Devices and components for use in healthcare delivery today are more sophisticated and complex than ever before, as advances in materials and technology give rise to new ways of improving surgical outcomes and patient care. Original equipment manufacturers (OEMs) operating in an increasingly complex environment face considerable hurdles in outpacing the competition while simultaneously keeping costs down. A result of the dynamic nature of the healthcare marketplace is that speed to market is now essential for success. Shorter design and production cycles require manufacturers to optimize every opportunity to improve efficiencies across the product development continuum, while simultaneously ensuring products meet safety and quality standards and increasingly complex regulatory requirements.
Given the economic, technological, and regulatory pressures of today’s medtech market, OEMs understandably look for ways to decrease development cycles, production time, and costs to maximize value and profitability. Outsourcing is one viable option, as it allows companies to focus on core competencies internally and free up resources that fall outside their core competencies for maximum competitive advantage.
Outsourcing manufacturing operations is commonplace in the medical device industry and offers numerous advantages for OEMs. Sub-contracting production and assembly can help OEMs realize cost savings by outsourcing the more labor-intensive operations to a contract manufacturing organization (CMO). A CMO partner can effectively streamline production processes and cycle times, reduce complexities, and improve operations for their customers. Outsourcing helps OEMs save time and labor and also reduces or eliminates the need for OEMs to manage component inventories.
Risks are introduced when outsourcing production of individual parts separately is dispersed among a multitude of sub-suppliers. This could compromise an end-product’s ability to function correctly and increase costs over time if products fail or underperform in the market.
Advantages of a Successful OEM-CMO Partnership
A successful OEM-CMO partnership relies on the complementary capabilities of each partner. Working with a full-service CMO partner that specializes in strategic outsourcing can help OEMs minimize risk and maximize opportunity and profitability. Often the CMO has established expertise over time and therefore has the necessary in-depth knowledge to understand the elements required to optimally produce a functional assembly for a component or a fully assembled product. There are other benefits as well to outsourcing to a full-service CMO. A CMO partner with capabilities in-house usually has the flexibility to accommodate and adapt as unit or product volumes change and grow. Another advantage is the ability to be nimble to make design adaptations when market dynamics require a shift in manufacturing processes.
A CMO partner should be committed to quality and fully invested in the success of each project. It’s important that OEMs and CMOs establish a relationship built on trust because their success is interwoven and dependent on each other.
Case in Point: Scissor Blade Expertise Put to the Test
I am reminded of a situation that best illustrates the value of a CMO partner with demonstrated expertise. Our company was asked by a customer to produce scissor blades for an endoscopic surgical device. To keep costs down, the customer wanted to have separate sub-suppliers build individual components, thinking this approach would decrease production cycle time and labor costs. The device was quite complex, consisting of microblades, a shaft and handle. Market dynamics required the device to perform in a narrow port with a consistent tactical feel to accommodate any surgeon performing the procedure.
As a full-service vendor with over 30 years of experience making functional single-use laparoscopic scissor blades, we knew instinctively that buying components doesn’t necessarily yield a functioning scissor. This type of device is much more than the sum of its parts.
After successfully prototyping the blades to print, our company determined that there would likely be high fallout on our customer’s end if we did not fully assemble the device. We made a strategic decision not to produce the scissor blades as stand-alone components. Our expertise told us the product would not function properly or save money in the long run. The customer was adamant about wanting a single component scissor blade, believing it was the most cost-effective option, so we mutually agreed to part ways. After several false starts with other suppliers, the product did fail to function optimally, and the OEM ended up incurring more costs in the long run. We re-engaged with the customer, and ultimately ended up producing the fully assembled product, which met with market success.
Over time, we’ve expanded our offerings and established expertise in core areas that enables us to help customers engineer cost-effective medical device solutions for end-users. We produce the critical components for full assembly solutions, which means we can engineer an effective production process without the use of sub-suppliers profitably and on time.
It’s essential that OEMs partner with a CMO that has the right expertise and that both parties align on the goals of the project. Both partners need to have a firm understanding of each other’s pain points and capabilities. It’s important that OEMs lean on the expertise and knowledge of their CMO partners. We counsel OEMs to weigh cost considerations carefully, helping them understand that the lowest price point isn’t always the best option in the long run.
Carl Savage is vice president, business management, for Micro, a full-service contract manufacturer. The company looks for novel ways to improve product design, development, and manufacturing. It works with customers throughout the entire process to help them deliver groundbreaking, cost-effective medical device technology. Micro will be exhibiting at Booth #1807 at MD&M West February 11-13.