Selecting the best manufacturer is a crucial part of taking a medical device from concept to market. Matthias Lorenz, deputy chairman of IVAM Focus Group Medical, explains how OEMs decide how to outsource microelectronic products.
Market pressure is enough to convince many medical device companies to outsource anything that falls outside their main areas of expertise. This tendency has been of particular benefit to electronics manufacturers, which have played a significant role in the medical device industry for decades, and will become even more prominent over the next few years. This is partly due to EMS contractors continuously increasing the scale and extent of their offerings for clients.
From system assembly to even shipping devices to the end user, many organisations are now providing a wide array of services. And, with medical products becoming ever more complex with smaller and more precise electronic components, medical device companies are increasingly looking to EMS providers for end-to-end electronic manufacturing support.
Additionally, product design and conceptualisation expertise can make EMS specialists an attractive prospect as the device development process can be streamlined by making use of their vast knowledge and experience.
The many advantages of working this way include lower costs; reduced capital expenditure; increased options for complex manufacturing processes; the benefits that come from having a network of partners, including shared knowledge; and freedom from day-to-day concerns.
Whether a customer operates in the field of prophylaxis, diagnostics, treatment, rehabilitation, or even prevention, the process of selecting a partner for outsourcing development and production tasks always follows the subsequent steps and rules.
The first step is market analysis. Comprehensive knowledge of the requested technology is vital and, if possible, should include relevant reference projects.
It’s crucial that a potential partner offers an all-encompassing quality management system covering at least the most common standards (for example, ISO 13485, EN 60601 and ISO 14971). Companies should be screened using a bespoke survey in order to make a preliminary rating, which will then be used for the ongoing assessment. The next phase is shortlisting.
To begin the process, suppliers should be screened over the phone. This is not the time to go into extensive detail about the project in question, and only suppliers that have listened carefully, and then asked the right questions, should be considered.
Questionnaires and on-site assessment
Questionnaires and assessments are a good means of determining which outsourcing candidates have the most potential. Ideally, assessment teams will consist of employees from every division involved in the project, but should at least include representatives from engineering, procurement and quality. It is often a mistake to rate potential partners by using a ‘dummy project’. While this procedure can be used for market research, discussing assumptions and tasks that will be repeated in the actual project is pointless. Remember that it will cost your prospective partner time and money to read and answer your questionnaire, or request for proposal, so be prepared to poll for the
- background and objectives, including all available
- project information
- scope of work and service, consisting of schedule, quantities and life cycle
- working assumptions, as well
- as responsibilities
- list of materials and/or equipment to be provided to the partner
- methods and standards
- deliverables, including acceptance and reject criteria.
Choosing two or three potential partners to receive your request for quotation is an extremely important decision, and should not be rushed. Records of compliance with regulatory, safety, technology and production standards, as well as experience, capability and capacity for producing your product, are good indicators that a partner will be able to bring your product to market quickly and continue supplying it over time.
Deciding with confidence
The hard facts are only the tip of the iceberg. An often misunderstood, but essential, factor during the supplier selection process is confidence. This is a ‘soft’ skill, and its importance is something that nobody can adequately explain or justify. This gut feeling, which is given congenitally, follows the Gartner graphic (also well known as the ‘hype cycle’), which is used to explain why things sometimes run contrary to expectation, and can be a useful decision-making tool. It describes a technology trigger, which is where a new idea first attracts interest. This will cover your own project, as well as the search for potential partners.
As a last resort, this can be a point of no-return, based on incorrect interpretations or incomplete data, or even false expectations.
The ‘peak of inflated expectations’ is where a concept, technology, or even a completed supplier selection process, is seen as the solution to every ill. At this point, a process has been pushed to its limit, with some successes and plenty of failures, and a lot of hype, as its name implies.
Once reality sets in, the programme enters a ‘trough of disillusionment’, in which interest decreases and criticism can exceed praise. This may be because an assessment team has done a bad job, for example, or a supplier has promised more than it able to deliver, which inevitably leads into a quagmire. To prevent such an eventuality, the scope of work required must be conveyed, in full and without any secrets, during assessment.
Companies sometimes mistakenly assume that it is to their advantage to withhold information, but doing so invariably leads to delays, costs, and dissatisfaction. Effort is then required to achieve the ‘slope of enlightenment’, during which the technology begins to mature and partners continue to experiment and innovate.
When applications appear and are accepted, and the value proposition gains traction, the relationship between the customer and the supplier hits a plateau of productivity, where more widespread adoption occurs. Once the partnership reaches this level, it is established and viable.
Choosing the right partner is critical to a project’s success. Time is required for good decisions to be made; as much tangible and non-tangible information as possible on every option must be gleaned, weighted and then compared.
Then, once a choice has been made, partnerships must be managed according to those criteria.
Contract manufacturing market outlook
A new report by visiongain calculates that the global medical device contract manufacturing market will reach $51.7 billion in 2015, with revenue growing until 2025. These forecasts and others appear in the report, ‘Medical Device Contract Manufacturing Market Forecast 2015-2025’.
Medical device companies have historically been profitable, and many have only recently succumbed to the competitive pressures that have existed in other industries. Such firms have traditionally maintained low levels of outsourcing activities, mainly as a result of a perceived lack of incentive to implement cost-cutting strategies. However, outsourcing has grown to become a widely accepted practice among OEMs over the last decade. Increased speed to market, reduced cost, quality improvement and the availability of highly skilled labour have all been factors in driving the uptake of outsourcing in the medical device industry. Analysts note that a number of contract manufacturers now offer multiple capabilities to cater to OEMs’ various needs.
Moses Akintomide-Akinwamide, a senior pharmaceutical and medical technology market analyst at visiongain, explains: "The rapidly aging global population, together with the associated increase in the demand for healthcare-related devices, has influenced growth in the market for medical device outsourcing. The widespread increase in prevalence of conditions such as cancer and cardiovascular disease will fuel the demand for cardiovascular and monitoring equipments. Medical device companies are rapidly adopting the use of contract manufacturers as a strategic means of staying ahead of the intensifying competition in the market place.
"As medical devices get increasingly complex, electronic manufacturing services in particular will offer great opportunities for market growth over the next few years. The rapidly improving protection of intellectual property in emerging markets, such as China and India, should also act as a catalyst for growth in these markets as more OEMs choose to partner with CMOs in the region in order to take advantage of the lower cost base offered."