Snap Chart
In most industries, the best supply chains do more than keep pace. They support growth while expanding gross margins and bringing inventory levels down. We call these companies “cost and capital high performers.”
Medtech has none.
We analyzed the cost and capital efficiency of the 19 largest pure play public medtech companies from 2019 to 2025. The results are striking. On a quadrant chart, the top-right corner, where cost and capital high performers should sit, is empty. More than half of medtech companies landed in the opposite corner, combining margin erosion with elevated days inventory outstanding (DIO).
Since the pandemic, the medtech industry has spent years prioritizing service recovery over efficiency. On average, gross margins have contracted by 149 basis points despite strong top-line growth. At the same time, DIO increased by 21 days, leaving inventory levels well above pre-pandemic norms.
Why have medtech companies struggled to deliver both margin improvement and inventory discipline? The answer is not a lack of effort; it’s that traditional improvement programs aren’t built for the industry’s realities. Among other factors, complex product portfolios, change control and quality management system constraints, demand variability, fragmented supply bases, inflated input costs, and continued pricing pressure from customers limit the effectiveness of standard playbooks.
Medtech’s supply chain problem is largely self-inflicted, not by bad decisions but good ones. Every SKU added for surgeon preference, every buffer stock built against a quality hold, every 18-month supplier qualification was the right call at the time. The companies that break into the top quadrant will be the ones willing to revisit the cumulative effect of those decisions, not just optimize around them.
With service levels finally stabilizing, it's time for a new playbook. Future industry leaders will combine radical simplification, zero-based redesign, risk-based quality management, and AI-powered modernization to unlock a step change in performance.
The top-right quadrant is still open for now. The first company to claim it won’t just improve its operations; it will gain an immediate cost and cash flow advantage over competitors. For the median company in this analysis, closing the performance gap could unlock more enterprise value than most medtech acquisitions deliver, without the integration risk.
The authors would like to thank Anshika Uppal for her contributions.
First published in aprile 2026