Getting it Right the First Time, Part Two

Setting up a collaboration with a contract manufacturer is a very complex process, and if you have no experience with it, you might make wrong decisions that could be very costly down the road.
           
Contract manufacturers and OEMs say that the process of finding an appropriate partner should be a diligent one, with tons of questions asked and tons of factors taken into account.
           
In second installment of this two-part series, they explain what sorts of mistakes are common to those going through the process for the first time, how to avoid them, and how to determine whose services best fit the needs of your product and your company.

Due Diligence
OEMs new to the contract manufacturing process need to seek out as many potential partners as possible and learn as much about them as they can. Only then will they be able to determine who is a good fit for the OEM’s products and goals.

It is likely that the best results will be achieved if the OEM finds a partner who has experience with devices similar to the one for which the project is being created. This way, the contract manufacturer can add valuable input that the OEM might not have considered otherwise.

p.MsoNormal, li.MsoNormal, div.MsoNormal { margin: 0in 0in 0.0001pt; font-size: 12pt; font-family: “Times New Roman”; }div.Section1 { page: Section1; } Gunnar Trommer, PhD, vice president of marketing and customer service for Sotera Wireless Inc., a San Diego, Calif.-based OEM that specializes in equipment for monitoring vital signs said that played a big role in Sotera’s selection of DD Studio, a product development firm based in Carlsbad, Calif. “They already had an appreciation of the issues and challenges in our product area, and they had the appropriate quality systems in the functions we needed,” he said.

Other questions should focus on specific operations. “You need to ask your prospective partners what they do. Do they just help with parts and processes, or can they help with design and development work also?,” said  p.MsoNormal, li.MsoNormal, div.MsoNormal { margin: 0in 0in 0.0001pt; font-size: 12pt; font-family: “Times New Roman”; }div.Section1 { page: Section1; } Susan B. Nichols, vice president of sales, medical device for Advanced Scientifics, a Millersburg, PA-based contract manufacturer. “They may be able to help you make cost-conscious decisions such as using a different material that serves the same purpose but at half the price. Go to the contract manufacturer early, get feedback from them, and create a partnership out of the gate. Look for a provider that can understand the full scope of the project, and that has experience in the medical market. Make sure they have a quality system in place. Can they help with prototyping? Are they ISO- and FDA-audited? Who currently partners with them?”

It is crucial that OEMs ask the right questions to determine which potential partners have what it takes to manufacture a medical device, acording to p.MsoNormal, li.MsoNormal, div.MsoNormal { margin: 0in 0in 0.0001pt; font-size: 12pt; font-family: “Times New Roman”; }div.Section1 { page: Section1; } Kenneth Fine, president of Proven Process Medical Devices Inc., a contract manufacturer based in Mansfield, Mass.

He asked: “Do they do order fulfillment? Supply-chain control? Do they follow GMPs and have design history files? Have they audited their own suppliers? Do they have ISO 13485 certification and have they been registered with and audited by FDA? If they help with design, do they use design controls? Do they have experience with making products like yours? The last thing you want to hear is `we have not done that, but we can.'”

Size and scalability are also major considerations, added Fine.

“You have to think of your contract manufacturer as your bricks and mortar,” he said. “That means you have to consider stability and scalability issues. Also, how dedicated are they to the medical device space? And are they the right size? A very large manufacturer may not be nimble enough for a small- or medium-sized OEM. A small manufacturer may not have the capacity or global reach that a large OEM needs. How responsive are they to your needs? Are they geographically aligned with your market and distribution?”

Shepherd agrees. “If an OEM chooses to go with a smaller shop, they could be at risk of having supply constrained due to the smaller shop’s ability to ramp up capacity due to capitalization costs,” he says. “In this case, the smaller shop may not be able to keep up with your demand and force you to work with multiple shops, which is not cost-effective.” 

The geography issue is particularly important if the OEM intends to market its product internationally, said Scott Kellogg, new business development manager for Jabil Healthcare & Life Sciences, a contract manufacturer based in St. Petersburg, Fla.

“If the OEM plans to market the device outside the United States, it is vital to identify a contract manufacturer with experience in the other target regions – ideally, with a local presence, regulatory expertise, and an established supply chain,” he said.

Indeed, when Eleme Medical, a Merrimack, N.H -based OEM specializing in body-shaping technology, went looking for a contract manufacturing partner, flexibility played a huge role.

“We needed a house that could work like it was our own shop,” said Jose doVal, senior director of operations for Eleme. “If we needed them to stop, they could do it. We didn’t want a small house, but one that offered flexibility and room to grow. But we didn’t want one that was too large, because there would have been too many hurdles to jump over if we needed to make changes.” Those requirements led Eleme to select Columbia Tech of Worcester, Mass.

“Everybody looks at price, but flexibility is the key,” doVal added. “To have quality, you need to interrupt the line once in a while, so you need to have a partner who will allow you to do that. You also need a partner who understands your long-term goals and will work with you to build toward them. If they will not work with you like that, don’t go to bed with them.”

Kellogg said OEMs need to look at what additional functions contractors can perform for them beyond basic manufacturing.

“The OEM should look for a contract manufacturer that proactively offers added value to the project, whether in design optimization, value engineering, regulatory guidance, or relationships with other third parties with specialized expertise,” he said. “These value-adds can be priceless, particularly to smaller or less-experienced device companies.”

It is also imperative to learn as much as you can about prospective partners’ financial situations. This must be handled delicately, of course, and you shouldn’t expect them to give you total access to their books, but there are questions that can be asked that can provide useful answers without coming off as insulting.

“You have to make sure your supplier is financially sound,” said  p.MsoNormal, li.MsoNormal, div.MsoNormal { margin: 0in 0in 0.0001pt; font-size: 12pt; font-family: “Times New Roman”; }div.Section1 { page: Section1; } Jeff Shepherd, general manager, implants, for Sandvik Medical Solutions, a Memphis, Tenn.-based contract manufacturer.

“You want to know if they can’t pay their suppliers or if they are at risk of folding before you commit to them. You also need to ask what percentage of their business does their largest customer have. If it’s large, you want to know that, because if they’re heavily dominated by one customer, that is a prioritization disadvantage for you.”

There are culture and personality issues that come into play as well, Fine said. “At the end of the day, it’s the relationship that’s the issue,” he says. “Do they match what you’re looking for in terms of integrity and openness? Is their work ethic the same as yours? It’s very important that the OEM feel comfortable with its partners.”

But most important, everyone agreed, is whether the contractor can handle regulatory compliance.

“That must be solid,” says Shepherd. “You need to audit them and make sure they have good controls.”

Once a Choice is Made
The questions should not end after a decision about who to choose as a partner is made. Only if both parties are on the same page will a partnership be a fruitful and productive one.
“You have to sit down and have a well-thought-out discussion on the scope of the process. Look at the partnership and the personalities involved,” said Nichols. “Be very forthright. Some problems we see in first-time outsourcers include holding on to technical information. That creates a roadblock. Everybody wants to protect their IP, and we are very respectful of that. But things can be difficult if not enough information is shared. You have to trust that they are the right partner and that they are there for you.”

Similarly, she said it is best to develop a communications protocol with your contract manufacturer. “Having point people on both sides is very helpful.”

Open communication will lead to a better synergized process, which can allow both partners to adapt better based on future developments.

“The better your processes are aligned, the lower the risk is,” Shepherd said. “If you make something in-house, and you have a good partnership, you can easily do a technology transfer that would significantly reduce cost and lead time. You then also have the ability to ramp up production with your partner and then bring it in-house. But if the contract manufacturer has made a big investment, unless you’ve got a good partnership, they may not want to hand it over.”

The contractor should be alerted as soon as any design changes occur, so manufacturability issues can be considered right away, said p.MsoNormal, li.MsoNormal, div.MsoNormal { margin: 0in 0in 0.0001pt; font-size: 12pt; font-family: “Times New Roman”; }div.Section1 { page: Section1; } Scott Clear, product development director for DD Studio . “Don’t let a manufacturing method dictate the design path,” he noted.

Don’t forget that contract manufacturers can help with long-term planning, also, added Nichols. “They can help you plan to eventually bring the manufacturing of a product in-house at a specified date, and they can take on existing products. Some product lifecycles are shortening, and it may be more cost-effective to move some older products to the contract manufacturer. Look at the long-term relationship.”

“Solid relationships ensure that outcomes exceed expectations,” Clear said.

Getting a partnership to a high level of synergy takes a lot of effort on both sides, notes Thomas Burns, vice president of business development for Tegra Medical, a contract manufacturer based in Franklin, Mass.

“There are plenty of horror stories of failed outsourcing relationships, but increasingly, OEMs are realizing that like any relationship, both parties have to work at it,” he said. “The OEM needs to provide accurate and timely information and be as transparent as possible. Responding quickly to supplier questions and needs and putting together the right technical resources when problems do arise are paramount for a successful project. The supplier has to be honest with regard to technical fit, lead time considerations, and product costs. It’s better to have the difficult discussions before a project is kicked off, and not after a key milestone has been missed. Inevitably, there will be problems at some point in the relationship: raw material issues, product design changes, late deliveries, etc. How the two parties communicate and resolve issues as they present will determine whether it’s `one and done’ or the beginning of a long and mutually satisfying relationship.”

If an OEM follows the advice laid out above, it is likely to avoid the mistakes that happen when an inexperienced firm ventures into the world of contract medical device manufacturing for the first time. The stakes are very high.           

“The right partner makes all the difference in the world,” said Nichols. “The wrong partner also makes all the difference in the world.”