The 2006 Supplier Directory - Orthoworld

THE BIG PICTURE
Beyond 2005, continued from page 9
Savvy suppliers have seen this coming and have begun the
process of building for the future, many through consolidation
and financing of growth. Exhibit 2 summarizes recent examples
of this activity.
EXHIBIT 2
KEY 2005 SUPPLIER ACTIVITY
Company Transaction
Paragon Equity Investment
Unique Merger
Precimed Equity Investment
Seabrook Equity Investment
Campbell Engineering Sale
Accellent Equity Investment
A primary motivation for all of this is the expansion of the
breadth of services that the supplier can offer to its customers, in
hopes of providing more value to the customer and spreading the
risk for the supplier.
Is the Sky Falling?
Absolutely not. The demand for orthopaedic devices will continue
to soar, based on a perfect storm of global demographics. Age,
activity, obesity; every seven seconds, someone turns 50! The current
cycle is one of slowing growth, not a shrinking market. Once
healthcare reimbursements adjust to the economics that technology
demands, and once hospitals, industry and the rest of the
supply chain evolve to accommodate those demands, growth will
increase with a vengeance. The last cycle took several years. This
one is already showing signs of being far shorter.
In the meantime, expect more consolidation of both companies
and suppliers, and at the same time new ones of both.
The Company/Supplier Relationship
As we manage our way through this cycle, life changes only
slightly, but the unprepared on both sides will suffer.
The orthopaedic companies will increasingly need suppliers who
are cheaper AND better AND faster. Any supplier who plans on
ignoring the ands in the last sentence will get whupped during
the adjustment of the next few years.
The relationship between supplier and company will become
more intimate in order to gain efficiencies. Real time inventory
tracking against blanket purchase orders will allow suppliers to
build when they have capacity and keep the OEM off of
backorder.
Nearly all orthopaedic companies predict more being brought in,
and at the same time more being outsourced. Suppliers are increasingly
developing programs to actively help their customers
insource the operations that make the most sense from a resource
10 BONEZone • Winter 2005
efficiency and profitability standpoint, and outsource those that
don’t and never will. A true partnership is emerging.
Real innovation will be rewarded as never before, from more efficient
manufacturing methods to instruments of higher cosmetic
quality and functionality. Streamlining inventory management
will be key. (Suppliers can stop groaning about their customer’s
lack of production planning, and accept this as characteristic of
the business we are in. Short runs in a hurry will always be the
norm. Find a better way to deal with it.)
For those on both sides of the supplier/company equation, this is
a great time to be alive in orthopaedics. The old “we/they” paradigm
will give way to solving each other’s problems. Sourcing decisions
based on price only will be more dangerous in the years
ahead. On time, every time will be the new mantra. A more
intense level of cooperation will make it a reality.
John Engelhardt is Chief Executive Officer of Knowledge Enterprises,
Inc. as well as Editor in Chief of U.S. Orthopaedic Product News.
He holds 19 patents for orthopaedic technologies and has published
numerous articles in the academic and popular press on orthopaedic
technologies and trends. He can be reached at 440-247-9051 or
john@orthoworld.com.
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