In the case of MacPherson Medical Supply, the weakness that we experienced initially was our silent reliance on semiconductor chips that were integrated into nearly all medical machines such as infusion pumps, portable monitors, and even some types of diagnostic equipment. In the midst of the global chip shortage, lead times on certain devices increased to 30 days and as much as 180, and that impact directly trailed to hospitals and long term care facilities which relied on us. Instead of waiting until the manufacturers did something right, we cross tabulated what our 200 SKUs depended on chip based parts, and found other secondary models that were based on other chip architectures or were older and more easily available derivatives. We also improved safety stock of high risk categories of 30 days supply to even closer to 90 days supply when literature permitted. That ruling had bound up cash in short term, but saved backorders which might have cost us six figure contracts. The outcome was a consistent satisfaction rate of above 95 percent as opposed to others languishing at below 80. More importantly, continuity of care rather than disruption was experienced by our customers. Handling that semiconductor vulnerability put us into reactive buying instead of scenario planning, and that science now informs how we consider each critical product line in our organization.
One weakness that attracted our interest was a single source dependency on a niche microcontroller which is in one of our diagnostic peripherals. During a regional slowdown in manufacturing, lead times have reached as long as eight weeks to a high of almost 32. The manufacture plans were unpredictable, and the service schedules were threatened. Rather than waiting it out we financed a quick redesign permitting the board to take two alternative chips of similar architecture. There was an increase in engineering hours in the short run but after four months we were able to qualify the suppliers and split procurement 60 40. The effect on the operations was instant. There was a reduction of about 35 percent in inventory buffers due to the fact that we were not stocking up components anymore and the amount of cash that was tied up in excess stock also reduced. In the case of RGV Direct Care, where continuity of medical services is based on reliable equipment, stability of supply has a direct relationship to patient access. The absence of a bottleneck ensured the flow of appointments and minimized the pressure of emergency sourcing at surged prices. Diversification failed to eliminate risk but rather placed us in the control planning stage as opposed to reactive scrambling. The difference kept margins intact and ensured reliability of the services in an unstable cycle.