B. Braun Medical Inc.’s strategic procurement department cultivates a base of reliable and high-quality suppliers.
By Tim O’Connor
The medical device market is one of the most regulated industries in the world, and the bar only gets higher every year. “It continues to be more rigorous,” says Michael Stammherr, vice president of strategic procurement at B. Braun Medical. “As an industry, we continue to see more regulations and requirements.”
Keeping up with those requirements is a constant challenge. Government agencies, customers, as well as B. Braun Medical itself continues to demand more transparency regarding its products and manufacturers must keep careful track of every material and compound to ensure they meet standards. “Our customers are constantly asking for product attribute information because they are being asked by their customers and agencies for this information,” Stammherr says.
Manufacturers such as B. Braun Medical must carefully cultivate their supply chains to meet those standards and ensure quality. “I’m proud of the fact we have been able to build a very high-quality supply base that supplies us with very consistent quality materials in a timely manner,” Stammherr says. “And they are also very reactive to our needs because we have developed some very strong mutually beneficial relationships with our suppliers. I believe procurement has to be a win-win.”
Globally, B. Braun is the largest privately held medical device company and 15th largest among all medical device companies in the world. B. Braun is best known as a market leader in regional anesthesia as well as a supplier of a full-line of IV therapy products including IV solutions, drug delivery systems, vascular access devices and infusion pumps. “We take great pride in knowing that our products are helping to protect and save patient’s lives,” Stammherr says.
B. Braun Medical is the only company Stammherr has worked for during his career. He started with the company directly out of college 38 years ago when it was known as Burron Medical Inc. In 1979, B. Braun Melsungen AG acquired Burron as a wholly owned subsidiary and in 1992 changed Burron’s name to B. Braun Medical Inc. In the decades since, Stammherr has taken on a number of positions that supported the company’s growth, including overseeing the implementation of IT systems, construction projects and serving on the transition team that integrated McGaw, a manufacturer of intravenous solutions, that B. Braun Medical purchased in 1997.
The biggest challenge came in 2001 when Stammherr was asked to build a strategic procurement organization from the ground up. Stammherr was tasked with consolidating all of B. Braun Medical’s procurement functions under one department, which he ran for eight years. After successfully implementing this strategic procurement group, Stammherr spent the next three years as the head of supply chain, which included strategic procurement, scheduling, distribution and transportation.
As time went on, however, B. Braun Medical identified a need for earlier supplier identification in conjunction with R&D innovation and stronger supplier management in commodity groups such as resins, packaging materials and active pharmaceutical ingredients. “Once we have suppliers on board we need to develop and manage them,” Stammherr says. “We need to make sure we are working collaboratively with our suppliers to ensure that we are all on the same page.”
To bolster that area, B. Braun Medical needed someone with experience in implementing transformations. Stammherr was the perfect candidate and five years ago he migrated back into strategic procurement with an expanded group focused on direct and indirect spend as well as contract manufacturing. The team sources all raw materials and most indirect materials used in B. Braun Medical’s products, identifies and manages suppliers, and negotiates and ensures compliance to all of B. Braun Medical’s supplier contracts.
At the same time, B. Braun Medical has heightened its supplier focused efforts, the company is moving from transactional relationships with its customers to a more collaborative engagement. The hospital industry is shifting the healthcare model from treatment to prevention and basing critical buying decisions on patient outcomes. Hospitals are looking for suppliers to function as holistic partners that can help them improve overall care and reduce costs.
B. Braun Medical was among the first medical device manufacturers to embrace this change. The company engaged in an innovative program with St. Luke’s University Health Network, a nine-hospital network with 300 outpatient sites based in Pennsylvania, which prioritized its products roles in addressing patient outcomes. This collaborative program is known as B. Braun’s Enterprise Initiatives® and it has fundamentally changed the way it approaches clients.
“Because of the Enterprise Initiatives program and a deeper collaborative relationship with our customers, we are constantly looking to be ahead of the curve when it comes to sourcing new innovative materials,” Stammherr says.
Staying ahead of the curve means knowing what’s coming. Understanding the commercial interactions with St. Luke’s University Health Network provides B. Braun’s procurement and R&D teams with a better understanding of the types of products customers will need in the future.
That enables strategic procurement to begin identifying potential sources for materials before the product development process even begins. “If we want to be quick to market with our products, we don’t want to be sourcing materials at the time when we need to begin developing the product,” Stammherr notes. “We want to be out ahead looking at quality suppliers. Do they have this capability? Do they have these types of products?”
Getting those suppliers in place early speeds up the first stages of product development and ultimately shortens
B. Braun Medical’s go-to-market timeframe. It’s a true example of strategic procurement at work. Stammherr has a team that is commodity-focused and their work makes a big difference across B. Braun’s North American operations. The company’s five manufacturing facilities place the actual orders against agreements negotiated by the strategic procurement group.
Finding a reliable source for new materials is a multi-step process. B. Braun Medical first evaluates its existing supplier base and potential new suppliers to see if any of them are capable of developing and producing the materials. Once it narrows down its list to the suppliers that are capable, B. Braun Medical does a sourcing initiative to solicit quotes. They also perform an in-depth financial analysis of the companies to ensure their stability. Finally an audit is performed to evaluate the company and their systems and procedures. Company representatives will also visit the suppliers’ facilities and meet with key leadership and discuss their business.
The strategic procurement team leads the overall process, but R&D, legal, finance and other departments strongly participate in the review. “It’s a cross-functional effort. We’re working in a heavily regulated industry so we need to make sure there are no surprises down the road.” B. Braun Medical’s quality team also performs quality reviews and audits to ensure their independent approval of all suppliers.
Once a supplier is approved, B. Braun Medical requests sample materials and performs a product evaluation. If the product meets specifications and the total cost of ownership is favorable, B. Braun Medical will enter into a multi-year supply agreement.
Completing the supply agreement doesn’t mean the evaluation process ends. B. Braun Medical continues to measure supplier performance using metrics such as on-time delivery, quality, sustainability, cost savings and participation in idea generation. “We’re always looking to optimize our costs, so we constantly review which suppliers are stepping up with product improvements that may also bring cost savings with them,” Stammherr says.
B. Braun Medical regularly meets with its suppliers to review these metrics, discuss the relationship between the two companies and identify problems to address. Suppliers must take an active role in this process. B. Braun Medical wants to work with suppliers that bring forward ideas for how to maintain quality, reduce costs, improve efficiency, and lessen their environmental impact. “Our suppliers are very aware of our need for continuing improvements and environmentally sustainable products,” Stammherr says.
Managing those supplier relationships requires good tools. “We constantly strive to stay current with our systems,” Stammherr states. “We’re trying to use the latest and the greatest.” B. Braun Medical’s primary tool is an integrated ERP system from SAP. It also utilizes other third-party systems to supplement its ERP and enhance its overall capabilities.
B. Braun Medical’s next big investment will be in SAP enhancements, including an end-to-end automated system that integrates the buying process across entire organizations and delivers insight into millions of suppliers across direct and indirect spend categories.
Keeping up to date on technology is not only important to B. Braun Medical’s internal systems, it’s a requirement for suppliers as well. “We want to make sure that when we are selecting suppliers we are evaluating their technology and infrastructure platform,” Stammherr says.
Technology can provide the tools and information that organizations need to make informed decisions and drive efficiency, but they still need people to handle those tools. B. Braun Medical is poised to hire more people within the strategic procurement department in the coming years. “As the company continues to grow, we will be strategically aligned to meet our customer’s changing needs,” Stammherr says.
Having those people in place will help B. Braun Medical prepare for the next transformation in procurement, which Stammherr anticipates will be driven by retailers. Many of the commodity-type items the company purchases are already commonly found in a neighborhood pharmacy. However, the growing acceptance of online purchasing could soon see more of those items sold through internet marketplaces, creating more opportunity for buyers to source materials directly from suppliers. “I believe online suppliers will continue to broaden the scope of what you can procure through their infrastructure,” he says.
At the same time, suppliers are increasingly making their materials available more quickly through local warehousing, placing their products nearer to end-customers. “Suppliers are trying to get materials closer to the point of use so lead times and the complexity of supply chains are simplified,” Stammherr explains.