Executive Summary
In early 2018, the Medical Device Manufacturers Exchange (mdmX) undertook the first survey of financial, commercial, and operational metrics across medical device supply chain companies. Designed by six mdmX member company executives, the Survey covers financial and operational topics of interest. mdmX partnered with Rodman Publishing’s MPO Magazine to reach a broad cross-section of supply chain managers.
Though response was modest, responding companies provided detailed and precise data.
The summarized responses point to an industry that ended 2017 economically healthy, growing, and investing for the future.
We plan to make the Survey an annual event with comparisons to previous years. For those who still wish to participate in the 2017 Survey, mdmX has kept the Survey open and will update the findings if a meaningful number of companies reply. We expect to issue the 2018 Benchmarking Survey in late January 2019.
Anyone who wishes to contribute questions for future surveys may contact Tony Freeman, Director of mdmX, at tfreeman@asfreeman.com.
Survey Methodology
The Survey, comprised of 16 questions, was developed by senior finance and operations executives at mdmX member companies. The desire for detailed data was balanced by the need to make the Survey convenient to answer in an online format. The Survey questions can be found in the Appendix of this report.
Survey Population
Email invitations to participate in the Survey were sent to 1,548 executives and managers drawn from the mdmX and MPO mailing lists. Reminders to participate were sent on two subsequent occasions over a six-week period. Response was modest but in line with the mdmX team’s expectations for a first-year survey response rate. While the response sample does not allow calculation of tight confidence intervals, it is the team’s opinion that the responses offer a representative snapshot of the industry in 2017. In agreement with MPO, the Survey will remain open through September 30, 2018 to deepen the sample size. For those who have not yet participated and want to do so, please visit:
https://www.surveymonkey.com/r/3VCCSHN
Compilation
Survey results were compiled via Survey Monkey. Results were anonymous and only the summarized reports are presented herein. Neither mdmX nor MPO know who participated in the Survey. No individual company results, anonymous though they may be, will be published.
Reporting
The results of the Survey appear below, grouped into a Financial Metrics section followed by a Commercial/Operations section. Mean, median, and standard deviation calculations are included where relevant.
Survey Results – Financial Metrics
What was your company’s revenue growth/decline percentage in 2017 vs. 2016?
All but one of the responding companies reported revenue growth in 2017. Average growth was 10.6% with a median of 10.0% and a standard deviation of 5.7%. For less statistically inclined readers, the 5.7% standard deviation indicates a fairly wide spread in revenue growth rates across all respondents.
A more nuanced picture emerges when company size is considered. Responding companies with annual revenues of over $100 million averaged a 7% increase in revenues in 2017 while mid-size firms with sales between $35 million and $100 million grew 9% on average. Smaller firms averaged 15% growth, though a single outlier reporting 27% growth had some impact on this average.
What was your company’s gross margin percentage in 2017?
Gross margin, an indicator of manufacturing profitability, averaged 29.9%. The median was 28.5% and the standard deviation was 10.4%. Firms with sales under $35 million differed sharply from larger companies. Indeed, smaller firms averaged an exceptional 36% gross margin; however, this figure was skewed by a single company reporting 50% gross margin. Firms with revenue exceeding $35 million reported an average gross margin percentage between 27% and 28%.
Once the high and low values are removed, there is a much tighter cluster of gross margin percentages around the 28% level. Recognizing that Survey respondents represent specialties as diverse as raw materials, assembly, metal fabrication, and plastic molding, it is illuminating that gross margin percentages cluster in the high 20’s.
What was your company’s operating margin percentage in 2017?
Operating margin, a measure of overall operating efficiency, averaged 12.7% among respondents with a median value of 12% and a standard deviation of 7%.
Again, there was deviation between smaller firms and those over $35 million. Companies under $35 million averaged an operating income of 8% while firms between $35 million and $100 million averaged 16% and companies over $100 million averaged 11%. This spread in results is challenging to explain. While smaller companies often manage to minimize tax impact as well as grouping indirect manufacturing labor as an SGA expense, the five- to eight-point spread between the $35-100 million companies and the over-$100 million companies has no ready explanation. A larger sample size would contribute to confidence in the reliability of this result.
Was your company’s capital spending higher in 2017 than 2016?
65% of respondents reported higher capital spending in 2017 versus 2016 while 29% reported lower spending. Six percent of respondents did not answer this question. Company size did not factor into the responses.
Higher capital spending is generally a sign of management’s confidence in the coming year’s prospects.
Did your company experience formal requests for extended payment terms from key customers in 2017?
82% of respondents reported formal requests for extended payment terms from key customers. 18% reported no such requests.
Though the Survey tracks requests made, it does not track whether the requests were granted by supply chain companies.
In how many separate facilities does your company manufacture? What is the total square footage of your company’s facilities?
Do your manufacturing facilities have FDA registration?
Do each of your medical manufacturing facilities have ISO 13485 registration?
Companies with sales of over $100 million averaged 4.5 medical manufacturing facilities. Those with sales between $35 million and $100 million averaged 2.6 facilities. Companies with sales below $35 million reported an average of 1.25 facilities.
Average facility size was 50,478 square feet (4,690 square meters).
Almost all respondents reported having at least one FDA-registered facility. All reported having at least one ISO 13485-registered facility.
Does your company offer manufacturing services outside the United States, Canada, Japan, or Europe?
35% of respondents – primarily companies with revenues over $35 million – reported manufacturing operations outside the United States, Canada, Japan, or Europe. 65% indicated that their manufacturing was limited to these developed nations.
Outside analysis suggests the Survey skews higher with regard to the percentage of companies that manufacture outside the aforementioned developed nations. The Benchmarking Survey Committee is reporting the information as originally provided by Survey respondents; however, the Committee has limited confidence that one-third of medical supply chain companies focused on developed markets are currently manufacturing outside those markets.
Does your company track on-time shipping percentage vs. a customer-supplied vendor scorecard? If YES, is your company’s on-time percentage, on average, within 5% of customer targets?
88% of respondents reported that on-time shipping is tracked against a customer-supplied scorecard. 76% reported being within 5% of the on-time target while 18% said they were not within the target. For 6% of responding companies, the question was not applicable.
For More Information
For more information on the 2017 mdmX Benchmarking Survey, please contact Tony Freeman at tfreeman@asfreeman.com or (917) 868-0772.
About mdmX
The Medical Device Manufacturers Exchange (mdmX) is an industry organization focused on medical device supply chain companies. For more information about mdmX, please visit mdmX.info.
See MPO’s article on the survey results
2018 Benchmarking Survey Questions for the Medical Device Supply Chain Industry
1. What is your company’s primary source of medical device supply chain revenues?
2. What were your company’s gross revenues in U.S. dollars for 2017?
3. What was your company’s revenue growth/decline percentage in 2017 vs. 2016?
4. What was your company’s gross margin percentage in 2017?
5. What was your company’s operating margin percentage in 2017?
6. Was your company’s capital spending higher in 2017 than 2016?
7. Has your company experienced formal requests for extended payment terms from key customers in 2017?
8. What was your company’s total number of employees at year end 2017?
9. In how many separate facilities does your company manufacture?
10. What is the total square footage of your company’s facilities?
11. Does your company offer manufacturing services outside the United States, Canada, Japan, or Europe?
12. Do your manufacturing facilities have FDA registration?
13. Do each of your medical manufacturing facilities have ISO 13485 registration?
14. Does your company track on-time shipping percentage vs. a customer-supplied vendor scorecard?
15. If YES, is your company’s on-time percentage, on average, within 5% of customer targets?
16. What reporting confidence level do you have in the responses to this survey’s questions?