Manufacturer Meets Medical Industry

Just two years ago, Veridiam had $30 million in sales. Today, after several acquisitions and internal growth, the company has sales of $70 million, with 500 employees working in 270,000 square feet.

That kind of growth-in just two years-is enough to raise some eyebrows. What strategy did Veridiam (San Diego, CA) take to expand so rapidly?

Two words: medical industry.

The company was founded more than 50 years ago as a division of Carpenter’s special products division. The division acted as the company’s draw-tube and machining supplier of specialty materials to the aerospace and nuclear industry.

“How much growth did the nuclear industry have in the U.S.?” asks Steve Thornton, Veridiam’s director of sales. Since the 1970s, not much.

Two years ago, Thornton was brought in to make some changes in market strategy for the contract manufacturer. It had recently been sold to WHI Capital, a private equity firm out of Chicago. He had two decades of experience in the medical field, both in selling equipment and in contract manufacturing. On Thornton’s first day, ten percent of the company’s revenue came from medical. Today, it stands at 40 percent.

What can account for this growth? As Thornton describes it, medical “was a natural fit. The fact that we drew the materials and helped develop new materials that are commonly used in medical-and machine and fabricate it-it was a natural thing for us to increase our presence in the market.”

The company works with the typical medical grades-Stainless 304 and 316; Ti6Al-4V. But it also uses some less common grades, like Carpenter 465, “which is a stainless that’s twice the strength of 304,” says Thornton. The company also works with Biodur 108-a nickel-free austenitic stainless-and other specialty medical alloys. And, thanks to the company’s background, these materials are actually drawn, giving the possibility of a wider size range “as well as better concentricity and ID surface finish than with gundrilling followed by centerless grinding,” Thornton adds.

Providing the keystone of Veridiam’s strategy has been what Thornton calls a “vertically integrated solution,” and central to that has been diversity on the shop floor, taking the customer from product development through material design and prototyping, part production-including machining, fabrication and assembly-and shipping. It’s all done in-house and all tightly controlled.

Specifically, the company’s capabilities include tube drawing, both thin-wall and cannulated round bar; electrolytic cutting; wire and ram/sinker-type and hole-popping EDM; Swiss-type screw machining; milling and turning; laser cutting; metal forming; welding; and assembly.

Much of these capabilities were brought in through three company acquisitions the firm has made during the past two years, the most recent being Costa Rica-based Point Technologies, which focuses on electro chemical grinding, screw machining and EDM.

Veridiam’s capabilities make the company stand out in a crowd. “We’re finding that a larger number of medical OEMs are looking for integrated solutions,” Thornton says. “They no longer want to get materials from one place, then process them in another place; that’s very inefficient from an operations perspective.”

From the beginning, managers identified four areas that fit the company’s diverse capabilities: dental, orthopedic, endoscopy and vascular markets. “We identified each of these to have steady growth going forward,” Thornton explains.

Nevertheless, before the company could truly take off within these markets, it had to help customers speed their time to market. The faster Veridiam’s customers can get their product to market, the greater their competitive advantage.

Prototyping in the medical field demands blazingly fast turnaround times. For this Veridiam has had to make some serious technology investments. “On the machining side, we’re always battling capacity issues,” Thornton says. “We’re always looking for the newest model out there that can speed our cycle times.” For this reason, much of the equipment on the machine-shop floor is less than two years old. “That new technology is how we keep competitive in the market,” he says, “and how we meet the short delivery time and flexibility our customers demand … For prototyping in the medical field, clients need their product yesterday.”

To meet this turnaround, Veridiam pushes its cutting tools hard. “We’re one of the largest users of [cutting] tools on the West Coast,” Thornton says. “Because the advancement in alloys moving toward very hard materials, we go through our fair share of tools. To make things efficient, we have an automated, online tool-replacement system in place, so tools are replenished on a daily basis.”

Flexibility, he says, also calls for something that may seem counterintuitive when thinking about modern lean-manufacturing methodologies: The company keeps several hundred thousand dollars of material in stock. “We try to keep as little inventory as we can,” Thornton explains, “but we need to support the market, and the materials we’re working with aren’t commonly available. Some have significant lead times-up to 12 months in some cases. It’s impossible for our customers to wait that long, so we needed to make the investment in material to support the medical market.”

That support starts with design for manufacturing (DFM) services. Though the contract manufacturer doesn’t do any “engineering,” per se, they do consult with clients as to how best to design a product for easy processing-fewer components, ease of assembly, etc.

Few parts Veridiam makes, however, could be considered “simple.” The DFM work merely takes the work from “impossible to manufacture” or “extremely complex,” to “very complex but cost-effective.”

For instance, as of this writing, the company is working with one company that is marketing an orthodontics piece to correct overbites. The stainless-steel device has 16 different parts, including drawn-tube components, along with pistons and collars that require milling and turning. On top of this, various parts are also laser-welded together. “We’ve developed very specific fixtures to weld and assemble these components,” says Thornton. “Here, like in many other places, a lot of different processes come together to form one assembly.”

In the future, the company plans to keep treading its continuous-improvement path. Currently the company employs 20 Six Sigma green and black belts.

“Efficiency is, of course, a huge focus,” says Thornton. “We beat our own growth expectations for the past two years. At the moment we’re starting to go back to the drawing board, to define our goals, to see where we want to be in five years.”

Medical is one of the fastest growing domestic markets for manufacturing, but it’s also one of the most competitive. Regardless of past success, Thornton concludes, the company can’t afford to slow down.

“In this market, you can’t stop,” he adds. “If you do, you’ll never catch up.”

Editor’s Note: Artwork courtesy of Veridiam, www.veridiam.com.