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I gave this presentation on the opportunity for operational excellence in the medical device industry at an S&OP conference in Boston
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Operational Excellence in the Medical Device & Orthopaedics Industry
Sales & Operations Planning SummitSeptember 15-16, 2011 | InterContinental | Bostonhttp://www.theiegroup.com/SOP_Boston/Overview.html
Dan Dodd, Vice President of Operations and Supply Chain
Presentation Structure
• Defining operational excellence• The opportunity in the medical device industry• The barriers• The dynamics of the industry• Key changes in the landscape• #1 reason S&OP does not achieve potential
Operational Excellence – Two Keys
5
24 month Demand, Supply, & Inventory
plans
ManagementBusiness Review
DemandReview
SupplyReview
ProductReview
Finance IRReview
Start(Begin Month)
MRP
• Executive led• One plan aligned
with financials
Doing the Routine Routinely
Sales & Operations Planning
Modern operational excellence is 75% lean and 25% S&OP in terms of effort/focus, but
S&OP comes first because it sets the direction
S&OP Lean Six-Sigma
How Well Does It Work?Danaher stock significantly outperforming:• General Electric• Berkshire Hathaway• Dow Jones• Even Microsoft
Cooper Industries prior to Danaher attempted acquisition, underperforming to Dow Jones
Cooper tracking to Danaher since
The Opportunity in Med Device
The opportunity for operational excellence is significant
Medical device/orthopaedic companies, avg=2.1 ||Other
Zimmer
Stryk
er
Medtro
nic
Smith
& Nephew
Johnso
n and Jo
hnson
Integra Li
fescience
s
Synth
es
Strau
mann
TeleflexDell
Hewlett-Packa
rd
Cooper Industr
ies
Danah
er02468
10
1.1 2.3 2.5 1.1 3.6 1.9 1.2 2.1 2.9 42.6 15.3 7.8 5.9
Inventory Turns
The Barriers/Current Focus
Zimmer
Stryk
er
Medtro
nic
Smith
& Nephew
Johnso
n and Jo
hnson
Integra Li
fescience
s
Synth
es
Strau
mann
Nuvasiv
e0%
20%
40%
60%
80%
Gross Margin
The great margins are going to SGA (37%) and R&D (6%)
Is the SG&A and R&D paying off?
Market share is stable – is it all hot air?2004 2005 2006 2007 2008 2009 2010
0%10%20%30%40%50%60%70%80%90%
100%
Other(1)ZimmerWrightStrykerSmith&NephewDePuyBiomet
Key Industry Dynamics
Cost
Delivery
Quality
Cost is #1 forHigh-tech, CPG, etc
MedDevice
Required and increasing government controls have meant the industry moves slowly, including the adoption of new practices, such as six-sigma… but this is changing
A Changing Landscape
Operational excellence is coming• 55% of practices are now
hospital owned (up from 30% in 2003)
• IP for 75% of devices expired/ing
• More outpatient and commodity surgeries….don’t need the rep in the OR
Compensation
S&OP
#1 Reason For Lackluster S&OP
More than one plan!...which is relevant to all industries
Next Steps In Medical Device
S&OP •X 1Lean Six-Sigma •X 3
Thank you!