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Our Business Development Executive Bob Maley and Director of Sales and Marketing Sean Stowik, along with a group of other industry professionals recently spoke with MPO magazine’s Sean Fenske about post pandemic supplier relationships. Read our team members portion of the interview below or see the entire piece on MPO’s website.

Partner Preference in Full-Service Medical Device Outsourcing

The pandemic wreaked havoc on the world, across all industries and among those who became ill. While the loss experienced was beyond what anyone may have expected, there were also valuable lessons learned from the period. Anecdotally, it was revealed companies with strong supplier relationships fared better in terms of their ability to produce much-needed medical equipment to battle the virus. Meanwhile, those without such established partnerships struggled more with communication and receiving the necessary amount of required supplies from their support system.

With this in mind, medical device companies (for the purpose of this article, referred to as OEMs) and their supply chains (for the purpose of this article, referred to as CMOs) must reflect on the successes and failures of the past four years. Moving forward, this assessment will help companies better address situations that arise from natural disasters, disease, logistics challenges, or other unforeseen events that occur and impact the smooth flow of supply.

To help facilitate this review, MPO spoke with over a dozen medical device manufacturing thought leaders to gain their insights on a variety of topics involving the outsourcing landscape for medtech production. These industry voices touch on everything from those aforementioned lessons learned, selecting a partner (and how to demonstrate you should be considered as one), just-in-time inventory, reshoring, M&A, labor concerns, and a host of other topics.

Did lessons learned/reactions from the pandemic affect this direction/change? How/Why?

Sean Stowik: With the focus of many OEMs on reducing costs and improving margins, the pressure to look wherever possible for immediate results may be too inviting and subject them to additional future supply chain risks from raw material to finished product.

Overall, has the industry moved beyond the supply chain challenges that originated from the pandemic or are we not yet fully recovered?

Bob Maley: We are still recovering as OEMs work to “normalize” inventories that didn’t move during the pandemic or post-pandemic based on new demand adjustments or other new market pressures. This lag has strained some supply chain channels and is requiring a higher level of communication and agreement over flexibility moving forward. Having an effective supply chain management team has proven to be critical to these discussions to ensure positive results.

Has your relationship with your suppliers changed as a direct result of challenges encountered during the pandemic? If so, how?

Maley: As I mentioned in response to the previous question, the lag to full “steady state” recovery has strained some supply chain channels and is requiring a higher level of communication and agreement over flexibility requirements moving forward. We are fortunate to have long-term relationships with a global supply base, making these sometimes difficult discussions easier to navigate.

On the other hand, has your relationship with customers/OEMs changed since the pandemic? If so, how?

Stowik: Relationship building has changed; face-to-face meetings are more difficult to organize. There is more focus on discussing business continuity and risk mitigation for both the OEM and CMO. Increased visibility on forecasting and securing long lead-time materials in support of forecasts has become increasingly difficult to predict and manage. We always prefer in-person meetings and, for the most part, request all critical discussions involving engineering, quality, or commercial be done on-site either at the OEM or one of our facilities.

Is M&A activity within the industry affecting the OEM/CMO relationship? If so, what is the impact?

Stowik: Some OEMs may have concerns over the risk of working with investor-owned companies as opposed to other structured companies. The “one contact to hold accountable” may be appealing to certain OEMs versus managing multiple “smaller” companies. M&As can certainly make it more challenging for private companies to have a bigger piece of the pie, but I think there are opportunities to secure new relationships and grow with existing customers regardless based on each OEM’s specific needs and strategic alignment with smaller CMOs.

What recommendations do you have for OEMs currently seeking new CMO suppliers? How can they best evaluate a prospective partner and what traits should be considered most important?

Maley: Some key traits an OEM should expect from a CMO are high-quality standards, a collaborative culture, flexibility, innovation that improves DFM/DFR, integrated capabilities, opportunities for dual-sourcing, best cost manufacturing location, business continuity plans, strong supply chain relationships, ongoing investments in talent, innovative technologies, and advanced automation. Finally, a proven track record of launching patient-critical programs flawlessly and maintaining the highest quality standards through product lifecycles are also important.

What steps must an OEM take to evolve from dealing with a CMO purely as a supplier to establishing a true collaborative partnership with that CMO?

Stowik: It sounds simple but transparency, mutual respect, fairness, and trust create the foundation for a successful partnership. Our innovation pipeline investments must be ahead of our customers to support their product launches and scaling requirements. To accomplish this, there must be collaborative discussions and commitments from both sides.

Conversely, what does a CMO need to do to illustrate to an OEM it is capable of being a collaborative partner in a medical device project?

Maley: In addition to mutual respect, fairness, and trust, a CMO must provide innovative manufacturing processes and solutions that optimize efficiencies, cost savings, and product performance throughout the product lifecycle. They must consistently deliver high-quality, reliable products and invest in continuous improvements and innovative technologies that mitigate risk, improve outcomes, and keep pace with the demands and technical advances of the medtech industry.

Have you continued with any virtual practices such as virtual tours with your customers and/or suppliers since the pandemic or are you fully back to in-person activities?

Stowik: We still support virtual requests when appropriate. Although a large portion of meetings can still be conducted effectively virtually, engaging with our talented people on the floor is what drives a successful visit. We always prefer in-person meetings and tours but remain adaptable post-pandemic to suit our customers’ and employees’ needs.

As just-in-time inventory practices have seemingly fallen out of favor, have OEMs approached you about offering warehousing or logistics services? If you already offered these types of services, are OEMs seeking to increase their usage of them?

Maley: Although we hear it, we have not seen a significant number of requests in support of these strategies. This is partly due to our strategic proximity to key customers’ facilities and partly due to redundant capabilities, as well as our ability and track record of being nimble enough to react to demand fluctuations and urgent needs.

Have you been impacted or participated in the nearshoring/reshoring trend? Have OEM customers inquired about you moving to/opening a facility closer to them?

Stowik: AVNA opened a facility in Costa Rica in 2012 to support our strategic customer base and our business has seen tremendous growth. So much so, we are building a new and larger facility in the new Evolution Free Zone that will open this summer. The advantages for OEMs and CMOs extend beyond logistics. Our expansion in Costa Rica supports business continuity planning, dual-sourcing opportunities, cross-training of skilled talent, and optimized cost efficiencies.

What impact, if any, have international conflicts (e.g., Ukraine/Russia, Israel/Gaza) had on your company and/or sourcing materials/components?

Maley: Fortunately, we have not experienced significant issues from the current international conflicts, other than increases in freight costs in certain channel areas.

Since the pandemic, have you revisited/revised disaster plans to address future crises? Has this become a more important question for your customers/prospective clients?

Stowik: Disaster plans are definitely a priority question for our customers. Our plan is reviewed and updated regularly, and it was expanded post-pandemic based on industry feedback and lessons learned. Sections addressing health issues and technology were revised to add increased robustness to business continuity and the safety of our facilities and people.

Social awareness programs have faced backlash recently and many companies are refocusing their efforts. Has your company altered its direction regarding DEI (diversity, equity, and inclusion) or ESG (environmental, social, and corporate governance) campaigns?

Maley: In the last few years, AVNA has remained committed to providing a safe, collaborative, and inclusive work environment. We continue to implement mentorship and leadership training programs that address unconscious bias and guide our team in achieving a culture of mutual respect. Additionally, we provide opportunities for our employees to engage in employee resource groups that foster spirit, build camaraderie, and celebrate each other’s successes and cultural differences. We are also deeply committed to empowering our employees to make a meaningful impact on the lives of the underserved within our communities. We poll our employees annually about our culture for suggestions and feedback that allow us to continuously improve and pivot as needed. Many OEMs look for synergies and mutual commitment to improving social awareness from their manufacturing partners, and it will always be AVNA’s priority as a globally responsible corporation.

When faced with an OEM customer who presents consistent requests for a percentage cost reduction year over year, does it cause a rift in the relationship or a reevaluation of whether the customer’s business is worth it? (or, have you experienced this at all?)

Stowik: We have experienced all of it. We take pride in building long-term, mutually beneficial partnerships, and that requires give and take on both sides. We are fully committed to pivoting, adapting, and being flexible when our customer needs us to, but in turn, we need OEMs to respect, trust, and understand the value of our investments, not only in technology and materials but the human resources that go into co-collaboration and advanced innovation. Setting clear expectations and ensuring both parties understand and agree to the intent of the initiative is essential. Is it a cost reduction initiative that requires a collaborative review of all aspects of the project to support it, or is it merely a price reduction request that is one-sided? Clearly, they have very different implications long-term for a relationship.

The industry is experiencing a shortage of skilled labor for many positions. How is your company addressing this and what are you doing to attract/retain/develop talent?

Maley: As the candidate pool of skilled labor continues to shrink, AVNA has taken a multi-strategy approach to find, attract, and retain. Attracting talent is just a small piece; retaining the talent is equally as important.

We’ve partnered with several programs that provide opportunities to individuals with physical impairments, individuals who have been recently rehabilitated, and individuals from Europe who have been displaced by the war in Ukraine.

We’ve also increased our engagement with trade schools to attract talent. These are students who may not necessarily want to take the “four-year degree” route. We also partner with local high schools and colleges to establish and support manufacturing technology education centers, and we offer paid internships and co-ops.

We are engaging with middle schools to introduce manufacturing as a path for students interested in STEM careers. We find it is important to not only educate students, but guidance counselors and parents about the benefits and rewards of a career in manufacturing.

Additionally, we partner with state agencies to promote manufacturing career opportunities and attract talent not only within AVNA but within our state. We have also been fortunate to benefit from training grants when available. One example is our Toolmaker Apprenticeship program. This program allows us to provide a path for individuals who want to pursue a career in the trade of toolmaking.

What trend(s) in medtech will you be following in the near- and/or long-term you expect to become more important or could have a significant impact on the industry? Explain.

Stowik: One trend we continue to follow closely is the impact of new pharmaceutical therapies for some segments of the industry that could impact or even replace “standard” surgical procedures or other traditional treatments in the future.