{"id":30777,"date":"2018-11-13T15:13:10","date_gmt":"2018-11-13T20:13:10","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/medtronic-must-continue-to-invest-in-additive-manufacturing\/"},"modified":"2018-11-13T15:13:10","modified_gmt":"2018-11-13T20:13:10","slug":"medtronic-must-continue-to-invest-in-additive-manufacturing","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/medtronic-must-continue-to-invest-in-additive-manufacturing\/","title":{"rendered":"Medtronic Must Continue to Invest in Additive Manufacturing"},"content":{"rendered":"

The benefits of additive manufacturing (\u201cAM\u201d) will aid medical device manufacturers. AM enables flexibility, precision, and customization, with more intricate design shapes across various surfaces and substrates. [1] [2][3] This enables medical device manufactures to design products to replicate human tissue and bones, customized for a patient\u2019s anatomy, compared to mass produced products. [1] In addition to these product attribute benefits, AM enables rapid prototyping critical for new product development. A process that took months in a machined manufacturing world is cut down to days. [4] Furthermore, the ability to have the flexibility to service frequent iterations (a 3D file can be quickly converted into the physical prototype) reduces the impact of variability. [4] The light weight and lower volume characteristics of medical devices, specifically implants, also eliminates some of the weight-bearing and cost issues associated with AM in automotive and aerospace. [5]<\/p>\n

Medtronic plc (\u201cMedtronic\u201d or the \u201cCompany\u201d) is at the center of these AM advancements for medical devices. Investing in AM technology is critical for Medtronic \u2013 research and development is core to the Company\u2019s business model as it must constantly develop new products for its spinal surgeon and orthopedist customers (among others). In this way, rapid prototyping that AM allows is critical as the Company competes to bring new products to market. If Medtronic does not take advantage of the opportunity to increase new product development output rate, it will fall behind. Similarly, the unique design functionality that AM allows (cavities, shape designs, etc.) will be critical as it rolls out its next generation of devices. [2][4][6]<\/p>\n

Medtronic has invested ~$2MM in 3D printers since 2014 (7 machines at ~$300k per machine) [2][4]. These investments have had a payback of less than 1 year from a reduction in material waste and fewer required materials, versus out-sourcing to traditional machining. Medtronic estimates up to nine years of R&D time was saved because of AM in 2016 (Exhibit 1<\/strong>), due to faster iterations, more internal control, and real-time adjustments to designs. In the short-term, further investment in both equipment and labor to run the machines will persist as the Company is publicly committed to accelerating innovation. [2] The Company is also working to use AM to produce 3D models of human anatomy. This enables Medtronic product-designers to more easily and accurately understand how their devices will \u201cdeploy and operate\u201d inside the body. [2]<\/p>\n

In May 2018, Medtronic announced the development of TiONIC Technology, which is a 3D printed technique that \u201ccreates enhanced surface techniques.\u201d [1] This manufacturing process allows for the intricate implant and shape designs of the Company\u2019s ARTiC-L Spinal System product. This is the Company\u2019s first spinal product produced using AM, enabling the Company to produce products not possible under traditional manufacturing processes.<\/p>\n

Other short-term developments include working with a new 3D printer to build products from metal and developing models of abnormal anatomies for doctors to practice.<\/p>\n

Longer-term, the Company is working to use AM to be able to treat a patient with a medical implant that is completely customized to a patient\u2019s physiology. The Company also discusses \u201cprinting\u201d repaired tissue for a damaged organ, or an entire new organ \u2013 replacing the need for high-risk and expensive transplants. [2]<\/p>\n

Medtronic should accelerate its investment in AM through the purchasing of additional equipment as well as through hiring incremental operators of the equipment. The Company\u2019s seven 3D printers run \u201cnon-stop,\u201d implying close to 100% capacity utilization. [2] This capital investment represents 0.10% of Medtronic\u2019s Research & Development spend in 2017 [6]. This recommendation implies there is substantial demand from design engineers (input rate of requests) to drive additional output from more printers, which is likely given the R&D-intensive nature of the business. Given that the machines generate attractive financial payback as well as time savings (see economics above) \u2013 further equipment investment seems obvious. Equipment investment alone may not be sufficient; as additional operators are likely to be required to run the machines. Equipment investment without labor investment would likely shift the system bottleneck to labor.<\/p>\n

The Company should continue to internally develop AM technology to leverage its unique capabilities for manufacturing new products (similar to the TiONIC). Proprietary manufacturing technology generates a \u201csecond \u2013 level\u201d of patent protection on proprietary new products. Mechanical devices for hernias could be new prime candidates, given their implantable characteristics, mixture of tissue and bone, and unique cavities and substrates for these devices.<\/p>\n

Given the relatively low barriers of adoption and capital investment per machine, (Exhibit 2<\/strong>)[4] rapid additional investment is critical as competitors will adopt a similar strategy and make similar investments.<\/p>\n

Questions:<\/span><\/p>\n