Optos - Eyes on Supply Chain

Procurement & Supply Chain

Optos Keeping an Eye on Supp

W

hen a five-year-old boy was blinded after a regular eye exam failed to spot a retinal detachment, his father made it his life’s work to help eye care professionals by revolutionising retinal imaging. Optos was founded by Douglas Anderson with the goal to make a patientfriendly device to capture a digital ultrawidefield image of the retina. Today, millions of patients around the world have benefited from optomap® retinal imaging. You will find optomap systems in many independent High Street optometrists, as well as eye clinics at Great Ormond Street Hospital in London and Harvard Medical Center in Massachusetts.

An inspirational beginning for a business head quartered in Dunfermline, Scotland which has grown from a one-man mission to a global leader in its field. Like most businesses the events of the past 18 months have caused significant disruption.

Mike Archenhold Optos VP of Supply Chain talks us through the impact the business has experienced and why having an agile supply chain function has made the journey a little smoother.

The supply chain function is dynamic.

It can be highly focused on a certain area of business, or it can cover the

broad spectrum of services. As VP of Supply Chain, what are your primary responsibilities and how is the function structured?

My role as VP of Supply Chain addresses a broad spectrum, starting with supplier selection and contracting, supplier management and development and procurement through to production planning, warehousing and logistics and ending at inventory management ensuring product availability for our sales and service functions. I have a dedicated team of 25 split across both locations (UK & USA) that manage these functions and processes for the organisation globally. Because of the technical nature of the products we manufacture, there is a significant collaboration with other departments, in particular R&D, engineering and quality. We are involved in most of the business projects and influential to many of the corporate objectives.

As a career supply chain executive with significant electronics experience, you joined Optos in 2015 with the remit of developing a global supply chain function. What was your initial plan for the function and how smoothly were you able to implement the necessary changes?

The Business Profile

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Procurement & Supply Chain I joined Optos in Feb 2015 just ahead of the launch of the California product which was the next development after the hugely successful Daytona product range a few years earlier. The supply chain function was immature in its position within the organisation and had gone through several leadership changes. My initial brief was to provide stability and develop the organisation so it provided the value necessary for a growing company, which was planning further new products to add to the

Mike Archenhold

Optos portfolio. We needed to provide the commercial support and structure to aid the engineering group through the technology roadmap and to ensure Inventory stability to support the sales organisation. Overriding this was the need for a strategic road map and a mission statement that ensured we would be viewed within the organisation as ‘a valued partner, working collaboratively to drive supply chain solutions that delight our customers and deliver our corporate goals’.

The mission statement is as relevant today as it was back then.

Thinking back on the 6 ½ years in the post, it is easy to forget how far we have progressed and how different we operate now to back in 2015. Some of the early initiatives proved hugely important. We conducted a detailed review of our key supply chain partners. By doing this we were able to focus on ensuring that we were developing partners that were a good fit for Optos or putting in plans to make changes where the fit was not appropriate. We worked hard in the early years to develop strategic supplier relationships where historically these had been mostly engaged at a tactical level. We established regular business reviews to ensure we were aligned on requirements in both the short and longer term. This helped our partners planning and was instrumental in driving improved service levels as well as supporting our cost goals. We created a purchase agreement template to further strengthen the commercial relationship and provide a contractual umbrella for both

The Business Profile

Optos and our suppliers. We introduced an Inventory policy which provided guidance on stocking levels which has hugely improved our availability of materials and finished goods to provide the necessary support to our sales and service functions and our manufacturing sites.

Of all the challenges that face an organisation, supply chain surety and risk mitigation is one of the key areas that needs significant attention. Understanding the risk is key. Whether it is single source, or a financial concern, a technology miss match, a future capacity concern, or the wrong fit, a solution is required, or at least a plan that the business can buy into. The last 18 months took risk management to a different level.

The business has been impacted during these months of the pandemic and the supply chain function was one area

that mitigated the effect. What initial challenges did the pandemic cause the business and supply chain function?

The impact of Coronavirus was seen at Optos well ahead of the realisation that the world was heading into a pandemic. One of our key supply partners is based in Wuhan, China. By the middle of January, the city of Wuhan was in complete lockdown with no opportunity to get product out. Fortunately, shipments were in transit to us to cover the imminent Chinese New Year period and with our stocking policy in place we had coverage for long enough to put a contingency plan in place. In this case being able to build in house – something Optos had done prior to outsourcing. Whilst challenging to reset up and get in materials, this was an approved alternative source. By the time Wuhan reopened and normal supply resumed we were well into March and the Pandemic had moved to Europe and the US. This all 5

Procurement & Supply Chain coincided with our traditionally busiest quarter ahead of fiscal year end in March.

The impact of lock down specifically in Europe and the US rapidly prevented us from gaining access to customer sites in order to install product and therefore had an impact on our year end revenue expectations and resulted in significantly more inventory than we were anticipating.

April was a month of rapid adjustment to the unfolding situation. Home working started for office-based staff, there was some staff furloughing in the UK specifically in the manufacturing and logistics areas, making the facilities COVID safe environments ahead of restart and ensuring that the business adapted to a new way of working to support future sales. From a supply chain perspective, the first task was to totally re-align our master production schedule to a revised forecast. This had a dramatic impact on our short-term requirements. Whilst we set a plan that anticipated a gradual return to normality through our fiscal Q2 (July to September) and back to budget levels through the second half of the fiscal year (October to March); Our Q1 was pretty much reduced to zero from an output level with any requirements being managed from excess inventory. We worked with our suppliers through this period and whilst the discussions were not without challenges, we were able to successfully create a route forward for both parties. Our suppliers were also adapting through this time and regular communication was key to ensure we were aligned on any deviations to the revised plan.

June saw a real change for the positive in terms of business activity. This was aligned partly to the lockdowns easing after the first wave of the pandemic, but mainly due to innovative ways in which the business tackled sales without a face-to-face visit.

We also were seeing the impact of pent-up demand from end of March through April and May releasing as more clinics/opticians came back online.

So, the next big challenge for supply chain was keeping pace with the recovery.

We had created a gradual improvement in numbers, but it became clear as we entered Q2 that the recovery was ahead of the plan and therefore we were now making positive adjustments to forecasts – whilst this is a nicer problem to have, we were now conscious that suppliers were manufacturing in COVID safe environments, in some cases at lower capacity due to social distancing and then there were the logistics delays.

The impact of the pandemic on passenger travel via airlines dropped significantly which had a direct impact on freight capacity – this coupled with prioritisation being given to PPE and latterly vaccines made air freight both costly and at longer lead times. We made several critical adjustments in planning and inventory holding to enable us to manage extended logistic lead times and incorporate a monthly 40ft container between the UK and US to try and limit the impact of rising costs.

By December we were achieving higher monthly revenues and the pace continued to

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increase until to the end of our fiscal Q4 in March. We were able to support all the sales requirements although not without a few diving catches and even went through Brexit without too many dramas.

As mentioned, after the initial challenges the business has gone from strength to strength. How did the business evolve?

As I mentioned above, April was a real period of adjustment, but the business quickly responded to the situation. As well as supporting home working and realigning our facilities to be a COVID safe environment for those who needed to be there; (As a manufacturer of medical equipment we were declared as essential from the outset) we were also working on innovative ways to engage customers.

Whether that was via online forums or via the creation of the virtual showrooms we were able to maintain contact with existing customers and bring in new customers. We were also assisted by products - our core products produce high resolution optomap® images of 82% or 200 degrees of the retina, something no other imaging device is capable of in a single comfortable capture. The most recent innovation from Optos integrates ultra-widefield retinal imaging and imageguided Optical Coherence Tomography (OCT). Being able to capture images quickly and across the different operating modes on a single device seemed to be conducive with socially distancing requirements and supported less clean downs of multiple systems between patients. We saw a notable switch in our expected product mix in the first months of the recovery.

Optos Monaco The Optos supply chain function plays a pivotal role in business decisions.

How important is the ability to sit at the table and collaborate with internal stakeholders in ensuring a smooth supply chain operation?

The answer seems obvious to me, it is critical. However, it is not always viewed as such in every business. If an organisation wants to realise full value from its supply chain, then understanding that early engagement can make significant difference in any outcome that is being worked. Some examples: being involved early in a product design cycle helps us ensure that the right suppliers are lined up ready to engage. Understanding changes in product mix or events that may drive sales spikes is key to our planning to position inventory ahead of those requirements.

Having solid strategic relationships with your key suppliers and regular business reviews, enables you to get ahead of issues such as lead time extensions, part obsolescence, potential capacity constraints such that there is a consistent 7

Procurement & Supply Chain supply of materials to maintain level production. These may all seem obvious, but it is surprising how often these things can get overlooked. A good benchmark that your supply chain is working effectively is the feedback from the business. If there isn’t any, then things are usually working pretty well! It’s good to know that you have a team that can firefight and be great in a crisis, but if you can plan and prepare so that the crisis isn’t as bad or isn’t one at all, is a more optimised way of working and I would take that approach all day long!

What do you believe are the main lessons your function has learnt during the challenges of the past months?

It has clearly been a year like no other.

Businesses have had to learn to adapt to a new way of operating. Technology has been a great enabler for successful home working and whilst there were some elements of doing the job which missed the face-toface communication – it bridged the gap necessary to keep the wheels turning. I learned a lot about my team and about their resilience and flexibility to tackle the issues as they came along.

The Supply Chain group had spent time the month prior to lockdown preparing the objectives we intended to achieve through fiscal 2020. It became apparent pretty quickly that those objectives would have to take a

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back seat as there were clearly important business priorities that had to be addressed.

I think the key lesson learned through this was that your supply chain is only as strong as the weakest link – understanding the supply chain risk and having an ongoing plan to address those risks remains the most significant task for supply chain leaders. Assessing this task is an ongoing process, not a one-time event. It can take a significant amount of time, resources, and commitment to maintain. It was not lost on me that some of the work we have done in the past 6 years aided us through last year in this regard, but there were other learnings coming from the pandemic that will shape risk planning going forward.

Optos Daytona

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