A Medical Device Producer Optimizes Supply Chain and Diversifies Supplier Base to Reduce Cost and Minimize Disruption

Client Context

A leading producer of insulin pen needles, syringes, and complementary diabetes care products sought consulting support to enhance supply chain efficiency and diversify its supplier base to mitigate risks.

The company faced several challenges, including:

• Limited internal capacity in product development, procurement, technical engineering, and warehouse distribution.
• Heavy reliance on a major supplier, exposing the company to potential production and distribution disruptions due to macroeconomic or geopolitical factors.

Key Challenges

• Supply chain risk due to reliance on a single primary supplier.
• Limited operational efficiency across procurement, production, and warehouse distribution.
• High freight costs and inefficiencies in contract negotiations.
• Lack of alternative suppliers, reducing flexibility in sourcing.
• Ineffective inventory management, leading to excess finished goods stock.

Approach & Key Success Factors

EFESO conducted a comprehensive operational assessment, evaluating ongoing improvement efforts and their impact on EBITDA and cash flow. The project was divided into five workstreams, addressing key areas for optimization:

1. Production Efficiency Improvement

• Identified areas for production enhancement and developed action plans to reduce direct labor by 30%.

2. Freight Cost Optimization

• Analyzed freight data and developed a negotiation strategy for inbound and outbound freight contracts, achieving an 8% cost reduction.

3. Inventory Management Enhancement

• Implemented new safety stock levels based on sales forecasts and supply chain lead times.
• Reduced finished goods inventory by 22% to improve cash flow and warehouse efficiency.

4. Supplier Diversification & Cost Reduction

• Recommended alternative supplier qualification from low-cost countries.
• Developed an action plan for supplier transition, with estimated material and freight cost savings of $2.7M.

5. Sales, Inventory, and Operations Planning (SIOP) Implementation

• Established a formal SIOP process to improve alignment across supply chain operations.
• Standardized receiving and shipping processes to enhance distribution efficiency.

RESULTS 

250

+250 SKUs to sourced from 4 different countries and predominately marketed in North America

+$2.7M

Targeted material and freight cost savings with alternative suppliers from low cost countries

30%

Productivity improvement in production shop floor

22%

Finished goods inventory reduction

Markets & Products

Medical Devices

Human and Vet Markets