High Tech medical device
Fast-growing medical device company with a high tech product, in need of manufacturing strategy for the future and to optimize its manufacturing footprint globally.
Assignment
Our client, a fast-growing medical device company with a high tech product, identified the need to define the manufacturing strategy for the future and to optimize its manufacturing footprint globally.
The key drivers for this project were:
- The enormous growth projected by this company (new regulatory approvals expected, leading to very high volume requirements)
- The risks the company identified in the current footprint: everything outsourced, dependency on specific locations including China, long leadtimes
The company’s management decided to start an initiative in order to ensure the company’s manufacturing operations could keep pace with market growth and secondly, to build a robust, low risk footprint that could support the company for the next 10 years out.
Project summary
The client company is a very fast-growing medical device company, with a high tech product and production process and a high level of outsourcing.
The company started approximately 10 years ago and had now grown to a substantial, profitable company with markets around the globe and with a global manufacturing footprint.
As the product is successful from a medical care perspective, new medical indications are tested in clinical trials and these are also successful. Therefore the company is expecting tremendous volume growth, driven by a high growth of the number of eligible patients around the globe.
The company has strong partnerships with some of their main contract manufacturing partners, but also a long multi-tier supplier network with significant risks in there.
Our approach
Our project with this client consisted of two main phases:
- Phase 1) Manufacturing strategy development; determining the strategy from a Make vs Buy perspective, developing and implementing a supplier management framework, benchmarking with other high tech and medtech companies
- Phase 2) Manufacturing Footprint Optimization
This second part of the project was conducted in a step-wise approach:
- AS-IS analysis; detailed quantitative data collection and analysis as well as strategic input gathering through management interviews and workshops. A detailed mapping of the current footprint was the result of this first step
- Scenario development; based on peer company benchmarking, our global manufacturing footprint experience and the client team’s own experience and ideas a set of 5 scenarios was defined and detailed out. The scenarios as defined ranged from extreme regionalization (moving towards one super plant per region (Europe, Asia, North America)) to more dispersed footprints with multiple locations per region and a split between sub-assembly and assembly.
- Scenario analysis; a very detailed and flexible footprint (software) model was developed, allowing for fast scenario analysis and sensitivity testing. Besides the quantitative modelling, in this step also the qualitative assessment per scenario was conducted
Roadmap development; based on the outcomes of step 3 the preferred scenario was selected and a roadmap was built together with the client team: when to make which shift in the footprint, when to do what capital investment and insights into the landed cost per product group, will evolve over time given these optimizations
Result
A first clear outcome of the study was that the company decided that continuing to outsource all manufacturing is the best way forward for them. Executing the plan together with their key manufacturing partners is a major priority for the company going forward, requiring a different way of working with the partners, moving from transactional to real strategic partnership models.
The second important result was the decision to regionalize the manufacturing footprint, aiming to build more or less autonomous manufacturing bases in Europe, North America and Asia. The analysis showed that this would de-risk the end to end supply chain to a large extend, but also result into the most cost-efficient footprint from a landed cost perspective.
The company is now implementing the results globally. This means executing the roadmap gradually, anticipating volume growth per region as per the commercial strategies. The specific situation, with a high growth expectation but also the complexity of uncertain timing of regulatory approvals, makes it important for the company to continue evaluating the plan: are we still on the right track? Should we redirect? Pause? Speed up the implementation?
“We are now implementing the strategy and the developed footprint globally, adding capacities in Mexico and shifting capacities from current to new locations in Europe and North America”