Align Technology Inc Case Study

I. Point of view Align Technology, Inc. (“We”, “Our”, or “Align”) designs, manufactures and markets the Invisalign system, a proprietary method for treating malocclusion, or the misalignment of teeth. Invisalign corrects malocclusion using a series of clear, nearly invisible, removable appliances that gently move teeth to a desired final position. Because it does not rely on the use of metal or ceramic brackets and wires, Invisalign significantly reduces the aesthetic and other limitations associated with metal arch wires and brackets, commonly referred to as braces. We received the United States Food and Drug Administration (“FDA”) clearance to market Invisalign in 1998. The Invisalign system is regulated by the FDA as a Class II medical device. We distribute the vast majority of our products directly to our customers: the orthodontist and the general practitioner dentist, or GP. In order to provide the Invisalign treatment solution to their patients, orthodontists and GPs must initially complete an Invisalign training course. The Invisalign system is sold in North America, Europe, Asia Pacific, Latin America and Japan. We use a distributor model for the sale of our products in parts of the Asia Pacific, Latin American, and smaller country markets in Europe, the Middle East and Africa regions. We were incorporated in Delaware in April 1997. Our headquarters are currently located at 2560 Orchard Parkway, San Jose, California 95131, and our telephone number is 408-470-1000. Our international headquarters are located in Amsterdam, Netherlands. Our digital planningand software facility is located in San Jose, Costa Rica and our aligner manufacturing facility is located in Juarez, Mexico II. Definition of Problems Although braces are generally effective in correcting a wide range of malocclusions, they are subject to many limitations and disadvantages. • Unattractive appearance. Braces call attention to the patient’s condition and treatment. In addition, braces trap food, which can further compromise appearance. Braces can also result in permanent discoloration of teeth. As a result of these and other limitations, relatively few adults with malocclusion elect traditional orthodontic treatment and braces can compromise the self esteem of young adults and teenagers. • Oral discomfort. Braces are sharp and bulky and can abrade and irritate the interior surfaces of the mouth. The tightening or adjustment of braces results in root and gum soreness and discomfort, especially in the few days immediately following an orthodontic visit. • Poor oral hygiene. Braces can make it difficult to brush and floss leaving teeth vulnerable to developing decay, plaque, periodontal

Case | HBS Case Collection | September 2002

Align Technology, Inc.: Matching Manufacturing Capacity to Sales Demand

by H. Kent Bowen and Jonathan P Groberg

Abstract

Align Technology is a four-year-old medical products company that has invented a new product requiring new manufacturing processes. Demand for the new product has grown more slowly than initial forecasts predicted, and the cost structure is preventing the company from becoming profitable. The manufacturing process involves six different operations located in California, Pakistan, and Mexico. The first dilemma requires downsizing the capacity until the demand grows. Increasing capacity in the future requires consideration of the time lags, costs, and incremental units of added capacity inherent in each of the six processes. Given the uncertainty of accurate sales forecasts as the company carries out new marketing initiatives, the manufacturing organization has been challenged to create a capacity plan to meet demand while lowering its fixed costs.

Keywords: Health Care and Treatment; Collaborative Innovation and Invention; Problems and Challenges; Product; Forecasting and Prediction; Marketing Strategy; Sales; Demand and Consumers; Production; Health Industry;

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