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Smart relationship Featured

5:59am EDT June 30, 2003
What's the best kind of vendor to provide a new component for your product?

The answer might be a supplier you're already working with. That's the conclusion that medical device manufacturer Respironics Inc. reached when it decided to apply a new technology to its products.

Respironics manufactures a variety of devices for use by individuals with sleep disorders like sleep apnea, which causes the sufferer to stop breathing during sleep. In a given night, the number of involuntary breathing interruptions may be 20 to 60 or more an hour. The deprivation of deep, restorative sleep often leads to excessive daytime sleepiness.

Respironics' device keeps the patient's airwaves open during sleep and stores usage data and breathing patterns for analysis and recommendations by a physician.

Respironics decided it wanted to add a feature to its products that would improve the data transfer function. Formerly, a home care worker visited a user's home to collect medical data from a Respironics device or the patient had to transport the device to the physician's office to download the data.

Respironics concluded that smart card technology, developed and in wider use in Europe than in the United States at the time, would make the process less complicated. Smart cards are in common use as loyalty cards for retailers, for gaining access to secure buildings by authorized personnel, by health care companies to store medical records and for pass cards in the transportation industry.

In Respironics' case, the smart card can be sent to the patient's doctor for review, eliminating a visit by a home care worker to collect the data.

DAWAR Technologies Inc., a 42-employee North Side company, had long supplied Respironics with parts for the control pads of some of its products, a relationship that dates to the early 1980s. Respironics, which had sales in 2002 of $495 million, is DAWAR's largest customer.

For a company like Respironics, which assembles its final products from parts acquired from a large number of suppliers, having reliable vendors that can deliver quality products on time is essential.

"You have to recognize that you're only as good as your supply chain," says David Butler, commodity manager for Respironics.

Butler says DAWAR has "a proven track record of delivering to expectations," a key reason Respironics courted it for the task, even though DAWAR had no direct experience producing smart cards.

"I'm not sure we could spell smart cards‚" says Gary Holcomb, DAWAR's president and CEO.

But Respironics had confidence in DAWAR's ability to get into the smart card manufacturing business. It committed to purchase at least 25,000 smart cards from DAWAR to justify the North Side company's investment in the equipment and technology required to launch the new segment of its business.

To date, Respironics has purchased approximately 200,000 smart cards from DAWAR. And the new segment has proven lucrative for DAWAR beyond its arrangement with Respironics -- it now manufactures smart cards for approximately 150 customers.

What would Holcomb advise a supplier considering a similar arrangement with a customer?

"Don't put a lot of your eggs in one basket unless you're confident that your customer has the same philosophy," says Holcomb. "Choose your customer as carefully as they would choose you." How to reach: DAWAR Technologies, www.dawar.com; Respironics, www.respironics.com