Fuel Growth with a Strategic Move to Reduce Complexity, Manage Risk, and Maximize Liquidity
Any truly successful business focused on profitability recognizes that more revenue and greater efficiency together will improve the bottom line like nothing else.
Hungry for that improved bottom line, medical device manufacturers pursue the capture of more market share, often through strategic acquisition. These acquisitions frequently introduce new levels of complexity in managing the supply chain. As a result of these complexities, your team may now contend with multiple vendors and lead times, which can create inefficiencies in assembly schedules. That kind of inefficiency looks like this: one component arrives now, a second comes in 12 weeks later, and a third is due 24 weeks after the second. Of course, without all the components, you can’t build the product. And, while you may have captured more market share and developed a more diverse product portfolio—at least on paper—these delays compound already existing challenges with your access to working capital.
Of course, as you already know, working capital is essential to reinvestment in your growth, to feed innovation and fund new product developments that help sustain your trajectory in the future. These new complexities increase your risk as more and more of your capital is locked up in components you can’t turn into finished goods to fulfill demand.
Resources are always finite, and as you grow, more and more demands are placed upon them, until your company reaches a tipping point where you need to think differently about your capacity, staffing, and capital.
What, then, is the best way to reduce complexity and manage risk while maximizing liquidity?
One highly compelling option is to engage with an expert outsourcing partner for a comprehensive solution, such as Millstone’s Tier 1 service. In this service, Millstone takes on the role of managing the supply chain, from purchasing components from contract manufacturers and paying for those components, to all invoicing, inspection, and assembly into finished goods. Under a Tier 1 contract, Millstone bills the OEM client only once for these end-to-end services—reducing multiple purchase orders to a single PO and cutting overhead costs dramatically.
This single-invoice approach can create more cash flow. Before it comes due, a Tier 1 service client will have finished goods in inventory for 30 to 60 days. In some cases, those components could be utilized in surgeries before invoicing, meaning the client is cash-positive before payment. And, in most cases, Tier 1 service gives clients 60 days more access to their working capital—a game-changer for growth-hungry OEMs of all sizes.
Reducing overhead, simplifying complexity, and freeing working capital all reduce an OEM’s risk. Additionally, risk is reduced in other ways:
- Supplier management: Not all suppliers are equal. With years of industry expertise and an array of supplier relationships, an outsourcing partner can be invaluable in choosing the best contract manufacturers to produce quality components, a vendor with staff who will be responsive if and when any issues arise.
- Assume risk of scrap: Millstone inspects all components and assumes risk for the scrap, eliminating the management of this aspect of the supply chain.
- Independent quality-critical inspection:Some comprehensive solutions guard against risk better than others. Independent verification that a product is made, packaged, and sterilized correctly—and sent to the customer in perfect condition—goes a long way toward ensuring the vitality and longevity of your key customer relationships.
Is Tier 1 for you?
Whatever your size, scale, and M&A activity, Tier 1 service could help you simplify complexity and manage risk while improving your access to working capital—and your profitability. Ask yourself:
- Does your team have the capability and capacity to, depending on your product mix, manage multiple vendors and lead times to ensure that components show up in the right time period for you to assemble finished goods?
- If you’re smaller or growing quickly, can you afford to hire professional purchasing and planning people to manage your supply chain really well?
- Are you really capturing synergies if your acquisition presents supply chain complexity and facility or staffing redundancy?
With a birds-eye view of the supply chain and supplier landscape, an expert outsourcing partner with a comprehensive solution can mean the difference between being in the red and being in the black.
At Millstone, we get it. We believe quality drives patient success. That’s why we’ve perfected all the capabilities medical device manufacturers need to get to market. Today we offer post-manufacturing and aftermarket services to more than 50 customers, including some of the top 10 orthopedic companies in the world. We are constantly evolving our processes and services to help OEMs achieve sustainable success. We offer clean room packaging, medical device specific warehousing, finished goods distribution, loaner kit management, advanced inspection and reverse logistics services—all with an unparalleled focus on quality.
What could we help you do better? Learn more at http://millstonemedical.com.
Comments are closed.