As medical device company executives, it can be challenging to identify opportunities for performance improvement that can quickly and efficiently drive incremental profits to the bottom line. New product development can often take years to successful launch into the marketplace, not to mention being highly capital intensive. Expanding sales and marketing, also expensive, can also take time to gain traction. These two strategic levers share a similarity, they both have a cost, tied to per unit input, that moves ahead of the profitability. Cutting G&A expenses is one option, but most companies are already remarkably lean.
There is one lever that is different. It’s the one that directly effects your Cost of Goods Sold (COGS). The push to get first generation medical devices off the bench, into studies and through regulatory is typically, pretty intense. Everyone’s pulling for the same goal…market clearance and launch. This effort, especially with startups launching their first device, can, due to the need for expediency, overlook opportunities to fine tune Design for Manufacture. It’s not a criticism, it’s simply a common reality we have all had to live with at some time or another.
Once the initial launch dust has settled, looking to strategically optimize Design for Manufacture can result in meaningful improvements to company profitability. Every dollar saved in lowering part counts, compressing assembly and cycle times, reducing scrap rates and strategically sourcing your supply chain, drops straight to the bottom line. For companies with a 20% net profit, this means every $1 saved in COGS is the equivalent to $5 in incremental sales. Here’s the other thing, the return on investing in manufacturability is, surprisingly, not all that expensive. Breakeven for such projects is often achieved in months, not years.
If you have a moment, I’d like to invite you to take a look at a 60 second video that describes our approach to Rapid Operational Improvement.
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