Dive Brief:
- Medtronic has plans to close five manufacturing sites and reduce its supplier base, CEO and Chairman Geoff Martha announced at the J.P. Morgan Healthcare Conference on Monday.
- The medical device company is cutting approximately 200 suppliers to “focus on strategic suppliers that can provide high quality, high service, continuous improvement all at competitive prices,” Martha said.
- The company is also consolidating eight distribution centers into two “super distribution centers,” according to Martha’s presentation. Martha did not say which manufacturing sites and distribution centers would be impacted or when they will close.
Dive Insight:
“We have no specifics to share right now. Consistent with operations best practices, we are always evaluating our manufacturing and distribution footprint for efficiencies that improve our performance,” a Medtronic spokesperson said in an email to Manufacturing Dive.
The news comes after Q2 2024 earnings resulted in Martha saying Medtronic’s top priority is to restore its earnings power.
He highlighted that new product introductions in high-growth markets, like cardiac ablation and diabetes, and a comprehensive transformation underway at the company are combining to drive sustainable earnings growth.
At the conference, Martha also said the company’s high expenses last year are pushing cost savings in a larger effort to manage headwinds and streamline efficiency.
“One of the biggest opportunities for us to leverage our scale and drive leveraged earnings over time is with our global operations and supply chain. We spent nearly $11 billion on cost of goods sold last year. That's a lot. And over half of the company's employees are involved in global operations and supply chain,” he said.
The medical device company also hired a new executive vice president of global operations and supply chain, Greg Smith, to manage the new organization in 2021.
Medtronic isn’t the only medical device manufacturer looking to streamline its manufacturing operations. In December, Baxter Healthcare announced it will close its Alabama plant as part of a $300 million costs-savings plan this year.
