Tord Lendau

President, Medical Area, Sandvik

Q: Why did Sandvik extend its presence in the sector?

A: We saw a gap in the market for a strategic partner to medical technology companies that is able to innovate and work with them to improve their competitiveness.
Our vision was to combine Sandvik’s expertise in metallurgy and long-standing commitment to research and development (R&D) with real manufacturing excellence in the orthopaedic sector and so become the partner our customers’ need.

Q: How have you progressed since?

A: We have continued to focus on realising our vision and consequently have broadened our offering and extended the services we provide through a series of strategic acquisitions. We can now offer medical device OEMs an implant solution covering hip, knee and spine; we have a comprehensive instrument solution and have integrated enhanced precision machining capabilities into our business.

Q: How are you making sure Sandvik continues to be ‘one to watch’?

A: R&D is at our heart. We invest twice as much as the average in the industry and are currently driving key initiatives in surface technology, optimisation of in-growth, wear properties and powder technology, among others. Furthermore, as one of the world’s largest orthopaedic device producers, we have the experience to advise on the most competitive and reliable means of production.
Consequently, we are well placed to free our customers to concentrate their energies and resources on developing innovative products that improve patients’ quality of life. Ultimately we are helping them increase the value of their product at the same time as improving their operational and financial efficiency, which is particularly important in the current economic climate.

Q: You have just touched on the global economic downturn. How is this affecting the market?

A: Its impact is two-fold. The pressure on medical device companies to innovate both products and services to remain competitive is intensifying and so it’s becoming more important than ever that they work with strong long-term partners. Sandvik has a strong and positive cash flow, with a turnover of €13bn. Furthermore, we are a global business, employing 47,000 people across 130 countries, with a track record of well-managed profitable growth. Therefore, we have the capability to invest for the future despite the current climate and so we are a stable partner our customers can rely on.
Secondly the downturn will undoubtedly affect some outsourced manufacturers and so we may well see further mergers and acquisitions in the sector.

Q: What other factors are affecting the market today?

A: The aging population and advancements in medical techniques mean the orthopaedic device market is growing rapidly and we foresee no substantial let up in this trend. Indeed, it has been predicted that the sector will double in size by 2015.
To support this growth OEMs need to almost double current production capacity, either by expanding their own facilities or by working with manufacturing partners to bridge the gap. But the market is also continually evolving, with surgeons developing new and better techniques. The focus of OEMs must be on innovation and finding new ways to bring their products to market, and they need to do this quickly. Time to market is critical for many of their customers and they must be in a position to respond.
OEMs also want to streamline their operations and so increasingly want to consolidate their supply base; they want to buy from fewer, more capable suppliers.
These pressures are coming together and mean our customers now demand a great deal from their suppliers; we must deliver far more than just one link in the supply chain. At Sandvik, with our commitment to R&D and manufacturing excellence, we are well placed to help customers bring to market innovative new products and support them in meeting the manufacturing demands of the industry.

Q: So how is the market responding?

A: Unsurprisingly, the outsourced manufacturing sector is consolidating as companies look to expand the range of services and products they offer. The elite players are gaining a greater market share; today the top five represent 55% of the market and we expect this to have risen to nearly 80% by 2015. As I’ve said, the economic downturn is likely to accelerate this trend and so ultimately we believe Sandvik will lead as a few strong players emerge and dominate the market.

Q: What does all this mean for Sandvik?

A: Our business strategy means we are very well placed to meet the changing needs of the OEMs and help them get their product to market quickly and efficiently. We are working towards a comprehensive end-to-end solution built on the foundation of materials and manufacturing expertise coupled with investment in R&D.
This unique position allows us to offer products and services that can help our customers increase the value of the final product. On the other hand, we also have products that can reduce customer costs by improving their operation or financial efficiency, such as near net shape products or powder technology.

Q: And looking to the future…

A: With the population continuing to age and medical advancements seemingly unstoppable, the pace of change in the market is unlikely to let up. OEMs will continue to need strong strategic partners that can work side by side with them to develop and introduce new products and processes, both quickly and cost effectively.
We are looking forward to the challenges ahead and are confident we are well placed to help our customers secure real competitiveness at the same time as achieving our commercial goals. A win-win situation for all concerned!

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