All eyes are on Medtronic’s global operations and supply chain leader as he works to modernize its operations and scrutinize suppliers.
EVP of Global Operations and Supply Chain Greg Smith sees fewer suppliers in Medtronic’s future, he said in an interview this week.
Smith spoke with DeviceTalks Editorial Director Tom Salemi in his first published interview since joining Medtronic (NYSE:MDT) in April 2021.
Smith was previously EVP of U.S. supply chain at Walmart and SVP of global operations at Goodyear Tire & Rubber Co. His more than three decades of experience also includes time at ConAgra Foods, United Signature Foods, VDK Frozen Foods and Quaker Oats.
Around the same time that he joined Medtronic, semiconductors and resins were in short supply following the February 2021 cold snap that took the Texas power grid down and halted operations at semiconductor factories and petrochemical plants for weeks.
Add that to COVID-19 pandemic and its lockdowns in China, labor issues in the U.S. and abroad, global logistics problems for freight by ship, truck and rail, increasing cyber attacks and Russia’s invasion of Ukraine, and you’ve got what Smith called the hardest two years in his career.
“There are signs on the horizon of certain things getting better, but I think it’s still going to be a ways before we work certain issues out,” Smith said. “Semiconductors has been a real challenge this last year and a half. There’s not a clear picture as you go forward about the implications of semiconductors. (There’s) a lot of work underway to bring more capacity to market, but also a lot of consumption, a lot of demand against that scarce commodity. So there’s a lot of work that’s going to be done. And I think it’s going to linger with us for a while.”
Facing pressure in late May from analysts after supply chain issues got out of control, Medtronic CEO Geoff Martha assured them that Smith is driving ongoing improvement.
“We’re well down the path of remaking our global ops and supply chain to provide that resiliency that we just haven’t had,” Martha said. “And we started that over a year ago, centralizing the function and building a very strong leadership team under Greg, bringing in new people from different industries, investing in all kinds of tools and technology and operating mechanisms for this. I’m confident we’re going down the right path there. I’m glad that we started when we did. I wish we would have started even earlier.”
Medtronic’s strategic suppliers
Smith said this week that Medtronic is doubling down on its base of strategic suppliers, emphasizing that this critical group of partners will only become more important in the future.
He defined a strategic supplier as “someone that can meet our quality needs, can meet the service that we require, are cost-competitive and drive continuous improvement, and then ultimately ones that we can partner with on innovation and to be able to help bring new ideas to us that we can work with to be able to even provide better products.”
Part of the process will be a strategic search for supply chain gaps and issues where new suppliers can help while replacing suppliers that aren’t performing to Medtronic’s satisfaction.
“We’re encouraged by the potential partners that exist out there. … There are a lot of suppliers that have weathered this storm incredibly well. There have been others that have been impacted significantly,” Smith said. “We want to make sure that we have the right partners that can weather the storms and to make sure that we’re thinking ahead of storms and ensuring that we have the right proactive relationships, but meeting those tenets that I described.”
That means “much more scrutiny on the choices that we make around supply base,” Smith said.
“It’s to evaluate the suppliers we have and as we look to our future, to make sure that we are putting forth the diligence of ensuring that the folks that we partner with are the ones that are most strategically aligned. We’re important to them. They’re important to us, and they can meet those parameters that we described.”
Asked by Salemi whether Medtronic’s list of suppliers would be longer or shorter two years from now, Smith said he anticipates it will be shorter.
“We want to partner with the right supply base, (and) we have the opportunity to align with strategic suppliers. That’ll probably be less than what we have today,” he said.
Medtronic’s supply chain opportunity
Smith identified the medtech industry’s high inventory levels as one of the biggest opportunities for Medtronic.
“It’s certainly a focus for us to be much better in our integrated business planning so that we’ve got more accurate signals of demand, and then we can run the supply requirements across our network to make sure that we are able to service at a high level while reducing working capital and reducing inventory levels,” Smith said. “In our industry, our levels of inventory are somewhat high. Others do much more complex business with a lot less inventory, but it comes down to them mastering and … understanding what the customer needs when they’re going to need it, and to be able to connect all their planning and their execution systems to be able to deliver against that. Those are big opportunities that we see ahead for Medtronic.”
Smith is working with a more complicated supply chain than at Walmart or Goodyear, with so many parts and components coming from a wide variety of suppliers to make just a single medical device. But “it really comes down to right product, right place, right time,” he said.
“The better you service your customer, the better you get the repeat on the business and build your brand,” Smith said. “And that’s what everybody seeks to do. There are nuances clearly., You know, regulated industries, non-regulated industries, just different ways of going to market, different points of distribution, different nodes, you know, different customer base. So I’d say every industry’s a little bit different, but at the end of the day, the fundamentals are there yet you care greatly about your people and you want to make sure that they’re working in a safe environment. You hold the quality to the highest degree, working on servicing the customer and doing it in a very effective and a very efficient way.”
Hear the entire interview with Smith at DeviceTalks.com.