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Medical Devices: Reduce Inventory

Quick Summary

  • Capital Preserved: $11M
  • Partstat Savings: $3.9M
  • Term: 10 Years Years

The EMS purchased approximately $7.6M of inventory for their customer, a medical devices OEM. This inventory consisted of end-of-life/last time buy material and heavily allocated inventory. Furthermore, the EMS committed to purchasing approximately $3.3M of additional inventory for a total commitment of approximately $11M. This inventory represented several years of production and service for the OEM’s devices.

Working capital was a major concern for both the EMS and the OEM. The purchase of several years of inventory is, at times, a necessary evil to ensure production and service commitments, and to avoid redesign costs. This concern and resulting obligation for the inventory is shared (sometimes unequally) by EMS and OEM companies. There are no other parties willing to enter into these long-term inventory obligations - until now, with Partstat's Inventory Ownership Solutions.

Partstat’s value proposition is very simple: We buy inventory so you don’t have to.

  • Partstat purchased the $7.6M of inventory from the EMS
  • Partstat assumed the EMS’ commitment for the on-order inventory: $3.3M
  • Partstat matched the OEM’s forecast and granted a 10-year back-end loaded delivery schedule

The EMS was able to recover $7.6M in working capital and transfer their obligation to purchase the additional $3.3M of on-order items. Furthermore, the EMS was able to transfer the obligation to purchase the inventory for future production to the OEM. Partstat and the OEM entered into a Supply Agreement.

The OEM was able to take control of the inventory and receive a discount for the on-order items as Partstat purchased all of the inventory immediately. The OEM compared their carrying costs to Partstat’s fee, and discovered that they reduced carrying costs with the Partstat solution.

Due to the successful execution of this immediate-need scenario, both the OEM and the EMS look forward to engaging with Partstat for all future inventory purchases to support both production and service commitments.