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Medtronic to close manufacturing and distribution site to improve profit margins

por John R. Fischer, Senior Reporter | January 17, 2024
Business Affairs Parts And Service
Medtronic is closing over five manufacturing sites and six distribution centers.
Come April, Medtronic will downsize, closing more than five manufacturing sites and six distribution centers, as part of a restructuring strategy to elevate its profit margins.

The Ireland-based company, which is run from Fridley, Minnesota, announced the news on January 8 at the J.P. Morgan Healthcare Conference in San Francisco, but did not disclose which of its 78 plants worldwide would shut down. It also is reducing its suppliers, having already ended relationships with 200, said CEO Geoff Martha at the event.

The six distribution centers to close will be integrated into two others to create megacenters. The locations of those megacenters also were not revealed, and the company did not say how many jobs would be affected by the shutdowns, reported the Star Tribune.

"We have no specifics to share right now," company spokeswoman Erika Winkels told the news outlet. "Consistent with operations best practices, we are always evaluating our manufacturing and distribution footprint for efficiencies that improve our performance."

She also said that downsizing would be focused on global operations and supply chain and is meant to provide the "largest near-term savings” for the company.

Inflation and other economic challenges have impeded the company’s ability to increase its revenue. At the conference, Martha said Medtronic has recorded mid-single-digit growth over the past four quarters and expects to do the same in the next. According to Seeking Alpha, it is aiming to create double-digit growth and plans to do so with the development of new medical products that account for 20% of the company’s revenue and are expected to drive profit due to being part of large and fast-growing markets.

“Our top priority is restoring our earnings power, full stop,” said Martha.

Over the last year, Medtronic has made several changes to its structure. In February 2023, it initiated cost-reduction strategies and launched global layoffs that April. Right before 2023, it announced that it was spinning off its patient monitoring and respiratory interventions business as one company, and is now reportedly in talks to sell the units to Carlyle for $7 billion.

It also merged its surgical robotics and surgical innovations units last March to create a surgical operations division.

The company’s five largest manufacturing sites are located in Connecticut, Puerto Rico, Mexico, China, and Minnesota, according to its most recent earnings report. Medtronic employs over 95,000 globally, with 43% of its workforce based in the U.S. or Puerto Rico.

Martha says that its supply chain progress is trackable and that its work in updating products and reaching long-term company goals will continue to push mid-single-digit revenue growth.

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