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Editor’s note: This is part 3 of a four part series on orthopedic supplier solutions to today’s most pressing challenges. Check out part 1 for advice on dealing with the uncertainty of today’s orthopedic market, part 2 for supply chain management pearls and part 4 for insights on ways to reduce lead times and the importance of transparent communication between OEMs and contract manufacturers.
As trade policies shift, the prices of raw materials — metals, polymers and specialty packaging materials — can fluctuate, leading to increased costs
Adam Paltzer, Vice President of Operations at Able Medical Devices, stresses the importance of constantly improving manufacturing processes to keep production costs low.
“If you’re running the same process over and over — buying materials at a premium and pushing them through a static workflow — you’re eroding your own margins,” he said. “Eventually, that trickles down to the customer.”
To counteract this, Able continually evaluates its manufacturing capabilities. “Where can we improve? Can we upgrade a tool, automate a step or reduce a manual process?” Paltzer said. “That’s how you build long-term sustainability.”
By focusing on continuous improvement, the company ensures that it remains adaptable and capable of withstanding manufacturing challenges, whether they arise from supply chain disruptions, tariff increases or fluctuating demand.
Paltzer also believes a supplier’s business shouldn’t revolve around securing purchase orders. “We all want to land as much new business as possible, but at the end of the day, when those new products can’t be delivered on time, it’s no longer the salesperson’s fault. The operations team is blamed for not getting it done.”
Paltzer said keeping costs low and the business running efficiently requires the entire organization to manage the product lines coming through. Able Medical has a sophisticated process for evaluating a proposed project based on its level of complexity. The company’s engineers assign each project a code based on the resource requirements.
“New products must match our capabilities, and we have to be able to manage the workload, not just on our machines, but also across engineering and operations,” Paltzer said. “Even though we can’t always control forecasting, we can control what products come into our pipeline.”
Able focuses on bringing in products from markets that are growing. “If we take on stagnant business, we struggle to secure margins and put ourselves at risk of unpredictable forecasts,” he said.
Being disciplined about which projects to bring online and placing smart bets on the right customers and product lines allows Able to control prices and drive volume, while ensuring the operations team doesn’t get overwhelmed. It’s not about chasing every dollar.
It’s about making strategic choices that keep the business strong. If the business is strong, customers won’t necessarily feel the crunch of price increases.
Solutions Both Large and Small
Steve Rozow, General Manager at Mach Medical, said controlling capital costs is crucial for OEMs. He noted that companies also focus on reducing the per-piece cost of products, a challenge driven by the rising cost of materials, manufacturing methods and labor.
“We’re continually focused on how we can remove cost from the system, both in terms of big levers like inventory and the more granular ones like production methods,” Rozow said. “In that sense, we’re ideally positioned to help our customers navigate both.”
Inventory management is a critical issue. “We know that, conservatively, OEMs are spending around 8% of their revenue just to maintain the inventory they carry,” Rozow said. “When you factor in things like salesforce utilization and related logistics, that number likely creeps closer to 15%.”
Given the significant costs associated with excess inventory, suppliers should focus on helping their customers reduce that burden.
“Anything we can do to help on that front is a win for them and allows us to add value in a way that isn’t always expected from a supplier,” Rozow said.
He recognizes that the next frontier in medical device manufacturing is the ability to produce parts directly from surgical plans. They aim to achieve this goal by designing manufacturing platforms that support a “make-to-surgical-plan” model, which could dramatically reduce finished goods inventory.
“In a perfectly executed, ideal scenario, that approach can drive finished goods inventory to zero — or virtually zero,” Rozow said. “You still need to manage some inventory, but the goal is to minimize finished goods as much as possible.”
To support that model, Mach Medical prioritizes short lead times and the ability to economically manufacture products down to a lot size of one.
Even without the full vision of the make-to-surgical-plan, Rozow said companies can shave about 25% to 35% of their inventory simply by sizing their safety stocks to match shorter lead times and by avoiding being forced into economic order quantities for every part.
The role of automation in improving efficiency is an area of focus for Mach Medical. “Automation isn’t about replacing people,” Anderson said. “It’s about extending the value of our workforce. It allows us to maintain high output and quality while minimizing costs wherever we can.”
Mach Medical is investing in automation to improve cycle times and reduce waste. In a high-mix part environment, the ability to reduce setup time and streamline production processes is essential to driving down costs while maintaining high quality and high output.
“A large part of our business is about making sure companies have inventory in low-use, outlier sizes,” Rozow said. “Companies that are forced into economic order sizes for rare items could end up building decades worth of inventory, so we believe this is a big lever for inventory optimization.”
Mach Medical has cost-reduction efforts underway. Recently, the company stepped up those efforts even further by adjusting its economic buying quantities, allowing for the purchase of more material to produce larger quantities of product at once, rather than building it multiple times throughout the year.
“Instead of producing four batches annually, we’d prefer to build twice a year, even if it means holding inventory a bit longer,” Rozow said. “This approach is still more efficient than performing two to four times the number of production setups. The strategy requires a high level of collaboration and coordination with our customers, but it’s an effective way to eliminate some of the hidden costs built into the system.”
Right-sizing Inventory
Reducing the need to hold large quantities of inventory is particularly important for low-volume, outlier parts, which can otherwise sit in stock for years without ever being used. By offering small-batch production capabilities, Mach Medical is positioning itself as a partner for OEMs seeking to minimize inventory costs.
While cost reduction is often a primary focus, Mach Medical’s Anderson also recognizes the importance of helping OEMs grow. “It’s not just about cost reduction — it’s also about driving revenue,” Anderson said. “In many cases, helping someone move the top line is an even more powerful lever than saving a few dollars on the bottom line.”
As suppliers work through these uncertain times, one of the key challenges involves balancing staffing levels. During periods of downturn, it’s tempting to make deep cuts to reduce costs, but this approach can leave companies vulnerable if the recovery comes faster than expected.
“Significantly reducing your workforce may save costs in the short term, but you risk losing valuable talent,” said John Ruggieri, Senior Vice President of Business Development at ARCH Medical Solutions. “When the market turns, rebuilding that talent base is incredibly challenging.”
ARCH Medical, like many other suppliers, recognizes this delicate balance and has been cautious not to make cuts that would hurt their ability to bounce back quickly when the recovery happens. The company has taken steps to tighten operations by trimming overtime and being more strategic with spending.
“We’ve had to be smarter with staffing expenses in some areas, but we’ve also been careful not to hurt core production teams,” Ruggieri said. “Losing skilled workers could cost you more in the long run if you don’t have the capacity to ramp up manufacturing when the market recovers.”
Capital spending is another crucial lever for companies navigating uncertain times. ARCH Medical has always been proactive in investing in the most advanced equipment and technology.
“We’ve always invested in capital resources to ensure our teams have the most up-to-date assets to deploy,” Ruggieri said “That’s how you compete on a global scale — not just against competitors in the next state, but against low-wage regions around the world.
Investing in automation and the best equipment available is one of the few levers you can pull to stay competitive globally.”
Focus on What Matters Most
Cost control is essential in a competitive market, but it should never come at the expense of quality. At Millstone, the focus lies on achieving efficiency while maintaining the high standards required in the production of orthopedic devices.
The company recycles and reprocesses unused field inventory, offers pre-validated packaging and sterilization systems and implements lean workflows and automation to reduce manual labor and improve production consistency.
By focusing on these operational improvements, Millstone helps OEMs avoid unnecessary manufacturing runs and reduce overhead expenses.
