Interview with Shannon Crespin, Vice President of Planning, Medtronic Global Supply Chain

Shannon Crespin started her career in 1993 at HealthSouth Rehabilitation of Denver, one of the nation's largest healthcare providers specializing in outpatient rehabilitation for orthopedic injuries, neurological disorders, joint replacements and various other patient needs. She was responsible for managing the daily operations and materials management for three outpatient clinics. Shannon joined Lucent Technologies Bell Labs in 1997 as Product Logistics Manager where she led a team responsible for planning, sourcing and scheduling voice messaging, VoIP and their flagship Private Branch Exchange (PBX) telecommunications technologies. During her tenure there, Shannon was part of a team to design and implement Manugistics' supply chain application for demand planning and the design and development of the accompanying and complimentary sales and operations planning process. She was also an integral part of their large scale SAP/R3 ERP implementation and the follow-on stabilization for key supply chain process areas - planning, procurement, scheduling and warehousing. In early 2000, Shannon joined Denver Management Group, a boutique consulting company, which was shortly thereafter acquired by Keane, Inc., a privately held information technology and services company, where she consulted in distribution operations and network assessments, supply chain management application design and implementations, and operations improvement initiatives in a cross section of industries from consumer product goods to quick service restaurants, engine manufacturing and publishing.

Shannon joined Medtronic in December 2002, and over the last eight years she has held a number of positions with increasing responsibility in supply chain. Most recently, Shannon was the Vice President of Global Supply Chain for the CardioVascular division of Medtronic where she was responsible for global planning, supply management, continuous improvement and IT integration for supply chain management applications. In November 2010, Shannon was named Vice President of Planning, Medtronic Global Supply Chain where she will be responsible for collaborating with business units to establish strategies for planning systems and structures across Medtronic. She will oversee a program management framework and monitoring plan that supports Medtronic's innovation and growth objectives for the coming years.

Shannon received her Bachelors degree from Metropolitan State College of Denver in 1992 and her MBA from the University of Denver, Daniels College of Business in 1998.

Please note: This interview was conducted prior to Shannon's recent appointment and the questions answered are from the perspective of her position as VP of Supply Chain at Medtronic CardioVascular.

How would you characterize Medtronic's supply chain?

Medtronic is the world's leading medical technology company. Our mission is centered on alleviating pain, restoring health and extending life for people around the world. As a result, the company's supply chain is complex and dynamic.

Medtronic has approximately 38,000 employees worldwide serving clinical customers in 120 countries from 270 locations. Every five seconds, someone somewhere in the world benefits from a Medtronic product. We have more than 45 manufacturing facilities interacting with 2,500 suppliers and contract manufacturers distributing from six major distribution locations, which produce and deliver everything from drug-eluting stents to heart valves to aortic stent grafts and pacemaker leads. Within our CardioVascular businesses we will introduce more than 80 new products globally in the next five years.

Many of our products are implantable devices having defined shelf-life dating. Medical technology is a highly regulated industry, overseen by various government agencies including the U.S. Food and Drug Administration (FDA), the European Economic Area's competent authorities for the CE (Conformité Européene) mark, and Japan's Pharmaceuticals and Medical Device Agency (PMDA), just to name a few. These regulatory bodies require specific data about the clinical studies we've conducted and documentation related to our quality systems which need to meet specific requirements in order to grant us approval to distribute product in the countries they govern. A few considerations for the supply chain as a result of being in a highly regulated industry are as follows:

Specific product requirements, like labeling, by regulators for their governing areas make it difficult to have a universal product that can be moved to multiple regions in order to optimize inventory.
Planning to approval dates for new products by country has a high degree of variability, creating an emphasis on multiscenario planning.
Relatively short product lifecycles for devices that warrant iterative improvements create inventory and obsolescence challenges.
Materials, manufacturing processes and distribution flow changes often require regulatory filings and notifications before they can be implemented, putting intense focus on design for manufacturing in the R&D process in order to limit changes post-commercialization.

As the world's leading medical technology company, could you describe how Medtronic's supply chain works?

Medtronic provides the broadest and most innovative therapeutic medical devices spanning the human anatomy. Our products are used to treat neurological disorders, spinal conditions, diabetes, ear, nose and throat problems, cardiac rhythm disorders and, of course, cardiovascular conditions.

Within CardioVascular, we provide more than 100 different product groups and 12,000 stocking units worldwide. Across that product portfolio, from a supply chain perspective, you can segment the products, their predictability for use and delivery method into three main categories:

Scheduled cases having specific products planned to be used. For example, a patient who has been screened and diagnosed with an aortic aneurysm would have a CT scan approximately one week prior to the surgery that would be used to three dimensionally reconstruct their anatomy in order to size the length and diameter of the stent graft needed to treat the patient. Working with the Medtronic representative, the product would then be ordered to be delivered and available at the time the patient is scheduled for their procedure and treatment.
Scheduled cases which have moderate to low levels of predictability for product use. For example, a patient may be scheduled for a coronary artery disease treatment so you can narrow the type of products, but can't predict the full range of products that will be needed to treat that particular patient. And finally,
Emergent cases which occur unpredictably. For example, we see emergency cases resulting from a car accident where the driver has hit his or her chest against a steering wheel causing an injury to the thoracic aortic artery. Such cases require immediate intervention; some involve endovascular treatment where our stent grafts are implanted to allow blood to flow through the artery normally. This procedure is extremely time sensitive to a patient surviving, and the number and dimensions of graft segments used is entirely unpredictable. As a result, we store a number of those devices at hospital locations where aortic injuries are treated.

How we deliver the product can vary across all three scenarios. In some instances, a Medtronic representative walks the specific product into the hospital the day of the procedure. In other instances, product is used from inventory that's on hand at the hospital, and is generally owned by Medtronic until it's used.

When you combine the diversity of our product portfolio, predictability and delivery methods with having more than 4,000 hospital locations around the world that manage patients with cardiovascular disease, you have a complex and dynamic supply chain network. Our clinical customers and their patients depend on our ability to consistently deliver the right product to the right location at the right time and in the right condition and cost despite this complexity and dynamism. Managing this careful balance between optimizing asset management and meeting clinical needs is a formidable challenge in our business.

How important is supply chain management to Medtronic CardioVascular's overall business strategy?

Today, across most companies and industries, it's recognized that supply chain is a strategic lever that needs to be highly integrated into business strategy. As a leader in this area, I am pleased to see supply chain continue to raise its contribution in enabling profitable growth, managing costs (particularly in slowing markets), and delivering new strategies in more complex global networks. The importance of supply chain to Medtronic's CardioVascular businesses is no different.

A finance colleague described supply chain as the bridge that allows for a seamless operational execution of our marketing strategies. I concur. Supply chain connects the manufacturing and marketing functions, influencing both to ultimately deliver optimal financial benefit and customer service.

What are Medtronic CardioVascular's primary Supply Chain Management focus areas?

The Medtronic Mission provides a great framework to guide all of our business imperatives. In addition to alleviating pain, restoring health and extending life, it calls on us "to strive without reserve for the greatest possible reliability and quality in our products." To that end, our supply chain is first and foremost focused on innovating to deliver new therapies with the highest quality products, services and relationships. This requires supply chain to be integrated into our development process, ensuring quality control with our strategic suppliers and creating an agile and responsive network that is capable of consistently delivering the perfect order to meet the needs of clinicians and patients around world.

How is Medtronic CardioVascular addressing the market's increasing focus on 'green' supply chains and reducing the company's carbon footprint?

At Medtronic we recognize the critical interdependence between human health and the environment, and our inherent responsibility for the welfare of our employees. Our well-being ultimately depends on the health and resources of the planet. For this reason, we continually strive to reduce our environmental impact. Environmental protection is a key value of corporate citizenship and provides Medtronic with a competitive advantage by reducing costs and managing risks.

In November 2007, Medtronic adopted an Environmental Sustainability Policy that articulates our global view of sensible environmental management. The policy's tenets are to conserve natural resources, promote energy efficiency, eliminate waste, reuse and recycle materials, and enhance new building construction and facility modification.

In July 2010, Medtronic joined the Electronics Industry Citizenship Coalition (EICC), an organization of multinational corporations who share a commitment to continuous improvement in corporate social responsibility throughout the supply chain. Medtronic has adopted the EICC Supplier Code of Conduct that covers ethics, environmental conditions, labor standards, and worker health and safety.

How do you prepare for the upturn now that the economy is showing improvements?

Whether a macro-economic change or an industry or company shift, we are always prepared as we depend heavily on the combination of our sales and operations planning (S&OP) process and our pull-to-demand-replenishment processes which allow us to sense short-term changes as well as prepare for mid- to long-term demand shifts. We respond to those signals by aligning our inventory, internal and external manufacturing capacities and materials to meet the demand at the time it is forecasted. In addition, S&OP includes an iterative risk assessment process that helps senior management to make trade-off decisions between service and cost given the sensitivity around our likely success of forecasting future demand.

What are your thoughts regarding globalization?

There are many exciting opportunities to reach patients in need of our therapies in countries around the world. At the same time, working globally has some unique universal challenges. For example, time zones available for people to do business in different regions has resulted in working hours that have changed the typical 9-5 work day; I'm based in the United States, so it's not unusual for me to be on the phone with colleagues in Asia late in the evening and others in Europe first thing in the morning. In addition, cultural differences, like holidays, need to be factored into global supply chain planning. You can predict a change in productivity, hospital procedures and logistics lead-times when it's Golden Week in Japan or Carnival in Brazil or August holidays in Europe.

There are also very specific considerations for the CardioVascular medical device supply chain related to regulatory requirements for our import and export documentation, as well as specific packaging and labeling needed for different markets. This requires our supply chain professionals to work closely with our regulatory business partners internally to stay abreast of changes we need to be prepared and compliant to support.

From a business continuity perspective, disruptions to the supply chain resulting from outbreaks of illnesses like H1N1 or SARS, or natural disasters like earthquakes, or the recent Iceland volcano – predictable surprises have to be considered while developing manufacturing and distribution strategies. Other considerations that have to be employed in order to reduce risk in a global supply chain include: inventory policies for risk mitigation, dual sourcing in different geographic areas for critical components, and understanding alternative logistic routes and methods that can be quickly exploited.

Overall, globalization creates tremendous business opportunity when your supply chain can be structured to handle the increased complexity and risk.

During this economic downturn, how do you keep your entire organization motivated?

We are a mission driven company with a keen focus on serving patients. Reminding our employees we are here to support the innovation of developing and delivering technologically advanced medical devices to people in need around the world keeps us motivated. Hearing stories of how our products either saved or improved a life always inspires. For most of us, it's very personal because a relative, a friend, a neighbor – someone we know has benefited from a Medtronic product.

What does it take to build the kind of career you have had?

Keep learning and be deliberate about your development. I do a lot of research and reading on a variety of topics that just generally stretch my thinking and eventually help me to consider issues and problems from a variety of angles. It's also very important to work for great leaders and companies who take an interest in developing their people and are also good role models. I've been very fortunate to have worked for and with a few really good leaders in my career, and today I work hard to emulate their strengths as I've had opportunities. At the same time it's so much about the people you hire and develop. Putting a good team together that is collectively working toward common goals is extremely important to consistently delivering strong results.

Who do you rely on for advice?

Friends, family and colleagues who know me well always provide the most valuable and insightful considerations for my personal and professional decisions. Having a broad network is critically important.

How do you balance your work life with your personal life?

First, it's about having a passion for what you do that reaches beyond personal goals and gives back, in the larger sense, to the organization, community and people you manage and lead. Secondly, it's staying grounded by having people in your life that you spend time with. I find a short walk around the park with a close friend to be incredibly rejuvenating. It's also about dedicating time to activities that take your mind off work and professional aspirations to relieve the inevitable pressures when they come on strong. Having a balanced life and maintaining perspective has a real impact on your contributions and productivity on the job; this is an area that needs to be constantly monitored for all of us.

What kind of qualities do you look for in a person who you would consider adding to your team?

It's about finding people who want to contribute beyond their individual aspirations. I came to Medtronic primarily because of the company's mission: to alleviate pain, restore health and extend life. The Medtronic Mission is also what keeps me motivated. I look for people who are personally ambitious but also recognize the broader context. I find people like this to be good individual contributors and also excellent team players. Secondly, I highly value people who can collaborate in global settings. Today supply chains are so highly complex that no one person can effectively devise great solutions or solve problems without working across a global network and cross functionally to ensure all voices have been heard and their issues and concerns have been considered. Supporting that, it's about being able to think critically with an aptitude for systemic thinking and a desire and commitment to continuous learning. In today's global information-technology-driven economy, being able to build upon your knowledge, being holistic in your problem solving and staying agile in learning are becoming increasingly important. Finally, relevant technical experience, like statistical analysis, forecasting, theory of constraints management, negotiation, leading through influence and strong financial acumen, are foundational skills to be successful in global supply chain roles.

What is the key Supply Chain Management priority for Medtronic CardioVascular in the coming two to three years?

For the last five years we've made significant headway in implementing our global ERP system, SAP. Over the last two years following the stabilization of those implementations we've begun leveraging and expanding the supply chain modules we use within SAP. Those efforts have resulted in real benefits related to better decision making from improved supply chain visibility as well as realizing more consistent service levels from our distribution centers with reduced inventory and increased productivity. That said, there have been challenges associated with change management following the implementation of these new systems, as you'd expect with any large scale IT implementation.

As we move forward over the next two to three years we have plans to continue to expand the use of supply chain application technologies throughout the value chain. In preparation and in advance of those implementations we are working toward standard documented processes with clear roles and responsibilities defined for each step in the process. We are also increasing our focus on becoming more capable of handling the change management aspects of the introductions of new technologies to increase the speed to stabilization and the benefits to the supply chain that follow.

Our system strategy provides the necessary support for our foundational supply chain processes and is a key enabler to achieving future strategic objectives.

What have you learned as the VP of Planning for Medtronic Global Supply Chain that has surprised you or changed the way you do business?

The rate at which information moves and change happens has really accelerated over the last 5-8 years. This increased speed at which information moves and competitive markets shift creates demand volatility and interesting challenges for maintaining stability in a global supply chain. To seize those opportunities or mitigate risk and cost, your supply chain has to have the right processes, systems and structures in place. Within Medtronic CardioVascular we've focused on three key areas to address these challenges:

Create a culture of continuous improvement. Regardless of how well your supply chain is designed and operates today, there are always areas for improvement. One of the many great concepts in Lean thinking is related to taking a systems approach to continuous improvement. This means that you take time to understand how changes within a system ripple across the value stream and have affects across constituents inside and outside the company. When you think about improving supply chain performance from that perspective, it's like the journey of leadership – a lifelong process of learning and improvement.
Leverage IT. As it relates to systems, we've taken the approach of using information technology to improve supply chain visibility and increase the speed of information sharing with a focus on reducing demand latency – these are key attributes for all great supply chains.
Optimize and integrate. Structurally, we've made great progress in ensuring the supply chain is structured in a way that allows for integration into the business management and operations both tactically and strategically. This has ensured that focus areas for improvement and the supply chain's strategic imperatives are clearly linked to the broader business growth, profitability and customer service objectives.

What are the biggest INTERNAL challenges for Medtronic CardioVascular to achieve supply chain excellence?

In most organizations, breaking down silos and getting functions working together to develop and implement the best solution for a value stream is always a challenge.

What are the biggest EXTERNAL challenges for Medtronic CardioVascular to achieve supply chain excellence?

Our biggest challenge and opportunity is working more closely with business partners up and down the supply chain. At Medtronic CardioVascular over the last 3-5 years we've increased our focus on collaborating with our trading partners and have had good success in improving supply chain performance. Moving forward, we plan to continue that journey in order to meet our quality, agility and cost objectives.

What trends are you watching in healthcare, and how might they affect your role in the medical supply chain?

If you like change and challenge, it is an exciting time to be servicing the healthcare industry globally. We have healthcare reform in the US and growth in a number of major countries around the world with new and increased regulatory requirements from those areas including proposals like track and trace and unique device identifier. In the face of that complexity, overall we'll need to continue to design a flexible and responsive supply chain that consistently meets the needs of patients, physicians, regulators and payors in a cost-effective way.

What is the most exciting aspect of Medtronic CardioVascular?

What excites me most is our pipeline of new products and therapies to serve patients around the world. Within Cardiovascular we plan to introduce 80 new products in the next five years. We are in a unique position to lead the industry with best practices, setting the bar high for all so that the customer benefits from cost-effective supply chain practices.

Where are the opportunities for healthcare innovation?

From a medical device manufacturing perspective there continues to be great opportunities to develop new products and therapies to treat patients more cost effectively, less invasively and with shorter surgery and recovery times. Our CardioVascular businesses have been very successful bringing to market innovative product solutions that meet those needs, from vascular stents and aortic stent grafts to heart valves and cardiac surgery technology. With a view to the future, we recently received approval from the FDA to begin the U.S. clinical study of an aortic valve that can be implanted without having to crack the chest as in traditional open-heart surgery.

IT for healthcare is the next major wave of innovation, and supply chain professionals are in a great position to help move those opportunities forward in order to drive efficiencies and reduce costs across the value chain.

March 2011

See the recipients of the 2009 Top 25 Supply Chain Executives Award.