By Kurt Woock
Peter Bonin is the paragon of the entrepreneurial spirit. First up is thinking outside the box: Bonin parlayed his experience making snowboards using injection molding into a successful medical device branch of the company he co-founded, Tenacore, Santa Ana, Calif. Next, a willingness to take calculated risks: Bonin decided his West Coast company would invest in clean room technology as well as new locations in Las Vegas, Chicago, and London because his customers asked for them. Last, he is always looking for new opportunities: When 24×7 and Bonin last sat down together in 2008, he had a long list of plans Tenacore was working on. This time, Bonin’s to-do list was just as ambitious. Discover how Bonin assesses the market when deciding what to do next and how he manages to think big without overstepping reality.
24×7: Why did you decide to start Tenacore?
Bonin: Brand Caso and I were kicking around some ideas, and we knew the health care industry was a pretty stable environment. We wanted to build a business that would keep jobs in the USA and reduce health care costs. We decided to build a business that offered quality products and services at a greater value to our customers.
24×7: What services does Tenacore provide?
Bonin: Tenacore is a medical device manufacturer, repair depot, and service center. We manufacture wall suction regulators, flow meters, O2 blenders, fetal transducers, SPO2 sensors, and hundreds of replacement parts and accessories. Our depot repair services include electronics, vital signs monitors, infusion pumps, endoscopes, diagnostic ultrasounds, fetal transducers, wall suctions, and more items that can be easily shipped.
24×7: Can you describe the growth of your business? You started as a distributor, but soon began a service business and later started a manufacturing branch of Tenacore.
Bonin: The evolution was customer-driven. In 2002, we began our depot repair side of the business. The depot repair was designed to serve the nation by choosing products that were small enough to ship at a low cost to our service center. In 2005, we started manufacturing parts to support the repair depot. Once we started manufacturing parts and perfecting the service, we started to manufacture our own products. There were a few products that weren’t too complicated to produce the entire device, such as the fetal transducer. We proceeded methodically—we manufactured the plastic housing, created the electronics—then, one day we realized, “Well, we already have 80% of the device finished. Let’s finish it and have a stand-alone unit.”
Over the years, we’ve perfected the process where we start in the repair lab, we understand the technology, then our engineers will reverse engineer it, look at common failure points, and correct them to make a better device. Every year since, we’ve launched one or two complete medical devices, and we make hundreds of parts that support our depot repair service, as well as other third-party depots. During the process we learned that there were additional regulatory requirements to be able to market that product. That led to the creation of our quality team to hire the people who could take care of the regulatory requirements and get us to market quickly.
|A Quick Take
24×7: What was your background before you founded Tenacore?
Bonin: I started out in the health care field in 1992 as a service technician, servicing cataract surgical equipment in operating rooms, hospitals, and surgery centers. In 1994, I began selling capital equipment and depot service. I took a 2-year hiatus from the medical industry in 1997. I became president and partner in an injection molding business that made snowboard bindings, car parts for Mustangs, and spare parts for the medical industry. I co-founded Tenacore in 2000 with a business partner and childhood friend, Brand Caso.
24×7: We last spoke to you in 2008 and with Jerin George-Mathew in early 2011. What’s been new at Tenacore since then?
Bonin: We have several exciting projects in the pipeline. Our customer base has expanded not only to include hospitals, but also surgery centers and other auxiliary health care facilities, as well as independent service organizations (ISOs) that service hospitals. That’s an area that has recognized substantial growth. We also sell our products to other OEMs who privately label them. Many of these products are within our current product line, but we are also working with these companies to develop new offerings. We’re also developing a flexible fetal ultrasound.
24×7: Any other expansion plans?
Bonin: In the past year we have also opened three new service depot distribution centers in Las Vegas, Chicago, and London. Our future expansion plan includes opening Northeast and Southeast service depot distribution centers. Each of these locations will include a courier to pick up and deliver products. We’re going to expand our on-site biomed service as well, offering biomed techs to support existing biomed programs stay compliant with their PM schedules and repairs.
24×7: Any plans for next year?
Bonin: In 2013, we’ll dive into the rental market. We’ll start with infusion pumps and vital signs monitors. In renting, we see an opportunity for cost-savings to the hospital.
24×7: Has Tenacore always supplied products to the entire country?
Bonin: Yes, however, our repair depot and manufacturing were all performed in our headquarters in Santa Ana, Calif. Now, we have locations in Las Vegas and Chicago and internationally in London, UK. The three additional locations are designed to conduct repairs and be a distribution center. This allows for real-time response.
24×7: Why Las Vegas? Why Chicago?
Bonin: Our customers drive our business. Many of our customers are viewed as partners in our success. Collectively, we agree on the opportunity and benefits to our customers to fulfill mutual goals. We look for a 3- to 5-year commitment from these partners. That gives us the incentive to invest in a new area. We have very strong customer partnerships in all of our locations, and we look to duplicate that model when we look at a new location.
24×7: How do you build relationships in other parts of the country when your headquarters are in California, especially when you are a growing company?
Bonin: It took time and credibility. The most important thing was to establish a strong foundation, including a quality system, infrastructure, and team members. We are ISO 13485:2003 certified. We also have FDA registration, and the insurance we carry through this business is substantial. Maybe the breadth of our products helped as well. It would probably be difficult to have another location if we had a narrow slice of business.
24×7: What’s the size of Tenacore?
Bonin: We have about 1,200 hospitals we do business with. We moved in 2010 to the current location, which is 37,000 square feet. Collectively, we’re near 50,000. We employ 160 to 180 people. It’s important to be part of the community. We like to keep manufacturing jobs in the United States. Our manufacturing capabilities include electrical, mechanical, and software design, as well as a full manufacturing platform, which includes injection molding machines (plastic), Swiss screw machines (connectors), a CNC machine (molds), sonic welders, and pad printing equipment.
24×7: From your perspective, what should a person searching for a provider look for?
Bonin: That’s a big questions in the industry: How do you validate a provider? Most of our customers are professionals—biomeds or purchasing agents. They don’t spend the majority of their time vetting vendors. We always suggest a couple things to look into. One thing is the size of the business. Do they have duplication? Is the bench deep enough that if you send in 100 products, they’ll be able to handle it? What kind of certifications do they have? Are they formally educated? Factory trained?
The second thing I’d look for is the quality system. The time in business is also important: that tells you if they have a reputation. And then I’d make sure the vendor can meet the expectations. Last, I’d say price. Many times, the order is reversed; many times, people pick price first. The decision is often based solely on price, but the minimal savings they get on that one part can be erased very quickly if that product is inferior.
24×7: Service and manufacturing require different talents and personnel than distribution. What challenges have you faced in starting these different segments?
Bonin: It’s easy to put together a bunch of people. It’s easy to say, “Work here; this is what we’re going to do.” But it’s always a hurdle to assemble a good team. We’ve assembled a dynamic management team who came from established companies within our market, people who know how to excel in our industry.
24×7: Do you use clean rooms?
Bonin: We have two clean rooms. Each is roughly 4,000 square feet.
24×7: Why did you feel it was important to add that to Tenacore?
Bonin: We receive about 5% of our revenue from custom manufacturing jobs. One of those devices is a DNA collection device. In 2006, we had a client that was interested in manufacturing in a clean room. They made a commitment to us, and we, in turn, invested in injection molding machines inside of a clean room. The long-term vision was that we could use that space to manufacture our own medical devices. Now, we make millions of collection devices per year, and we use those same clean rooms to manufacture our own clean room devices.
24×7: How did you go about acquiring the infrastructure?
Bonin: I ran an injection molding business before, so I had the experience. We built the clean room about the same time we invested heavily in our quality assurance team. That’s when we attained ISO 13485 and the California medical manufacturing license. We had those quality procedures in place, so installing the clean room was less difficult than we originally anticipated. Quality came first, and then the clean room.
24×7: Tenacore continually adds to its product line. How do you determine what to focus on next?
Bonin: The style at Tenacore is aggressive but conservative. What I mean by that is you have to believe in the industry, and you have to know the risks you’re willing to take. If we can get commitments to mitigate those risks, that’s usually the lever that makes our decision one way or the other. At Tenacore, it takes commitment from a customer prior to making a new, unique device. We also look at the costs and other barriers to entry for a particular product, as well as the time that it will take to get a product or service to market.
We also rely on our repair depots to give us information about what new technology is out on the market. We look for at least a 5- to 10-year life span for each project that we start. We make sure what we’re introducing isn’t foreign to our audience. Instead, we focus on bringing improvements to existing products and services to provide the solutions that our customers need.
24×7: Where do you get your information?
Bonin: Our intelligence drivers come from all over. Hospitals are one. The ISOs are another. Our competitors, because they buy parts, are another one. Hospital chains and the smaller community hospitals, too. We also get information from our suppliers, the manufacturers. So, we have all these information ports that are unique to most businesses. Our competitors might have exposure to a couple, but we have access to all this information. Our management team reviews the information, and we utilize that to our advantage. We ask, “What does the customer want?” And then we deliver a solution.
24×7: Will you be affected by the medical device tax?
Bonin: The medical device tax is certainly going to affect the entire medical device industry. Many companies are already planning and implementing layoffs and price increases. At Tenacore, we drive about 60% of our revenue through service and the other 40% through our OEM medical devices. We are currently focused on lowering our costs internally through Lean manufacturing and the use of robotics to help offset the additional burden that this tax places on manufacturers in the US. 24×7 Industry Insider, November 2012
Kurt Woock is the associate editor of 24×7.