Media Coverage
Stryker Reaches Out
Traffic World
William Hoffman
November 2006
When you ship to organizations that expect more than half their orders fulfilled the same day they are placed, you need an extraordinary level of inventory control.
Technology can only do so much. You also need partners you can rely on and more logistics managers are realizing that means their suppliers’ supply chains can be just as important as their own.
“We knew we needed to strengthen our whole supply chain, and it was something we had been working on since the mid-1990s,” said Mark Lincoln, vice president and plant manager for surgical device maker Stryker Instruments. “If we were going to grow our business at a 20 percent clip, our suppliers needed to run their businesses that well.”
Managing inventory effectively is the focus of just about every attempt to build a responsive supply chain. Yet each business has its own demands and stresses on inventory, depending on the number and lifecycle of SKUs, modes and quality of transportation and warehousing and many other factors.
The goal is always rapid and accurate fulfillment but the means to achieving that goal will vary greatly according to the shipper’s individual supply network. Finding the common ground is a key challenge for many shippers.
“What runs common across anybody’s supply chain is lack of visibility, or really, timely visibility,” said Al Salerno, regional vice president TradeBeam, which provided its iSupply inventory management system to Stryker to enhance the shipper’s replenishment systems through its suppliers.
Salerno said iSupply’s network effect connects upstream and downstream actors in the supply chain, allowing more efficient planning and response using the cheapest, fastest and most easily available communications technology yet devised—the Internet. “The Internet is as open and affordable as any customer’s supply chain really needs,” Salerno said.
Stryker Instruments provides surgical instruments and pain management systems. Stryker Instruments buys between $140 million and $160 million a year in goods from up to 400 suppliers, although less than 10 percent of those comprise 95 percent of purchases. More than 90 percent of shipments are parcels handled by package carriers and more than two-thirds are domestic.
Lincoln said Stryker needed inventory management that was sensitive to its rapid response needs as well as to inventory fluctuations due to Stryker’s reliance on introduction of new products. Stryker also placed a premium on inventory accuracy for life-critical product shipments. Lincoln said Stryker might have outsourced its replenishment capabilities to a third-party but opted for a more novel approach. Rather than send purchase orders to suppliers, Stryker asked suppliers to manage the replenishment process for them.
By sharing demand, consumption, shipping and receiving information among them all, Lincoln said, “You have to have the faith that they’re going to make the right decisions, and our suppliers were going to do that.”
TradeBeam provides the EDI and other online, on-demand tools the shipper and its suppliers needed to begin collaborating. Stryker had nurtured close relationships with suppliers during the 1990s through quarterly supplier advisory board meetings and ongoing discussions about supply chain issues and systems. “It was easy to get them on board,” Lincoln said, “because they knew the problem and we created the solution. …(Suppliers) had a big piece in selecting it.” Lincoln said TradeBeam’s system took less than eight weeks for Stryker and its suppliers to implement during the busy year-end shipping season. Direct material inventory decreased 30 percent. In-transit visibility allowed suppliers to ship more goods by ground than by more costly overnight express, since they knew apparent stock-outs were being covered by inventory on the move. Some suppliers saw component inventories fall 25 percent.
Although technology immensely increased Stryker’s control of its inventory, Lincoln said the company’s strong relationships with its suppliers were no less crucial. “One thing that helped this be successful,” he said, “was the effort we put into the suppliers and setting up the system ahead of time, and getting their buy-in. If you get their support ahead of time, they’re enthusiastic and want to succeed. Plan accordingly, get all the right people involved in the process early on, and get buy-in.”
Salerno said companies that prepare for collaborative relationships will get more out of new supply chain technologies. “When companies embrace a more modern approach to inventory replenishment, they will gain greater benefits from implementing those technology tools,” he said. “Getting people to understand business as usual isn’t in anybody’s interest anymore.”
