Medtronic CFO offers supply chain update as medical device industry concerns mount

Monday, September 27, 2021

Source: Medical Design & Outsourcing

Medtronic (NYSE:MDT) was among the participants in a White House semiconductor summit last week to address the continuing global shortage of electronic chips. Still, CFO Karen Parkhill says the world’s largest medical device manufacturer is not in the same dire straits as chip buyers in other industries.

Medtronic’s supply chain is “holding up OK, but we’re seeing pressures like everybody else,” Parkhill said Friday in an interview with Medical Design & Outsourcing.

“Semiconductors are an issue. Resins are an issue,” Parkhill said. “I think it helps that we’re a medical device manufacturer that’s producing life-saving technology … because when push comes to shove, I think we’re more important than new cars coming off the line, for example. We haven’t necessarily pulled that card, but I do think that that could help if needed.”

GE has warned of supply chain challenges lasting well into 2022. 

Medtech trade group AdvaMed has pushed the Biden Administration to prioritize the industry throughout the semiconductor shortage.

“We’re starting to see signs that it could affect us soon if the supply constraints continue,” AdvaMed CEO Scott Whitaker said on Thursday. “… Not anticipating problems can create a bigger problem.”

Fridley, Minnesota–based Medtronic is working with its suppliers not only on shortages of materials and components, but also limited labor availability, Parkhill said.

“So far, we’re managing through them,” she said. “It’s not becoming a big impact on us at this stage.”

Most importantly, Medtronic kept its manufacturing operations running and cash flowing to suppliers through the pandemic.

“We didn’t cut back on manufacturing. Our plants were operating at full capacity. We were building up inventory, and that was OK,” Parkhill said, later continuing, “We used our strength and stability to help our suppliers and … built great credibility and a stronger long-term relationship with our suppliers.”

In June, Medtronic CEO Geoff Martha specifically contrasted his company’s decisions against automakers, which will lose out on an estimated $210 billion in revenue according to one new projection.

“Because we kept talking to our suppliers and making financial commitments during the pandemic — unlike the automotive industry that just stopped — we kept going, we held up our commitments, we doubled down, and so that’s helped us be ready for this,” Martha said in a presentation at Bernstein’s 37th Annual Strategic Decisions Conference.

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