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Ben Thompson, Chief Commercial Officer at Avalign Technologies, believes orthopedic suppliers have a unique perspective on the challenges their OEM partners face. “We work with numerous companies, and it has become evident that there is a growing need for strategic partnerships with suppliers because OEMs are striving to do more with fewer of them,” he said.
The complexity of orthopedic product development, persistent supply chain issues and economic pressures have increased the importance of cultivating OEM/supplier collaborations so they grow into long-term partnerships based on an overarching strategy that benefits both parties.
Shared Vision and Goals
Thompson pointed out that multiple business units in large OEMs might place various levels of importance on partnerships with suppliers. To address this inconsistency, Avalign implemented a couple of key internal exercises.
First, Avalign’s team conducts a comprehensive account plan review twice a year. The process involves evaluating priorities, objectives and OEM relationships, and confirming whether the company delivers on commitments made to its customers.
Next, Avalign refined its OEM partnership strategy and priorities at various levels throughout the company. Executives and internal leaders plan for the next 12 months from a big-picture perspective, assess the team’s preparedness and then drill down to specific projects.
“This structured approach ensures that every site and internal function understands what is most important for OEM customers and the projects they are working on,” Thompson said. “The entire process helps drive alignment and overall success.”
Problem Solving
John Manning, Sourcing Director of Global Freight, Supplier Outside Processing and Injection Molding at Zimmer Biomet, noted the importance of vetting risk throughout the entire supply chain — from tier-one suppliers down to raw materials — because you never know where vulnerabilities might lie.
“OEMs and their supply partners need to work closely together to identify these risks and develop strategies to mitigate them over time,” he said.
Manning also highlighted the need for the faster sharing of data. “Quickly relaying information from demand planning teams to suppliers can significantly enhance operational efficiency and success for both companies,” he said.
Zimmer Biomet is exploring whether technology such as AI can facilitate the rapid flow of information and allow supply chain personnel to make effective decisions. “This capability will ultimately lead to more stable supply chain performance,” Manning said.
Suppliers that have partnered with Zimmer Biomet during the current inflationary period and actively sought solutions to pricing issues have significantly strengthened their relationships with the company.
“Collaboration — or lack thereof — in working through current pricing challenges has made a notable difference in our working relationships,” Manning said.
Maintaining Alignment
M&A activity in orthopedics is changing the landscape for suppliers, which must manage networks of stakeholders that are becoming more complex to track.
“Relationship building boils down to organizational alignment,” Thompson said. “The more aligned your organization, the stronger and more strategic OEM partnerships will be.”
Thompson appreciates the complexity and the high level of detail required to develop and produce complex orthopedic devices. He suggests both sides of the OEM/CM working relationship keep detailed documentation of their interactions with each other.
“As the saying goes, ‘the biggest problem with communication is the illusion that it happened,’” he said. “Some OEMs are too large to rely on one-off conversations and assume that everyone in the organization is aware of what’s been discussed.”
Avalign has invested in manufacturing equipment, automation technology and labor, allowing the company to support the growing capacity demands in the marketplace.
The investments have also allowed Avalign’s leadership to strategically allocate the company’s capacity. “We can ask ourselves what services we need to set aside for new product development and determine ways to remain nimble,” Thompson said. “We’re able to focus on legacy support and critical areas of growth.”
Avalign has also made significant improvements in integrated business planning and its S&OP process. “Before COVID, we only looked at about 50% of our volume through the S&OP lens,” Thompson said. “Now, we’re at over 85%. That’s helped us plan more effectively and stay agile for our OEM partners. We’re fortunate that most of our leadership team has experience in the OEM market. That allowed us to redesign our NPI process to mirror that of an OEM.”
High Expectations
Manning often receives questions about ways suppliers can become strategic partners with Zimmer Biomet and his response is simple: act like one.
“Force us to see you in that light by excelling in your performance,” he said. “The collaboration and synergies that develop from this approach are crucial. You need to be best in class in your current offerings for us to consider partnering on NPI projects in the future.”
According to Manning, a significant measures of a supplier’s performance is how they progress from approved supplier to preferred supplier and, ultimately, strategic partner. “If one of our suppliers is performing well, it compels us to reevaluate their status,” he said. “That type of growth is typically reflected in NPI work over time.”
Some OEMs have successfully outlined their definition of a strategic partner, established clear criteria and shared how they intend to operate within these parameters. However, Thompson noted that some companies are still grappling with this concept. He said OEMs must determine not only what they want in a strategic partner but also what they are willing to commit to in terms of production volumes and future growth.
“This clarity makes a substantial difference in how well OEMs and suppliers work together,” he said. “The days of taking every order indiscriminately and treating all suppliers equally are behind us. The sooner OEMs can define their approach to strategic partnerships, the more efficient we can all become.”
