Thursday, May 27, 2004
Notes from Tuttlingen
Tuesday afternoon I flew from Berlin to Zurich, the nearest airport to the southern German town of Tuttlingen, which is nestled in a long, green valley just beyond the Swiss border.
Tuttlingen is a business destination for TigerHawk because my employer owns two facilities here. Tuttlingen is also interesting as a business case because it is a most unusual "industry town": Virtually every specialty surgical instrument in the world is made here, in whole or in part. There are more than 300 companies that manufacture specialty surgical instruments here, virtually all of them descended, directly or indirectly, from the German instrument giant Aesculap. Since the town has perhaps 35,000 residents, you can imagine the extent to which surgical instruments dominate the culture here.
For starters, the traffic circles and some of the roads are named after famous surgical instrument brands -- you can drive around Karl Storz Platz, for example, or down Aesculap strasse. Then there's the "radio channel" on the local cable TV system, piped into the hotels: the still screen on the television shows mechanical drawings of scalpals, as if that were more interesting to the average viewer than, say, pictures of the beautiful countryside or the old castle that dominates the hill over town.
Yesterday we spent the morning at our instrument purchasing operation here, where we order, receive, inspect, bag and tag a huge number of instruments a year, worth millions of dollars and weighing many tons, to sell in the United States and around the world. We buy these instruments through perhaps 150 of Tuttlingen's 300 manufacturers, who machine, mill, polish, coat and etch extremely fine -- almost sensual -- specialty instruments used by surgeons throughout the world for the most delicate procedures. If you have endured surgery in the Western world, you have benefited from the work of Tuttlingen's craftsmen.
During the afternoon we visited a couple of the manufacturers, as well as the foundry -- Bronner + Martin -- that dominates the market in the steel and titanium forgings that are the foundation for the industry. Bronner + Martin is a few klicks down the road from the town, out in the middle of flowering yellow canola fields. There they build molds for precision instruments at a cost of thousands of dollars each. The forgers smash out the shapes for more than ten million tools a year by bringing down powerful electric hammers on to hot steel or titanium that they hold perfectly over the mold. The job looks easy -- how hard can it be to hold a piece of hotel metal over a mold? -- but in fact it takes Bronner + Martin more than a year to train a forger to the point of productivity.
Interestingly, Bronner + Martin has been raising its prices recently. It blames the soaring cost of steel, which it attributes to huge demand from China. China's impact on the steel market cannot be exaggerated -- it now imports more steel than all the steel manufactured in Germany, a great steel producing country.
In any case, the many manufacturers of Tuttlingen buy these Bronner + Martin forgings -- which are rough, gray, unfinished inchoate handles, blades and tips -- and then push them through more than 80 production steps to produce finished rongeurs, retractors, scalpals, scissors, hemostats, curettes and so forth. The diversity of these products is astonishing -- my company alone sells many thousands of different instruments for hundreds of different surgical procedures performed by surgeons with very different views about the proper "feel" of a good surgical instrument.
Tuttlingen's monopoly begs at least two questions. First, why isn't it in danger of losing out to low wage countries? Well, perhaps it is. In recent years an Asian Tuttlingen has sprung up, in Sialkot, Pakistan. Sialkot, like Tuttlingen, contains hundreds of manufacturers of cheap, low-end instruments such as scissors and tweezers. By all accounts, it has become the center of such manufacturing notwithstanding that it's a dangerous place for the Western buyers who must go their to visit their vendors. But Sialkot has not supplanted Tuttlingen in the manufacture of the specialty instruments that surgeons rely upon, and it probably won't for many years to come. The German craftsmen of Tuttlingen continue to refine the quality of their products and increase the speed with which they can deliver them to the companies that sell them to surgeons. Indeed, by "outsourcing" the basic work to Sialkot, the manufacturers of Tuttlingen have been able to climb up the value chain by adding sophisticated new coatings and designs that catch the eye, or hand, of the surgeon.
Second, why didn't Japan learn this business? Like the Germans, the Japanese have a long tradition of fine work with steel, especially swords, knives and other blades. Like the Germans, the Japanese have a culture that respects craftsmen and their products. It would seem that the Japanese had all the inputs necessary to build their own fine surgical instrument industry. That they didn't suggests that something essential was missing. My own speculation, without knowing any actual relevant fact, is that Japanese medicine did not deploy surgery as willingly or as early as Western medicine, so the demand that would have fostered such an industry never materialized. If that hypothesis were true, it would also imply the reverse for Tuttlingen -- that it was the surgical tradition of Western medicine, rather than the availability of manufacturing inputs, that turned Tuttlingen into the industry town that it is today.
Tuttlingen is a business destination for TigerHawk because my employer owns two facilities here. Tuttlingen is also interesting as a business case because it is a most unusual "industry town": Virtually every specialty surgical instrument in the world is made here, in whole or in part. There are more than 300 companies that manufacture specialty surgical instruments here, virtually all of them descended, directly or indirectly, from the German instrument giant Aesculap. Since the town has perhaps 35,000 residents, you can imagine the extent to which surgical instruments dominate the culture here.
For starters, the traffic circles and some of the roads are named after famous surgical instrument brands -- you can drive around Karl Storz Platz, for example, or down Aesculap strasse. Then there's the "radio channel" on the local cable TV system, piped into the hotels: the still screen on the television shows mechanical drawings of scalpals, as if that were more interesting to the average viewer than, say, pictures of the beautiful countryside or the old castle that dominates the hill over town.
Yesterday we spent the morning at our instrument purchasing operation here, where we order, receive, inspect, bag and tag a huge number of instruments a year, worth millions of dollars and weighing many tons, to sell in the United States and around the world. We buy these instruments through perhaps 150 of Tuttlingen's 300 manufacturers, who machine, mill, polish, coat and etch extremely fine -- almost sensual -- specialty instruments used by surgeons throughout the world for the most delicate procedures. If you have endured surgery in the Western world, you have benefited from the work of Tuttlingen's craftsmen.
During the afternoon we visited a couple of the manufacturers, as well as the foundry -- Bronner + Martin -- that dominates the market in the steel and titanium forgings that are the foundation for the industry. Bronner + Martin is a few klicks down the road from the town, out in the middle of flowering yellow canola fields. There they build molds for precision instruments at a cost of thousands of dollars each. The forgers smash out the shapes for more than ten million tools a year by bringing down powerful electric hammers on to hot steel or titanium that they hold perfectly over the mold. The job looks easy -- how hard can it be to hold a piece of hotel metal over a mold? -- but in fact it takes Bronner + Martin more than a year to train a forger to the point of productivity.
Interestingly, Bronner + Martin has been raising its prices recently. It blames the soaring cost of steel, which it attributes to huge demand from China. China's impact on the steel market cannot be exaggerated -- it now imports more steel than all the steel manufactured in Germany, a great steel producing country.
In any case, the many manufacturers of Tuttlingen buy these Bronner + Martin forgings -- which are rough, gray, unfinished inchoate handles, blades and tips -- and then push them through more than 80 production steps to produce finished rongeurs, retractors, scalpals, scissors, hemostats, curettes and so forth. The diversity of these products is astonishing -- my company alone sells many thousands of different instruments for hundreds of different surgical procedures performed by surgeons with very different views about the proper "feel" of a good surgical instrument.
Tuttlingen's monopoly begs at least two questions. First, why isn't it in danger of losing out to low wage countries? Well, perhaps it is. In recent years an Asian Tuttlingen has sprung up, in Sialkot, Pakistan. Sialkot, like Tuttlingen, contains hundreds of manufacturers of cheap, low-end instruments such as scissors and tweezers. By all accounts, it has become the center of such manufacturing notwithstanding that it's a dangerous place for the Western buyers who must go their to visit their vendors. But Sialkot has not supplanted Tuttlingen in the manufacture of the specialty instruments that surgeons rely upon, and it probably won't for many years to come. The German craftsmen of Tuttlingen continue to refine the quality of their products and increase the speed with which they can deliver them to the companies that sell them to surgeons. Indeed, by "outsourcing" the basic work to Sialkot, the manufacturers of Tuttlingen have been able to climb up the value chain by adding sophisticated new coatings and designs that catch the eye, or hand, of the surgeon.
Second, why didn't Japan learn this business? Like the Germans, the Japanese have a long tradition of fine work with steel, especially swords, knives and other blades. Like the Germans, the Japanese have a culture that respects craftsmen and their products. It would seem that the Japanese had all the inputs necessary to build their own fine surgical instrument industry. That they didn't suggests that something essential was missing. My own speculation, without knowing any actual relevant fact, is that Japanese medicine did not deploy surgery as willingly or as early as Western medicine, so the demand that would have fostered such an industry never materialized. If that hypothesis were true, it would also imply the reverse for Tuttlingen -- that it was the surgical tradition of Western medicine, rather than the availability of manufacturing inputs, that turned Tuttlingen into the industry town that it is today.
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