Intuitive Surgical CFO Jamie Samath [Photo courtesy of Intuitive Surgical]
Top executives at Intuitive Surgical (Nasdaq: ISRG) have sole-source suppliers on their minds as they ramp up manufacturing capacity in the face of continued supply chain challenges.
The robotic surgery technology developer’s growth and mindfulness of supply chain resiliency could bring new opportunities for Intuitive’s suppliers — along with competition from others who want in.
Sunnyvale, California–based Intuitive had just more than 10,500 employees at the end of March, CFO Jamie Samath said today on a conference call to discuss Intuitive’s first-quarter financial and operating performance. That employee count is up 26 percent from the same time a year before, and of the 2,100 new employees, he said about 900 work in manufacturing.
The company spent about $95 million on capital expenditures in the first quarter, primarily to expand the company’s facility footprint and manufacturing capacity, including production line automation projects, Samath said.
Asked by Wells Fargo Larry Biegelsen how Intuitive is addressing supply chain and inflationary challenges, Samath reiterated an earlier statement by Guthart that the top priority was delivering orders to customers.
When the supply chain eventually rebalances, Samath said, “we will refocus our operations teams to focus on cost reductions, getting our manufacturing efficiencies back to our targets, but that’s gonna really be a question of when will that be?”
For now, Intuitive has increased its inventories, but Samath said “the mix of that, though, is clearly not perfect.”
“We’re replenishing inventory where we can if and as supply lasts, but we have an imbalance currently. Certainly if we look at the medium to long term, we’re going to look carefully at what levels of inventory we want to hold as one risk mitigation,” Samath said. “I think the other thing we’ll look at is how do we make ourselves less dependent on sole suppliers?”
Guthart followed up to say that the future is difficult to forecast with so many moving parts, but that the supply chain challenges are becoming less broad and more focused.
“The number of parts that are under stress has decreased, but the intensity of the stress around a few parts has increased,” he said. “The number of things that are challenges is narrowing, but the ones that remain are more stubborn … We use various tools, whether it’s buying ahead, buying safety stock, or redundancy in supply chain. We use any and all of those if we can to help mitigate the risk.”
It’s a lesson many manufacturers have learned in recent years as natural disasters and the COVID-19 pandemic kept crucial components like semiconductors and materials like resin out of reach.
If you’re an Intuitive supplier and your ears are burning, a replay of the call is available at Intuitive’s website.
Hear more about Intuitive and robotically-assisted surgery from leaders like CEO Gary Guthart in Mass Device’s IntuitiveTalks Podcast.