The Supply Chain Management Professional Designation Program

Supply Chain Canada: Module 1 - Written Case

Report Response

Nexus Cardiac Products Ltd.

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The Supply Chain Management Professional Designation Program

Nexus Cardiac Products Ltd.

Written Case Report
Executive Summary

Nexus Cardiac Products Ltd., a small Canadian company, started as a company spun

off from Wilkinson University in order to commercialize research work done by the

Biomedical Engineering Department. Until recently, Nexus has remained tightly focused

on its first product, a pacemaker. The Nexus design has won several research and

development awards and was innovative in two areas. Once Health Canada approved,

annual revenues in the previous year and a half rose from $3,000,000 to $9,000,000.

Now that the pacemaker looks to be a success in the Canadian market, the scientists

and engineers in the company are starting to integrate its patented technologies into

two cardiac rhythm products that are closely related to the pacemaker, an internal

defibrillator, and a subcutaneous heart monitoring unit. The worldwide market for all

cardiovascular surgical devises, including cardiac rhythm management devises, was in

the order of $240 billion per year. North America was the largest market, followed by

Europe. However, there are strong expectations of growth in the Indian and Chinese

markets as their health care systems are expected to develop rapidly. Nexus has

become a highly respected company with an innovative product that was starting to

prove itself. Technology companies in similar positions had often taken one of two

approaches. 1. Sell out to a large competitor or 2. Remain a small technology

development firm, licensing patented technology to others and leaving it to them to

manufacture and distribute product.

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The Supply Chain Management Professional Designation Program

Based on the analysis presented, I recommend not to sell Nexus Cardiac Products Inc.

Instead focus on company growth by developing its manufacturing capabilities further

and its own marketing and sales expertise.

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The Supply Chain Management Professional Designation Program

Nexus Cardiac Products Ltd.

Written Case Report

Table of Contents

Executive Summary Page 3

Issue Identification Page 6

Root Cause Analysis Page 7

Operating Environment Page 8

Alternatives and Options Page 9

Recommendations Page 11

Implementation Page 12

Monitor and Control Page 13

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The Supply Chain Management Professional Designation Program

Nexus Cardiac Products Ltd.

Written Case Report
Issue Identification:
Nexus Cardiac Products Ltd. is currently facing confusion as to what path their company

should take.

Short Term Issues:

 Nexus is currently facing uncertainty in terms of where they should place their

resources, the pacemaker or their two new patented products, the defibrillator, or

a subcutaneous heart monitoring unit.

 Nexus does not currently have the manufacturing capabilities to support the

projected growth of the pacemaker.

 Global health care manufacturer headquartered in Germany has claimed that

one of the Nexus patents infringed on a patent that they held.

Long Term Issues:

 Nexus does not have a large enough sales and marketing team. Selling health

care devices is a highly specialized activity. It requires the sales representative to

have technical and medical expertise in order to talk intelligently with physicians

about the product.

 Cost reduction is a priority in the medical community. This has created a push

from most health care managers to put a higher priority in inventory management

levels. There has been an increasing pressure to reduce excessive inventory,

especially of expensive medical devices. They are looking to move to a more

“just in time” approach.

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The Supply Chain Management Professional Designation Program

Root Cause Analysis

SWOT Analysis:

Strengths:

 Worldwide market for all cardiovascular surgical devices, including cardiac

rhythm management devices

 Excellent seed funding when it began

 Lead time for Nexus is less then the typical medical device business (60 – 70

days vs 120 days)

 The Nexus design as won several research and development awards

 Zero post-implantation failures reported for the pacemaker

Weaknesses:

 Sales and marketing team

 Although the full-time staffing has increased in the last year, they are still

understaffed in specific areas

 Nexus does not currently have the manufacturing capabilities to support the

projected growth of the pacemaker

Opportunities:

 Several economic development loans and grants that Nexus can still apply for

and no trouble raising more capital if it wished to expand further

 Reduction of lead time to 30 days

 Can increase sales/market share by increasing sales and marketing teams

 Use ERP system to its full capabilities

Threats:

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The Supply Chain Management Professional Designation Program

 Large competition

 Changing trends – less product on hand, lower costs

 The Health Canada Act – “who is the customer?”

 High barriers to entry, rapid technological advancement

Operating Environment:

Porters 5 Forces:

Industry Competitiveness In Canada, there are approximately 1000

medical device manufacturers but, due to

the industry barriers, very large

companies, with very deep pockets,

dominate the market.

Threat of New Entrants Large competition: however, there is a

low threat of new entrants as the products

are technically complex and often require

an extremely high degree of specialized

knowledge to develop, test and bring to

market.

Bargaining Power of Buyers Buyers have bargaining power because

there are other options in the

marketplace.

Threat of Substitute Product or Service There are currently no substitutions

however there is a change in focus to try

and move from a sickness management

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The Supply Chain Management Professional Designation Program

system to a health and wellness

improvement system in our healthcare

systems.

Bargaining Power of Suppliers Suppliers do not have a lot of bargaining

power because there not a lot of options

in the marketplace.

Alternatives and Options

1. Sell Nexus to a large competitor

Pros:

 Receive a lucrative pay out for all stakeholders involved

 May not have to work anymore or competitor could give current employees a

job at their firm

 No more tedious business decisions

Cons:

 Risk the loss of their innovations

 Losing value from their shares by selling out instead of holding on and helping

the company grow

 Fakhoury and team may be out of a job if they sell

 Competitor could kill the product in order from the marketplace

 2/3 of companies manufacture their product offshore resulting in job loss and

taking money out of the Canadian market

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The Supply Chain Management Professional Designation Program

2. Remain a small technology development firm, licensing patented technology to

other and leaving it to them to manufacture and distribute product:

Pros:

 Continue to have control over product design

 Nexus would still own the rights to the technology

 Nexus could continue to create new projects in the cardiovascular surgical

space such as replacement aortic and mitral valves

 Technology would stay in the market

Cons:

 Job loss, Nexus would no longer need manufacturing, packaging, and

shipping positions

 Loss of branding

 Could lose out on lucrative payout

3. Continue to grow Nexus:

Pros:

 This is what the ownership group wants

 Nexus has huge potential to continue to be a profitable company

 Maintain possession of both products and technology

 Continue to create new projects in the cardiovascular surgical space

Cons:

 This is only the first year of profit for Nexus – no proven track record yet

 Potential to lose out on a large payout

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The Supply Chain Management Professional Designation Program

Recommendations

Based on the above options, my recommendation is to go with Option 3 – continue to

grow and expand Nexus Cardiac Products Ltd.

1. Nexus needs to ensure they can support the pacemaker projected sales moving

forward. In order to achieve this, I recommend moving into the unoccupied space

at the long term leased space, in order to allow production to at least double.

2. Fakhoury needs more staff on hand in the sales and marketing teams in order to

expand. New employees must undergo specialized training, so they have the

technical and medical expertise in order to talk intelligently with the physicians

about the product and no longer need to rely on the biomedical professors and

senior research staff.

3. Nexus needs to take advantage of the economic development loans and grants

that they have access to.

4. R&D needs to continue. As this was the success behind the pacemaker and with

more patents in the works, this is a viable option to continue to grow the

business.

5. Continue with the installation of the SCM ERP module, which includes

purchasing and inventory control functions. As this will allow individual device

tracking and good visibility with customers due to its ability to integrate with a

wide variety of the end users’ systems in the healthcare sector.

6. Reduce lead time to 30 days through the SCM ERP system. This was one of the

reasons that the system was pushed through first. Demand planning was a

strong focus for Fakhoury.

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 The Supply Chain Management Professional Designation Program

Implementation Plan

Recommendatio Description Person(s) in Charge of Time Frame

n Implementation

1. Moving into the unoccupied space at Fakhoury with the help of 18 months,

the long term leased space management and admin when the lease

is available.

2. Hiring of new sales and marketing Fakhoury with the help of HR Urgently

staff needed. Dec 1,

2022 –

continuous, as

needed.

3. Economic development loans and Accounting and Finance with help More finding is

grants from Fakhoury if needed needed to grow

now faster. Start

January 1, 2023

to apply for all

new loans and

grants available

at the start of

the new year.

4. R&D Research and development team Current and

Continuous

5. SCM ERP module Fakhoury and supply chain Current and

management team Continuous – by

the end of Q1

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(three months)

the first wave

should be

implemented

6. Reduce lead time to 30 days Fakhoury and supply chain Q2, once the

management team improved ERP

system has

completed first

wave

Stakeholders buy-in:

All of our current stakeholders want to stay with Nexus and continue to grow the

business. Since they are already on board, we would not require any further action from

them at this time.

Monitor and Control

Monitoring and Controlling means to assess the risks and to manage tasks in such a

manner that the project is completed on time. If any problems are encountered, they

need to be properly recorded and solved. Issues that arise will be escalated to

managers so they can be solved and avoided in the future. The main role here is to

manage problems and to identify and eliminate before they occur. The performance of

the project plan will be timely evaluated and required changes will be adjusted if

required.

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The Supply Chain Management Professional Designation Program

The KPIs will be monitored regularly which helps in keeping the project deliverables on

track and make sure performance is up to date. This helps managers in effective

decision-making and identifying risks.

A shared tool should be made to monitor the activities and employees should put in

their tasks to avoid miscommunication and to keep tasks in control. A quality report will

be maintained to ensure quality control process.

Project leads will be created for different milestones to ensure all the tasks are in control

and are done in an efficient manner.

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