Orthopedic Outsourcing Relationships are Evolving

“These are interesting times we’re working in,” said Rod Wilson, director of U.S. procurement for DePuy Orthopaedics.

During the first day of the Orthopedic Design & Technology Conference and Exhibition, on Wednesday, Oct. 7, Wilson said that outsourcing by orthopedic companies is a growing component of their success, but it’s a relationship that has to be crafted carefully—and current market forces make that kind of matchmaking much more of a challenge.

Among the obstacles Wilson outlined were an evolving political climate, economic pressures, social changes, emerging markets and keeping costs down all while introducing new products. These, of course, are significant hurdles for any organization, but they become even more difficult to navigate when including an outsourcing partnership component.

With the changing political landscape, Wilson said it’s not a matter of “if and when but what” form the proposed healthcare reform will take and how it will impact companies. The recent economic downturn has forced all manufacturers to “run a bit more lean,” he said. And while social demographics (an aging population with greater orthopedic demands, for example) certainly are an incentive for the medical device industry, patient expectations also are increasing.

“[Patients] are more informed, and it drives up the complexities of the products,” Wilson said. “People are taking much more of an active role in managing their health, and we need to meet their needs. It’s about new product development and reducing cost in that process, and that’s where outsourcing is a valuable tool.”

To correctly manage a successful outsourcing partnership—at least at DePuy, according to Wilson—it usually takes more than simply “throwing it over the wall” for someone else to build. “The lens we look through is ‘value.’ Does outsourcing add value?” he asked.

To ensure that there indeed is value, medical device OEMs must have a checklist and be vigilant about managing the process. Wilson recommended a variety of “musts” that have worked for his organization.

The supply base has consolidated, and he predicts the shrinking number of suppliers to continue. Thus, it is important for companies to thoroughly vet their outsourcing partners not just for capabilities and quality, but also for financial viability to ensure continuity.

“We want to make the supply chain less complex, not more,” he said. “Given the increasing regulatory scrutiny from the [U.S. Food and Drug Administration], we have to be more vigilant. All those links in the supply chain have a risk barrier. The FDA is all over our supplier controls.”

Wilson said his company treats suppliers differently based on their mix of capabilities and role as well as an “alignment of core values” between organizations. In addition, supplier firms should have a breadth of capabilities. Product lifecycle management is a “huge” consideration, he said.

He told the audience that change is going to be much more rapid, and the learning curve equally as steep. OEMs are going to have to move quickly to meet demands for new, innovative and often patient-specific products.

“The majority of the focus on outsourcing has been just on manufacturing—contract manufacturing,” he explained. “Going forward, supply capacities will need to evolve further from design to distribution. We can’t just look at it as manufacturing.”