Originally Published MPMN March 2009

EDITOR'S PAGE

Diversify or bust. That seems to be the mentality of scores of supplier companies struggling in the current economic downturn. And as one of a select few industries managing to stay afloat, the medical device market seems to shine as a beacon of hope and prosperity to these vexed vendors.

Desperately seeking new revenue opportunities, many supplier companies are scurrying to adapt their skill sets and equipment to accommodate medical device manufacturing. Suppliers serving an array of industries are attempting to get their respective feet in the door or increase their presence in a market they may only have targeted on a small scale in the past.

Perhaps the best example of this phenomenon is found in Michigan. With car sales plummeting in January to the worst levels since 1982 and The Big Three begging for federal aid, The Automotive State is in a state of panic. To remain viable, suppliers to the automotive industry are setting their sights on the medical device industry, encouraged by several Michigan-based organizations helping to facilitate the transition. In November, for example, the Michigan Economic Development Corp. hosted the Automotive Supplier Diversification Summit, which focused on introducing other growth opportunities, such as medical devices, to automotive suppliers. The event drew more than 150 automotive suppliers and manufacturers.

So, what does this influx of new suppliers mean for medical device OEMs? Potential savings in the supply chain, for one. It's probably safe to say that these new suppliers will provide cost savings over industry-established suppliers--and in this economy, everyone's looking to trim expenses. At the very least, OEMs may be able to use new competitor cost information as leverage with current partners. Beyond cost-effectiveness, these "outsiders" may be able to bring fresh eyes and new ideas to a project as well.

"The supplier diversity can ultimately help the industry grow, despite potential concern in terms of price versus quality," comments Marco Bafan, technology analyst, medical devices, for the research firm Nerac.

But, as Bafan notes, there are also risks and drawbacks associated with these newcomers. As Patrick Anderson, vice president of corporate affairs for Michigan-based Stryker Corp., told The Detroit News in February, "There are plenty of folks that can do injection molding, but not many that can do it to a level of precision required to meet the quality regulations." In the medical device industry, quality simply can't be compromised. Of course, everything is relative to the project at hand and its associated requirements.

Nevertheless, it will be interesting to see how these migratory medical device suppliers fare in the coming year and whether their diversification efforts pay off. Will you take the automotive suppliers for a test drive? E-mail me your thoughts on the new breed of suppliers at the address below.

Shana Leonard
Editor

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