Lean in Medical Device Manufacturing: A Case Study

This article shows a case study of how Kohlberg, Kravis, Roberts & Co. (KKR) was able to create value at Biomet, Inc., one of their portfolio companies through the implementation of Lean Thinking in the enterprise.

Lean in Private Equity is not new. There are several example where lean was used to stimulate corporate renewal, such as using lean to improve a medical device manufacturer, or using lean to improve the buyout of Sealy Mattresses, or using lean manufacturing to improve the automotive aftermaket.

KKR acquired Biomet, Inc. in 2007 ¹.  Biomet designs and manufactures orthopedic medical devices.  At the time of acquisition, Biomet sales had declined 13% and sales force attrition was at 40%.  This presented a clear opportunity for improvement.

Through the implementation of Lean Thinking, Biomet results were are the following:

Adding dedicated sales resources to underperforming territories; Developing sales force incentive plans to reduce attrition and attract professionals with greater levels of sales experience and medical device training; Professionalizing the management of the sales force; Hiring skilled leaders in critical functional areas including supply chain management and surgeon relations; Identifying opportunities to lower manufacturing costs, including moving production of selected products closer to the customer, consolidating plant and warehousing operations and consolidating vendors; and Standardizing product launches and new product development.

To date, the turnaround has been a success. Sales force attrition has fallen by 50%, the sales force has grown by 20%, fill rates ended fiscal year 2008 at over 95% and new products have been greeted with enthusiasm by the medical community. Importantly, following six consecutive quarters of declining sales, Spine and Trauma sales increased during fiscal year 2008 and have continued to accelerate, with sales in the second and third quarters of fiscal year 2009 increasing 7% versus the same time period in fiscal year 2008.

Hindsight is 20/20, but some organizations do not see wastes and therefore cannot describe how they can improve. Knowing the Seven Wastes is just the first step and most organizations fail in that area already.  Once the Seven Wastes are known, systematically exposed, then they can be surgically attacked.  Lean Thinking can get us to that point fast and for the long-term.

Lean Thinking creates and unlocks value for organizations as described in this case study from KKR.