Applied Medical Resources Corp. in Rancho Santa Margarita expanded its European operations this month with the opening of a 215,000-square-foot manufacturing, research and development facility at its European headquarters in Amersfoort, Netherlands.
The facility will house design, development and manufacturing of medical devices and distribution to customers across Europe, the Middle East and Africa.
“Initially we were shipping products there and building only high [sales]-volume products like Kii in Europe,” said Gary Johnson, referring to an Applied surgical device. “ … but as we have more development there, we need to grow our manufacturing capability.” Johnson is a group president. Applied does not believe in specific titles for its executives.
Johnson said product manufacturing in Europe will help the company better serve European customers and reduce its transportation-related carbon footprint. It opened the European headquarters in 2006 with 100,000 square feet.
Applied develops minimally invasive surgical products used in a wide range of specialties, including general, colorectal, gynecology, urology, bariatric and obstetric surgery.
The Kii Access System is used to puncture, provide opening to introduce endoscopic instruments during surgery. It features minimum penetration, better views of surgical sites, and an easy-to-use seal detachment for easy tool changes.
The company plans to add more than 100 employees at the European headquarters in the next 12 months, bringing the headcount to about 300.
“Everything we are doing in the Netherlands is an expansion,” said acting group president Dima Hilal. “We are not shipping any jobs there.”
Applied employs over 3,500 people, 500 of them outside of the U.S., and will also be hiring domestically.
Its international headquarters in Orange County is comprised of 18 buildings totaling 1.4 million square feet. It had nearly 2,800 employees there as of June, according to the Business Journal’s annual survey of medical-device makers, which ranked it second. It says its annual sales are approximately $500 million.
Johnson said Applied is able to expand operations, deliver high-quality products and maintain affordability because it chose to directly manage the manufacturing process from the onset (related stories p. 17).
Vertically Integrated
The company, founded in 1987, said its mission is to deliver healthcare at a lower cost without compromising quality. Johnson said that in other industries, such as consumer electronics, innovations drive costs down, but that the opposite is true for healthcare.
“We thought we could be part of that change by building a next-generation medical device company that invests heavily in developing new technologies and is committed to making those technologies more available [and] affordable,” he said.
Applied executives say they believe the company can achieve the goal through a vertically integrated business model that allows it to completely control product quality and cost. It designs, develops and manufactures all of its products in-house, and owns all aspects of manufacturing, ranging from injection molding and automated assembly packaging to labeling.
Applied said it doesn’t increase prices when new features are added to existing products. The company said it honors that promise by fairly pricing a product when it’s introduced on the market.
Its trocar line has five products ranging from basic to more sophisticated designs. A company spokeswoman said technology ranges from simplistic to proprietary, but that all of its trocar products are priced the same because “the surgeon should be able to determine what is best for his or her patient without thinking about cost—[costing] more or less should not alter the course of the treatment.”
If the cost of manufacturing a product increases, she said, “It is our job to figure out how to [better] manage production to keep prices the same.”
Applied conducts a variety of manufacturing in OC, including advanced metal and polymer processing and mold development. It has 14 buildings in Santa Margarita, two in Lake Forest and two in Irvine.
The company makes its own metal injection molding and says it’s the largest single-site mold maker in the U.S.
People-Centric Design
Another aspect of manufacturing is automation—robots taking on jobs.
Johnson said that often when people think of automation, they think of robots filling jobs people used to do, leaving them jobless. “But that’s not true, he said, “because we are actually growing [employment].” The company hasn’t used layoffs to improve profability.
He said businesses turn to automation when demand rises and they suddenly need to scale production, but that that’s the wrong approach.
“It’s very expensive if the product hasn’t been designed for automation—robots don’t have the dexterity of human hands—and [businesses] ultimately farm these things out to lower-wage generating countries.”
Applied involves automation and product designers early on in the process so that products are designed for automation from the outset, even if it doesn’t immediately require automation. “Products have to be designed like Legos, easy for robots to assemble,” Johnson said.
The company hasn’t let any employee go whose job was taken over by a robot, instead training him or her to do jobs requiring more skill.
Applied says its employees are at its center. Hilal said the company is proud of the “town squares” in all of its buildings. The feature, comprised of a big, open space outfitted with tables, is designed to create “this flow of hallway conversations to make this vertical [structure] work—multiple departments need to be talking and working together … and not be in those silos,” she said.
Other design elements include walking paths, open offices and station rotations so that different teams can “have conversations and collaborate.”
The company also has green initiatives at newer facilities it designed from the ground up, such as using solar energy and leveraging waste water to power heating and cooling systems.
Growth Plan
“Most medical device makers are assemblers at best. They buy every part from suppliers, assemble them, and send them to clean rooms,” Johnson said.
He said Applied is a true manufacturer: “We consider our manufacturing and control of our supply line as valuable to our brand as our promise to … satisfy the needs of our customers.”
Applied’s growth isn’t exponential but is pursued as needed and in line with customer demand. The company plans to hire in a number of key areas, including engineering and skilled manufacturing, which includes advanced injection molding, and metal processing.
It also has a four-year metalworking apprenticeship program consisting of departmental rotation in assembly, milling, lathe, grinding, electrical discharge machining, polishing and mold maintenance.
