place and is not modular.

Zach Peterson

Okay. man, there's a lot there. maybe if we could, switch gears here for just a moment, because you, you've brought this up just a little bit. but what I'm wondering is, is just a little bit more about how the regulatory requirements affect things like component selection, where you can buy parts, even how they're handled when they go from point A to point B and then where you can or should manufacture medical and life sciences products. And

I think this kind of relates back to one of the things you said because I think you said it creates a very high barrier to entry for some of these trans shipping strategies for medical and life sciences products.

Simon Hinds

Yeah, it is a challenge. think it's one that's interestingly being addressed in different ways. think I mentioned previously, we talked about launches and launching a new product and you get what's called mutual recognition. And this is where regulators around the world say, look, we will agree to a common standard. So if country A says it's good enough, we'll accept that.

And this mutual recognition is an interesting strategy to when we think of component selection, when we think of buying parts, because if you've got country A is saying, you know, is part of this mutual recognition, then anything approved in country A, actually the other 30 countries are saying, yeah, we're fine with that. I'm picking 30 as a number. And this is where you start seeing like why, you know, the interesting question is why do we have these centers, these

geographic centers for some things. And often it's because of that. It's because many other countries have said, we're accepting that standard. So therefore, this is the equivalent of getting it from that country. Hopefully that makes sense.

Zach Peterson

Yeah, this is kind of like EMC regulations, right? Like radio frequency regulations and with medical devices, are more, I think more, a little bit deeper EMC regulations relating to like user safety. But it's really the same kind of thing, right? We have those in the EU, we have those in the US.

Simon Hinds

Yes and no. So yes, that you've got an agreed, because I would say those are standards. So those are kind of operating standards. When I talk about regulations, it's almost like the compliance quality that you've got in that country. So that's saying your manufacturing practices are at the same level. So yes, you're going to have standards about EMC. You're going to say like, you know, it's got to do this. It's got to...

It's got to meet some standard that's globally or regionally agreed. But mutual recognition is saying, your practices have gotten equivalency. So it's more complex. It's got many more factors to prove equivalency versus just a standard. Something's going to operate at so many megahertz. Does it operate at so many megahertz? Great. We're good to go. When you're saying about mutual recognition, you're saying, hey,

how you run that factory in all aspects from security, compliance, training, quality is an equivalent to what we accept. hopefully you can see it's similar, but it's just much, much broader in what it's saying meets the standard.

Zach Peterson

I see, I see. OK, thanks for clarifying that. Yeah, another important point with the global supply chain for medical devices and medical electronics and life sciences products is traceability. I think with devices and medicines and chemicals that are meant to go into the human body or monitor the human body or whatever the case may be,

Simon Hinds

That's OK.

Zach Peterson

that extra focus on safety probably also puts a little bit of an extra focus on traceability. Is that correct for medical devices and for life sciences products?

Simon Hinds

Absolutely and it comes back to the kind of the previous question about the regulatory requirements and because quite often that traceability is is part of it if we think of I think it's CFR 21 part 11 kind of ingrained in me, which is electronic signatures, you know, it just just happens. It's the traceability of who did what in the simplest terms from the FDA. But what's that saying is I need to have a a chain of

traceability on who touched this product all the way from start to finish. That's ultimately it. And if you're to go electronic, you need to make sure you've got all of those systems talking to each other. So there's a singular record which shows who did what to that product over its entire life cycle. And that's why traceability or that's why regulatory requirements are so important because that traceability is inherent in it. In medical device manufacturing, if we go down again,

I don't think it's got to the level where tier three traceability is required, but we're certainly getting towards that. It's becoming a, if we think of blockchain technology and what's being asked, there's certainly a future where going down to tier three level may be an expectation that comes in. At the moment, it's more tier two level and that's required and that kind of level of traceability. But if we were to give an example, if we have,

some kind of impurity in a chemical, a starter chemical that's going into a compound that makes a drug. You need to know that. Now what happens today is testing, testing, testing. So there'll be testing that's done at a tier two level, you know, and then even for a tier one to accept it, has it passed the test. And then the tier one is expected to do testing as well to say, now it's not necessarily a hundred percent testing on every product, but it's statistically significant testing. you've got this

chain of quality control, is showing, yep, everything's fine. And you're using that on top of traceability, but because you don't have traceability down to tier three, that's why you do testing. So you can see that there's a financial benefit coming in if you can get traceability to the lowest level, because if you've got that full traceability, then what you're saying is I don't actually need to do as much quality control testing because I know where this product has come from. I know that it's passed certain standards. So therefore I know it's safe to use.

Simon Hinds

This would be the same if we think of components, is I know where it's come from. I know that it's effective. I know that it's not going to fail. And therefore, you know, I can see that. And then if I have an end user issue, I've got this immediate traceability all the way down to the lowest level to see is there a potential issue in my supply chain. So traceability is critical. I traceability is key on consumer confidence, on patient safety.

And I think traceability is going to a higher onus on supply chains in the years to come, than that. But I think the good sign is we've got technologies that are coming through that will allow that to happen. give blockchain as one example, because it gives you an immutable chain the whole way through. So how do you use that in the traceability of complex global supply chains?

Zach Peterson

So that's really interesting, right? Because you mentioned kind of who touched what part all the way through the supply chain. How would someone do that with electronic components? Well, the reason I ask, guess, is because if you order some resistors that are going to go in a medical device, they come in a big reel. And I'm sure there's a serial number and everything. You could take that back to the manufacturer, and they could probably see.

Okay, it came from this batch and these operators were working on the line at that time. Is that the level of traceability that everyone expects? Okay.

Simon Hinds

That's you've just laid it out, Zach. That's exactly what it is. And when we talk about CFR 21 part 11, it's not only that, it's like, where do you take it? It's did the operators log on to the machine? And there's many factories around the world. And particularly in Asia, you'll see that is, you you might have your pass and you log on to your workstation. And what it's doing is it's saying Joe Smith logged on at 7.01 a.m.

Zach Peterson

you

Simon Hinds

Joe Smith is up to date with their training on this, this, this, this, this, this, this, then Joe Smith worked on this station for 73 minutes before they logged off to take a break. But it's that level of traceability that does exist today in many suppliers, particularly the semiconductor supply chain where you're seeing this. So the reason to be is to give you confidence that you know who the operator is, you know.

how trained or up to date they are within their experience on it. And then you can tell if there's an issue, is it that same operator all the time? Is it the workstation? Was there a fault at the workstation or there's something wrong in the mold? And you're answering these questions really quickly and that's why traceability is so critical. Where we've come from when I started an industry was paper-based. It's a signature and it had to be done at the time.

and be legible. you have to almost become Sherlock Holmes is like, who signed that? Like, what's their name? And you would keep a log of people's signatures. And when we think of that being archaic, that is in the last 20 years, that's what traceability was done. It's your signature. You gave it the day you started and it had to match. Don't change your signature over the life of your career because that's what's going to be used for traceability.

Zach Peterson

I see. see. So we really have come a long way in a short, short period of time for traceability. It's funny that you, you bring up signatures. I would have not expected that in, I would have expected that to be a 1980s solution, not a 2000s solution, you know?

Simon Hinds

I would go as far as to suggest it's probably still a solution today in the 2020s. The degree of adoption is still low, but I think we are reaching that tipping point once you get past about 16%. Adoption, becomes the new. And I think we're certainly hitting that inflection point on the expectations for electronic traceability, but it is still quite common.

that it is a physically printed signature, like a physically written signature on many, many, many manufacturing processes, some which are quite critical in our global supply chains across many industries. So we're certainly moving that way, moving at the pace that people expect, probably not, but I certainly think in the very near future, that's where we'll be.

Zach Peterson 

OK, OK. So I think last question for you. As companies maybe consider some ways they can shield themselves from any of the geopolitical risks or tariff risks or all the stuff that's going on out there in the world right now, my question to you is, what are some ways medical device companies can go out and qualify and vet?

potential new suppliers because this is one thing that has come up in some of my conversations with with other folks in the industry is you know as soon as they heard some of the the Costs and people started posting their their tariff bills on social media. They start saying dang. I got to get a new supplier

Simon Hinds

It's a great question. What comes to mind is a quote and I have who the reference is. I'll have to search it. But ultimately it says, the competition today is not between companies, it's between supply chains. It's the world we live in. The competition is between companies, it's between supply chains. So when I think about this and we think of medical device companies and qualifying new suppliers, I think the first that starts is with your peers.

It's like, what are those relationships in an industry and understanding where are their supply chains, who are their suppliers? Now, some of that is working for the greater good, that you'll have confidential terms and conditions. So it's less about talking about that and elevating it a little bit to kind of look at how you can diversify your supply chain. If we think of that mutual recognition concept that regulators do, why would the same not apply

you know, at the supplier base, you know, if your competitor is using supplier X and you're not supplier X possibly, you know, is going to meet some standards. the first piece I think is look at what are peer supply chains doing. And sometimes that's the quickest way to vetting new suppliers as you know that they work there. I think the second piece then comes down to standards, regulations, and where they're operating. It's again on this concept, like if you're approved,

by regulator X or you're operating in country Y, which has these standards, it's probably a very good indicator that they're going to be, it's going to be easier and more efficient to qualify and vet that supplier. So it's again, looking at supply base, where am I present? Where am I not? Where are the countries or geographies around the world that I know there are qualified suppliers and looking at that. it's again, it's how do you get there quickly rather than

you know, what's the outcome going to be? I think the third piece is then if you are going to go in a very much a, you know, blue field, blue sky, however you want to call it, where I'm going to get somebody new in a new market, going to stand them up, that very much becomes about how integrated are you? You know, I think they, for me, they would move away from being a supplier and into being a partner. These are joint projects, you know, and we talked at start of this, like make to order, make to stock and

Simon Hinds 

what percentage of their business for me, if you're going into that field, it's very much in that you are a significant portion of their business. And ultimately they're an extension of yours. Now that will be very much situationally dependent, you know, how exposed you, what's the degree of risk. But it's certainly a tactic to consider is like, do I need to bring somebody on who's going to be quite significant or I'm going to be quite significant to them? So therefore we're doing this together. I do think the first two steps

So what are your competitors doing and who's operating in areas or geographies that I know are kind of secure are probably the simplest ones that get you there very quickly. I think it's that kind of alignment to standards are really important. If we were to take it, how would I work it through then? So if I've done that first few steps and I've identified one, I think it still comes down to that tier two, tier three question then.

So as much as I'm saying that, also then need to know, am I just transporting one problem to another problem? So, okay, I've got my tier ones out of this area and I've created tier ones, but all of their tier twos happen to be back in this area. And all I've done is just, okay, I've got assembly happening over here, but I'm still exposed because everything's coming from this area or this country that I know is now exposed to big tariffs. So that's why, you know, as much as you can do it quickly, it still needs that.

discipline and consideration of kind of diving into the new supply chains that you may be creating.

Zach Peterson

Okay, this is all really great advice and Simon, I got to tell you, I've learned a ton today. We don't talk to enough supply chain people and I think this was really a great time to have you on. So I want to thank you so much for coming on the show today.

Zach Peterson

did you get me? Did you hear me? Okay. All right. Great. all right. let me do the outro and then I'll go ahead and kill the recording. All right. To everyone that's been listening, we've been talking with supply chain executive Simon Hines. If you're watching on YouTube, make sure to hit the like button, hit the subscribe button. You'll be able to keep up with all of our podcast episodes and tutorials as they come out. And last but not least, don't stop learning, stay on track and we'll see you next time. Thanks everybody.

Simon Hinds

Thank you, my pleasure. I did.