Equipment Investment Hinges on Demand Plus Versatility

Steve Logterman

Vice President

Fidelity Bank

steve@fidelitybankmn.com

fidelitybankmn.com

Topic: Banking / Finance

Cost-conscious consumers have delayed elective surgeries over the last few years, which have inevitably impacted demand for medical devices. This in turn affected U.S. original equipment manufacturers (OEMs) and their suppliers. Since then, the success of OEMs and their key suppliers are interdependent — particularly in the area of developing new products and having just the right capacity to meet demand.

Background: Mendell is a precision manufacturer in Lakeville. In the highly regulated and exacting environment of medical device components, they engineer and produce components as small as a human hair and as large as hip joints. For more than 20 years, the company has developed key relationships and “water ballet” synchronicity. Last year its on-time delivery rate was an enviable 96 percent. www.mendell.com

Challenge: When a valued client approaches Mendell to launch a new product, there are a series of questions and steps that must occur for Mendell to justify an investment of $500,000 to $750,000. Even if they’ve had a long relationship, the client must provide sales projections and timelines as well as the expected product shelf life (length of time before something better comes along). The selected equipment must be able to perform the work at required tolerances and specifications, but have other uses beyond one product line. The more versatile the equipment is, then the higher the cost.

Another challenge is that the quality of equipment required is manufactured only in Europe or Asia, which involves procurement, customs and shipping.

Solution: Rather than investing in new equipment the last two years, Mendell has built capacity with existing equipment. They have also opted to pay overtime or add a weekend shift to accommodate increased order volume. The company has daily meetings with team leads, managers and schedulers to maintain just-in-time production. At the most, client lead times are four to six weeks.

Lessons Learned:

• Quality control and quality assurance must be built into every process, not only to meet product specifications, but also to eliminate waste and unnecessary expense.
• Every equipment purchase must pay for itself through sufficient client demand, flexibility and the life of the products produced on it.
• Equipment down time of any sort costs money. Every machine on the floor must have multiple uses and highly trained operators who know every inch of it.