Changes are coming to Medtronic.
Changes are coming to Minneapolis-based Medtronic. During the J.P. Morgan Healthcare Conference in San Francisco, the company announced a restructuring initiative that could save the company $3 billion over several years and impact an unknown number of jobs.
Called the “Enterprise Excellence Program,” Medtronic anticipates the initiative will drive long-term business growth and sustainable efficiency, according to a filing with the U.S. Securities and Exchange Commission. In the filing, the company said the program will be focused on three categories – global operations, functional optimization and commercial optimization.
While the filing laid out its areas of focus, it did not provide any meat to its proposed restructuring. For global operations, the company said it will enhance global manufacturing and supply processes, systems and site presence to improve quality, delivery, cost and cash flow. For its functional optimization plan, Medtronic said it will leverage its operating models and systems across “several enabling functions to improve productivity and employee experience.” For the commercial optimization program, the company said it is looking to improve productivity and the customer experience.
“The program is designed to drive operating margin improvement as well as fund investment in strategic growth initiatives,” Medtronic said in its Jan. 8 filing.
Medtronic said it anticipates incurring expenses of approximately $1.6 billion to $1.8 billion as part of the initiative. The majority of the costs are expected to be felt by the end of 2022, Medtronic said. Approximately 40 to 50 percent of the costs will be associated with severance packages. The rest of the costs are primarily associated with job cuts, employee training initiatives and professional services, the company said.
How many employees the restructuring will impact is unknown as of yet. In its filing though, the company said its “overall employee base will remain relatively unchanged, as new jobs are created in new capability areas and resources are deployed to support the company’s growing market needs.” Medtronic maintains about 9,000 employees in Minnesota, the Minneapolis/ St. Paul Business Journal reported.
The Journal noted that Medtronic laid off an undisclosed number of employees in Tennessee over the summer of 2017 and also announced it was closing an Illinois distribution center that was expected to impact 185 workers.
As the company plants its restructuring it became well-positioned late last year after the decision by Animas Corporation to exit the insulin pump space and lay out an optional path to shift its customers to Medtronic. In October 2017, Animas, a division of Johnson & Johnson, announced it was exiting the $1.7 billion market space due to the changing needs of customers, market dynamics and increased competition. The company told its customers about its decision and informed them of options they could find with Medtronic.
