As the largest pure-play medical device company in the world, Medtronic has more suppliers than most companies have employees.
Although we were unable to get an exact number out of him, John Klein, Medtronic’s new Chief Procurement Officer, told us the company managed a growing universe of “tens of thousands” of suppliers. With each acquisition the company makes, and they’ve made many in the past two years, the more suppliers Medtronic has to either onboard to its way of doing business, or cut to reduce costs.
Managing that vast universe falls on the broad shoulders of Klein, who joined the company late last year after spending seven years with adhesives giant Avery Dennison Corp.
In his new role, Klein runs all strategy for Medtronic’s supply management functions, focusing on “developing functional best practices across Medtronic, while also pursuing combined spend opportunities across the divisions,” he tells us.
We asked Klein to give us an inside look at how Medtronic looks at managing and picking the suppliers it works with. The following interview was conducted via email to accommodate Klein’s busy schedule.
DeviceTalks: As the largest pure-play medical device company in the world, about how many suppliers is the company dealing with at any one time, and what is the process for vetting and securing new vendors such, as contract manufacturers?
John Klein: We currently have tens of thousands of supplier partners, and our primary focus is on optimizing our supply base and those partnerships. We evaluate new supplier capabilities and competencies on a number of critical areas such as cost, quality, service and innovation performance. We then evaluate how these potential suppliers might best fit with our current and future business needs.
DT: How large a team is required to understand and manage these suppliers? Is it done from a central office or is it up to each division to manage their own suppliers?
JK: We have an extended staff of employees in Supply Management around the globe who are responsible for supplier quality management, technical sourcing, advanced sourcing, continuity engineering, contracting, purchasing, and process excellence, to name some of the predominant areas of functional concentration. We deploy a center-led approach for direct materials and contract manufacturing, and then a centralized structure for indirect goods and services.
DT: The automotive and aviation worlds are often said to be analogous to medtech, in the relationship of suppliers to the manufacturing process. But both of those industries have changed dramatically as a result of consolidation; now airline and car companies carry very few suppliers. Has the current system helped or hurt medtech, in that companies continue to support a vast constellation of suppliers and vendors?
JK: Medtronic is focused on delivering medical technologies that foster better patient outcomes while maintaining or reducing costs. That focus extends into how we manage our supply base. In some cases, our patients and customers are better served through strategic consolidation of our supply partners. However, Medtronic also partners with many smaller suppliers who have unique technologies and play a vital role in advancing our mission and strategies.
DT: You said Medtronic has tens of thousands of suppliers; about how many contract manufacturers is the company working with at any one time?
JK: We work with several hundred contract manufacturers who are strategic partners in our efforts to lower costs while improving quality, service and innovation.
DT: Before the Covidien merger, roughly how many suppliers was the company working with?
JK: The Covidien merger nearly doubled the global footprint of Medtronic, which increased our supplier base by roughly the same proportion.
DT: What is the SRM (Supplier Relationship Management) Program and how will it change the way the company does business?
JK: Medtronic’s Supplier Relationship Management program aims to create the strongest possible relationships with our most critical suppliers, and encourage efficiencies throughout our global supplier network. It allows all parties involved to maintain focus on our strategic priorities, while creating alignment internally and externally on those programs.
DT: Your background is not in medical devices. What drew you to the industry and Medtronic specifically?
JK: I am not entirely a newcomer to the industry. My last employer, Avery Dennison, had a medical division called Vancive Technologies, so I was familiar with supply management in a regulated environment. As a material scientist and engineer, the vast majority of my 25-year career has been with both manufacturing and material science-based companies that are innovation leaders in their fields. Medtronic fell right into this comfort zone for me. I’m excited to become more involved in a dynamic industry on the verge of tremendous growth and opportunity. The Medtronic Mission has been a strong driver of allegiance and commitment combined with a compelling corporate strategy that made it extremely attractive for me to join.