Contract manufacturer Medbio Inc. in Grand Rapids provides injection molding, assembly and packaging for medical device and biotech customers, and owns Concept Molds, a tool and die shop in Schoolcraft. The company, which employs about 190 people, is bracing for what’s expected to be a big year of growth in 2018.
How is 2018 shaping up for Medbio?
We’ll have record sales next year, absolutely. Knock on wood, every year has been record sales, but I would expect next year to be more along the lines of a breakout year. If not 2018, certainly 2019. We’re getting ready for a big growth spurt and most of that’s actually booked already — established business — so I’m fairly certain we’ll be seeing that increase in revenue on the bottom line.
What’s driving this pick up in business?
I don’t know quite frankly. … I would say it’s just the economy in general is healthy and when that’s the case, then companies seem more likely to jump off the capital expenditures plank.
How do Medbio’s growth projections affect your investments in the next year?
Right now, we’re in a pretty good period to spend as we’re forecasting a pretty good period of growth over the next year to two. As a matter of fact, we’ll add about five machines here in the next two to three months, which is probably the largest single group purchase of machines we’ve had in the history of the company. We’re really bullish on our sales front.
Is that linked to any specific customers or sectors?
It’s tied into two or three customers, both in the medical device sector and in the biotech sector. Our biotech sector is growing probably at a much faster rate than even our medical device customers. We’re seeing a big boom here in the diagnostic biotech devices and you’re seeing a pretty big uptick in services in the diagnostic area for biotech companies.
Talent concerns seems to be on everybody’s mind right now. How is Medbio facing that challenge?
As best as we can. I don’t know that we’re wading through it that well, quite frankly. … We’re doing the best we can and being as creative as we can with some of our hiring avenues, but we still have a big need in the talent area. … We’re having a little bit of a challenge filling the spots as we grow. We have positions that remain open for quite a while, and in some cases we’re even turning toward doing more and more internal training and promotion and all that kind of stuff.
Are you investing in automation because it is such a difficult environment to find people?
I wouldn’t say specifically because of the talent. I would say our automation is typically done more on a return on investment model versus the need for any talent. Certainly, if it would mean … we wouldn’t have to hire an extra person, then we would consider it, but it would still have to follow an (internal rate of return) process as well.
Does the talk of repealing or tinkering with the Affordable Care Act affect any of the customer decisions that you’re seeing?
No. I think it will change how things are done in the industry, but ultimately I don’t think it will really change people having the need to use medical devices. … One of the good parts about our business is that people will always be in need of our services. A lot of the time, it’s just the mechanisms for payment that change versus the real need for our products.
Have the changing reimbursement models affected the medical device supply chain?
Maybe ultimately in the long run, it could add little bit more cost pressure to the industry, but we’re seeing cost pressures creep in more and more in the industry than say in the last decade or so. It seems to be moving more toward an automotive model. You see people asking for price downs and cost downs and things like that, which were a little bit unheard of five or 10 years ago.
Does that model of annual price concessions translate into the medical device industry?
The business model is significantly different in the med device space. Products can last for 30 years. I’ve made products that have been on the market 30-plus years in some cases. I can’t give you 6 percent year over year, or before long I’m out of business.
Given all that, why are OEMs pressuring suppliers over price?
I think a lot of people in the industry might feel that they can have the same kind of leverage that the Big Three had over their suppliers. But it’s more of a symbiotic relationship in the med device industry because it’s so expensive to move a manufacturing process from one place to another. You really need to be more partners. Eventually, most people are going to end up realizing that — or I hope they will.
In the meantime, what can the suppliers do?
I believe most people in contract manufacturing positions are pushing back on them — I know I am. I’m hoping that everybody else is. Typically, I get some relief, although I’m probably making some concessions that I probably wouldn’t have ever made 10 years ago — or maybe wouldn’t have ever been asked to make 10 years ago.
What’s keeping you up at night as you look out to next year?
There is a little bit of worry for me still on the talent front. I mean, I don’t know where it ends or if it ever starts to become alleviated. … And I think the increasing number of regulations and government oversight is worrisome a little bit. Common sense is kind of dying in our industry.