Every medtech company has been forced to transfer suppliers. When a sole-source plant burns down, a sterilization facility floods, or a molding supplier fails overnight, companies mobilize quickly and execute transfers under pressure. They have the capability; what’s missing is the ability to do this proactively, on demand, in the absence of a crisis.
Historically, procurement has often prioritized supply continuity over efficiency to support growth. Unlike companies in the automotive sector, medtech firms have not aggressively pursued cost-optimized supply chains. However, as growth stabilizes, margin expansion is becoming more important.
Transfer excellence—the institutionalized ability to switch suppliers efficiently—is a key driver for margin growth. Procurement assessments often show that more than 30 percent of potential savings depend on the ability to switch suppliers, a routine skill that few medtech companies currently have. A dedicated transfer office enables companies to move from reactive switching to a proactive approach, turning a complex, regulatory-heavy headache into a routine, repeatable process.
A well-run transfer office can lower direct material costs enough to expand EBITDA margin by 1 to 2 percentage points. It can also reduce the time taken from 2 to 5 years to 6 to 18 months.
Companies are often hesitant to change suppliers because of perceived requirements for regulatory re-filings and strict technical specifications. Without a dedicated team, the initial effort needed to qualify new suppliers usually exceeds the ROI. A transfer office breaks this cycle, and sends a credible signal of willingness to switch, which boosts negotiation power and accelerates innovation.
Putting it into practice
Here is an example. A leading medtech OEM recently aimed to build a higher-performing, more cost-competitive supply base: securing short-term savings through supplier negotiations and capturing long-term savings from competitive sourcing events. Supplier transfers, critical to fully realizing the value of RFQ awards, usually took the company 2 to 5 years, thereby reducing and delaying the potential savings.
By establishing a dedicated transfer office, the company has tackled both challenges. The office helps category management teams conduct strategic supplier negotiations to achieve immediate savings and large-scale RFQs to create long-term value. The transfer office guarantees smooth supplier transfers, allowing the company to realize the long-term savings built into RFQ awards.
Success depended on several key enablers. First, strong collaboration between the transfer office and business units was essential to prioritize and execute transfers efficiently. Second, the team proactively executed essential steps. For instance, verifying and updating part drawings early helped prevent bottlenecks during quoting and post-award stages. Similarly, conducting supplier visits during the RFQ phase, rather than after awards, sped up readiness for execution. Lastly, the team continuously improved the transfer playbook by removing non-value-adding or duplicative steps.
As the transfer office demonstrated its capabilities, the company’s leverage in negotiations grew significantly. Reluctant suppliers became more responsive as they observed the OEM successfully executing transfers. In some cases, skeptical suppliers changed their approach dramatically after seeing their parts transferred to alternative sources.
The results were transformative. Transfer timelines decreased from 2 to 5 years down to just 7 to 9 months, enabling faster value realization. The company saved over $160 million on $1.5 billion of addressed spend. Additionally, the streamlined transfer process allowed the company to significantly consolidate its supply base, reducing complexity and boosting operational efficiency.
These results are typical. It’s common for a transfer office to enable incremental savings of 5 percent or more of direct materials, equivalent to 1 to 2 points of margin. Transfer times are also usually shortened to 6 to 18 months, depending on the complexity of the change.
Diagnosing the need
Before committing resources, leaders should evaluate their organization's current maturity. If the following symptoms are present, a transfer office is likely a high-ROI investment:
- Reactive versus proactive transfers: Are transfers only triggered by urgent disruptions like supply availability or quality challenges? High-performing organizations transfer proactively to optimize cost and service levels.
- Cycle time: Do simple transfers take years? Best-in-class transfer offices can often execute transfers in 7 to 9 months. Extended durations signal structural inefficiencies.
- The complexity backlog: Is there a list of identified savings opportunities that are ignored because the effort to switch suppliers is deemed too high? A transfer office eliminates this "cost of inaction."
- Performance visibility: Can the organization isolate the specific impact of transfers on cost, quality, and service levels? A lack of data often obscures the opportunity cost of staying with incumbents.
Building the engine
Building a transfer office requires rethinking today’s process. High-performing organizations delegate more qualification work to suppliers, use existing regulatory documentation instead of recreating it, and remove steps that do not add technical or compliance value. These adjustments often speed up transfers more effectively than simple process tweaks. To develop enterprise-scale transfer capabilities, organizations need to develop four core capabilities.
Standardized process. Create a playbook that outlines every step for supplier transfers, clearly distinguishing between parallel and sequential tasks, as shown in the exhibit. This ensures efficiency without compromising quality or safety. Refine the playbook continually, adhering to regulatory standards
Cross-functional governance. Involve business units and engineering teams early, ideally embedding dedicated engineers within the transfer office. Maintain transparency by tracking end-to-end timelines against milestones to ensure accountability. Fully integrate regulatory and quality teams to maintain compliance.
Effective tools. Utilize digital platforms, standardized templates, and visual management boards to monitor progress throughout the entire process. This visibility helps prevent gaps during handovers, where momentum is often lost. Incorporate a transfer management toolkit into the broader playbook to improve transparency of milestones, ownership, and interdependencies. Use automation and emerging AI tools to predict bottlenecks, create timelines, and identify regulatory dependencies before they cause delays.
Maintain a proactive mindset. Show conviction to inspire transfer teams. Cultivate a culture that welcomes change and challenges the status quo to promote innovation and creative solutions.
The path forward
Building this capability does not require a massive upfront reorganization. Leaders can start by following these five tactical steps to launch a pilot:
- Identify pilot parts: Select parts within categories where supplier transfers can yield the most significant benefits in quality, service, and cost. Piloting transfers on a few parts initially helps identify potential challenges and refine the approach.
- Draft the initial playbook: Map out the process steps and key roles needed to execute these specific transfers, setting expected timelines for each step.
- Resource a dedicated task force: Assemble a cross-functional team with the necessary expertise in procurement, engineering, quality assurance, and regulatory compliance to complete the transfers.
- Engage stakeholders: Ensure all relevant stakeholders are aligned and supportive of the transfer initiatives. This includes internal teams as well as key suppliers.
- Monitor progress: Establish metrics to track the progress and success of the transfer initiatives, making adjustments as needed to optimize outcomes.
Ultimately, the choice to establish a transfer office is about more than just cost savings; it is about strategic control. In a market that increasingly rewards operational discipline, a 1 to 2 percentage point margin expansion is a significant competitive advantage. By breaking the inertia of the supply base, transfer excellence enables procurement to be a strategic value driver. The question is not whether medtechs can afford to build a strong transfer capability—it is whether they can afford to ignore it.
About the authors
Aasheesh Mittal is a partner in the Washington, DC, office; Abhi Patangay is a partner in McKinsey’s Minneapolis office; Mike Gordon is a partner in the Newark office; Mohammad Behnam is a senior partner in the Vancouver office; and Sheridan Lichtor is a consultant in the Chicago office.