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Supply chain management in an age of Covid-19

Interviews |
By Nick Flaherty


“Our upper management made me responsible for the European response to Covid-19,” said Jan-Hein Broeders, Healthcare Business Development Manager at Analog Devices, based down the road from Philips in The Netherlands. 

“Fighting Covid-19 is the top priority so I am managing now the applications coming in from customers, and if it is equipment for covid-19 such as a ventilator, lab system or point of care system then the exact part number, exact customer number and contract manufacturer (EMS) is combined for priority,” he said.

“It’s obvious that our classical customers working on ventilators, and we supply the six big manufacturers such as Philips and GE. But then there are other such as Hamilton Medical [in Switzerland] and Getinge [in Sweden]. All those customers get my highest priority for amplifiers, converters, and the Linear Technology power supply solutions. While most of the Philips ventilators are assembled in the US, the sub-systems are built in Europe. Philips also makes patient monitoring systems in Boeblingen, Germany.

Then there are other ‘unofficial’ customers such as Dyson who are developing a design from TTP in Cambridge. “TTP as an ODM is very experienced in making medical equipment so they are able and get my support. In France we have a similar situation with Air Liquide.”

“I see this happening now and they are placing orders in the 10,000 order quantities.”

Part of the challenge is around the orders to support the ramping of volume production. “Some companies are more realistic, starting with 1,000 scaling to 2,000 ventilators a month, but some looking at 5 to 10,000 units per week.

This will put pressure on the supply chain in coming week for both fabs and assembly and test as wafer production takes 8 to 10 weeks.

“We hope that the factories in the US won’t close down, that will be a bigger challenge,” he said. Power device production in Milpitas, California from the Linear Technology acquisition in 2016 has been cloned at Wilmington, Massachusetts and foundry TSMC gas fabs iin Taiwan and Washington in US to ensure production. The customer understanding of the supply chain is key.  “A lot of customers are helping to lobby governments,” he said.

It’s not just about the semiconductor devices. “What about the valves, the motors, that is not easy to scale to 5 to 10 times the volume,” he says. “We can scale up but if one critical piece is not delivered what we do does not pay off.”

ADI also has parts in the open source PB560 ventilator design released recently by Dublin-based Medtronics.

“We have amplifiers, power management, current amplifiers and charges in the PB560 – I have not seen a huge ramp in orders but probably the reason for this is these are smaller companies that start with 500 pieces, that’s in the noise compared to the larger manufacturers, so they end up at our distributors such as Arrow or Digikey.” ADI also uses Anglia in the UK which has set up its own task frorce to prioritise and coordinate delivery of key parts for ventilator production. 

The channel partners are key to managing the supply chain. “So far I am surprised about how much inventory there is the channel, and we can prioritise channel stock for some customers. This will dry up though and that’s my worry and that might happen in the next three to four weeks. I hope our capacity on assembly and test will be back online before that happens

“Customers started to pull in their orders already in the system and placed more orders – the bigger ones took a little more time with the contract manufacturers and then to the channel partners, this is now starting to happen. But we haven’t had a single line down so far which I am very happy about.”

These priority accounts can also buy from the distributors at the same price as ADI direct. “We have our high service account managers for the distribution channel, at the moment we see those distributors have inventory the accounts can buy that for the same price as from ADI direct.”     

One way around the challenge of availability is to use other, similar parts.

“Many customers are using commercial versions so you do not need the industrial temperature range, so they could use the industrial versions or different parts. For example with one critical ADC that we have in 12, 14 16bit versions the customer was using 14bits. So we suggested going to 16bits, same pinout, serial interface, maybe scale the clock and adapt the code. They do not want to do this now but when the situation becomes critical they are now looking to keep production running, but not every customer is open to this.”

This would be at the same price. “Price is not a critical issue,” he said. “There should not be a financial disadvantage for our customers, we are very transparent and don’t want to profit from this.”

Obsolescence is also an issue, as some ventilator designs are 15 or 20 years old.

“My biggest worry is that I have seen customers ordering very old parts, and still we are able to supply those and its manageable from our side. ADI is serious about wafer banks and depends on assembly and test but we have acquired companies over the last few years that didn’t do that.”

For example, he points to an ADC that was launched in 70s on a 4in wafer made in Limerick. When that became obsolete, the customer was offered a lifetime buy to give time to design the part out. Instead the customer wanted to keep buying, so ADI transferred the design to a 6in process to keep it in production. This was for 6,000 pieces per year, a relatively low volume.

However he has an eye on what might happen in the longer term with ventilators flooding the market. “The steep ramp we are seeing now will continue for another year as hospitals are under resourced,” he said. “Within 2 years they won’t be selling ventilators for another five years.”

www.analog.com

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