Having suppliers that make components in more than one region of the world also helps to reduce risk for the company.
Working closely with component manufacturers and their authorized distributors, making sure there are at least two suppliers for each component and involving buyers in new product introduction are some of the strategies that GE Healthcare employs to manage supply chain risk.
The company also likes suppliers to have multiple manufacturing locations for a needed component in different regions of the world. If one plant shuts down because of a natural disaster, the component will be available from other manufacturing locations.
GE Healthcare, based in Chicago, makes a wide range of medical equipment including ventilators, patient monitoring, ultrasound, magnetic resonance imaging (MRI), computed tomography (CT), and ultrasound systems among other medical equipment.
Nicole Kosmowski, executive – category sourcing, electronics & high tech at GE Healthcare, said that the supply chain risks that her company faces aren’t any different than the risks electronics companies in other industries must deal with. Such risks include disruption in production of needed materials, components and assemblies and delays in the shipment and delivery of components and finished goods because of natural disasters, strikes and other events such as the COVID-19 pandemic.
To identify risk and manage them, GE Healthcare has developed a formal data-driven risk mitigation program, which will identify risks in a supply chain in a specific region of the world or with a specific supplier.
“The risk mitigation program flags potential risks and whether they are short-term, medium-term or long-term risks. We have action plans to mitigate the risks,” said Kosmowski. “My team is responsible for the sourcing strategy which would be included in supply chain risk mitigation.
Kosmowski meets with her sourcing team weekly to review ongoing risks. Risks can be dynamic and can change throughout the course of a year. The COVID-19 pandemic is an example.
During the COVID-19 pandemic, GE Healthcare buyers were spending a lot of time monitoring supply availability in different regions of the world. COVID-19 has impacted different regions at different times. For instance, electronics production in China was impacted in the first quarter, but resumed in the second quarter. However, the U.S. and Europe were impacted in the second quarter and production did not begin to resume until the third quarter.
GE Healthcare did a deep dive into its supply chain, including electronics manufacturing services providers, semiconductor and other component factors, distributors and raw material providers to assess how each link in the supply chain was being impacted by the pandemic. The monitoring was part of a GE risk management plan it developed and fine-tuned over the years. The plan enabled GE Healthcare to minimize the impact of the pandemic on production of GE Healthcare equipment.
“There were minor disruptions to the supply chain throughout the pandemic, however, we worked together with our supplier partners on prioritization and worked through the disruptions,” said Kosmowski.
Monitoring was important because each country handled the pandemic differently. Each country hast different laws and regulations concerning the outbreak. In some countries production was halted entirely while other companies in other countries were allowed to operate at a limited capacity. In Asia, some countries shut down for a period of time.
“It was mix of things. A lot of restrictions were put in place in terms of how many people could be inside a plant,” said Kosmowski. “Even if a supplier had the material to operate at 100 per cent capacity, they couldn’t do that” because not enough workers were allowed in facilities to operate at 100 per cent, she said.
In addition, logistics was a problem as “our logistics providers were very backlogged through the second quarter,” said Kosmowski.
Wanted multiple sources
A key part of GE Healthcare’s risk management strategy is making sure the company has dual or multiple sources for parts and assemblies. “One of the things that I continue to look at is dual sourcing especially for our new products,” she said. “It is a
big piece of our strategy. We want to make sure we have two suppliers that can make the same parts or the same assemblies.”
She said one thing GE Healthcare sourcing team does is work closely with our engineering team and lifecycle management team to ensure that we have multiple suppliers on our approved vendor list. “So, if there is a pandemic, or a natural disaster we can switch from one supplier to another,” said Kosmowski. “We have a lot of dual sourcing, especially with electronics components.”
She added that GE Healthcare like suppliers to have multiple manufacturing locations that can make the same parts. We don’t want production that is tied to one facility only,” said Kosmowski.
For electronic components GE strives to have more than two. “For some of our higher-level assemblies. We will qualify multiple suppliers and multiple parts,” she said.
There is a renewed focus as we launch our new products to ensure we have a dual source at the time of launch,” said Kosmowski.
GE Healthcare also uses a dual-source strategy with its EMS providers. “We have a fairly high percentage of dual sources at our EMS providers.”
During the COVID-19 pandemic, the multiple supplier strategy helped GE minimize the impact of the pandemic because “we were able to leverage our multi-source qualification strategy for electronic components,” which helped GE maintain continuity of supply, said Kosmowski.
The supply chain issues that the pandemic caused were similar to the issues following the 2011 earthquake and tsunami in Japan, she said. “The major difference was that the pandemic caused fulfillment issues on a more global scale as it has affected many countries and impacted multiple commodities, logistics and sites around the world,” said Kosmowski. “Understanding the global and regional footprint of your supply base is critical to managing the risks.” she said.
GE learned many lessons throughout the pandemic. “We learned how to work faster and in a more agile way within GE Healthcare as well as with our suppliers, always keeping the hospitals and patients around the world as our number one priority, said Kosmowski. She said GE buyers also established stronger relationships with many of strategic suppliers and gained a deeper knowledge of their supply chain.
Besides COVID-19, GE Healthcare buyers deal with other risks including counterfeit and obsolete parts. “We take counterfeit parts seriously because quality is our top priority,” said Kosmowski. “We have a really a robust process that allows us to trace parts back to the manufacturer,” she said.
She said GE Healthcare has close and trusted strategic suppliers for electronic components. “We work directly with the component manufacturer and their authorized distributors,” said Kosmowski. “We go directly to the semiconductor or component manufacturer and discuss the volumes and pricing with them directly. We don’t leave that up to others,” she said.
GE Healthcare uses authorized distributors because “they have full tracking and traceability back to the manufacturer,” she said.
Component obsolescence has always been a supply chain risk management issue in electronics, but it is becoming more acute because the consumer market is a big driver in electronics equipment and consumer products tend to have shorter life cycles than other industrial and medical equipment.
“We have a product lifecycle management that works with our engineering team and suppliers on obsolescence issues,” she said. The idea is to make sure components that may soon go end to life don’t get designed into GE systems. “We’re also monitoring the components that are in our products in the installed base,” said Kosmowski. GE keeps tabs on older components used in GE systems to determine if they will continue to be produced by manufacturers for as long as the GE product will be in the field or manufactured.
Of course, each year component manufacturers send out end of life (EOL) notifications for thousands of parts. GE buyers monitor those notices. If the EOL parts are used in GE products, GE does a return on investment analysis of the product to determine if it should be redesigned using new parts, or if a last time buy should be done with the supplier, or if parts from other suppliers could be used.