Mark Crawford02.04.13
An Evolving Charge
A host of factors—miniaturization, taxation and even the “consumerization” of electronics, to name a few—are impacting EMS providers’ role in medical device manufacturing.
Business isn’t as easy as it used to be for electronics manufacturing services (EMS) firms—it moves a lot faster and brings extra pressure to satisfy a growing list of quality and regulatory objectives. Some OEMs are asking EMS partners for complete product commercialization services such as prototyping, design for manufacturability (DFM), verification and validation, and transfer to best-cost countries for volume production—sometimes even putting a finished device into commercial service. Other medical device manufacturers expect EMS companies to provide design services that lengthen product lifecycles and take cost out of older products.
“This often requires product redesign and validation,” said David Busch, vice president of corporate development for OnCore Manufacturing Services LLC in Fremont, Calif., which provides electronic product design, supply chain services, manufacturing, and high-level assembly. “EMS partners are also expected to evaluate product design using DFM and design for testing to reduce costs and improve manufacturability.”
OEMs also are looking for more horizontal and vertical integration from their suppliers.
“Customers want a partner that can do complete box-build and also provide access to ancillary resources as they look for greater efficiencies,” said Gregg Mozdy, vice president of business development for Cirtronics Corporation, an electronic contract manufacturer in Milford, N.H. “These services include full product design, mechanical assembly, painting, kitting, warehousing, direct ship/fulfillment, and depot repair.”
Entrepreneurial medical device manufacturers also are pushing U.S. Food and Drug Administration (FDA) concerns upstream to their EMS providers, seeking more help with design and system
integration. “This brings the challenge of balancing the desire to provide more full-product solutions to customers, while also mitigating the risks associated with FDA compliance and/or certification,” said Mozdy.
Some customers seek reduced material liability yet also want the supply chain to support upside demand without annual purchase orders. Supporting this expectation, especially at lower volumes, can be challenging for EMS providers.
“Our solution is reaching compromises with customers that provide the volume pricing they want, but give us the coverage for long lead-time items and minimum buy quantities needed to achieve that pricing,” said Ed Evangelista, vice president of business development for Federal Electronics Inc., an electronics manufacturing firm in Cranston, R.I. “As long as there is consistent consumption and replenishment, kanban and limited liability programs can be created.”
In other words, medical device firms don’t want an EMS partner who says, “I can’t do that.” This even goes as far as helping to pay the bills.
“Because of market uncertainty and regulatory change, many medical device startups are relying more heavily on their EMS providers to support them financially through their early stages of growth, including product design, prototype and first-article production, and supply-chain staging—all of which occur pre-revenue stream for companies like Cirtronics,” said Mozdy.
Cost Reduction a Top Priority
Expectations are very high (and getting higher) for what EMS companies provide. The top concern, of course, is keeping costs down and doing more with less.
“Cost competitiveness and robust quality are always key issues,” said Curtis Campbell, vice president of sales, west coast operations, for SigmaTron International , a multinational EMS provider headquartered in Elk Grove Village, Ill. “Customers want a smooth product launch with no surprises.
They also want to maintain long-term relationships with their contractors because of the cost of switching suppliers. For that reason, many look not only at a contractor’s current capabilities but also at its global footprint and ability to support production scalability over time.”
Cost-consciousness is at a high level in 2013—thanks especially to the new 2.3-percent medical device excise tax.
“The Medical Device Manufacturers Association is fighting to get the tax repealed, but in the meantime, manufacturers are squeezing suppliers to help offset that increased expense,” said David Cianciolo, director of engineering for Fischer Connectors, a manufacturer of connectors based in Alpharetta, Ga. “But it’s tough for component suppliers, because our costs are holding steady and even increasing. There’s not a lot of relief available from the component manufacturers if you want to maintain your quality standards, so costs will be going up to cover the tax.”
Another side effect of the medical device tax is that more medical device manufacturers are outsourcing full-box build opportunities, especially for Class II devices. Historically, such companies have been reluctant to outsource the last touch of a product before it is shipped to the end customer.
“That mindset, however, seems to be changing,” observed Todd Baggett, senior vice president of sales and account management for EPIC Technologies LLC, a multinational EMS provider in Norwalk, Ohio. “The full outsourced model is being driven by the financial pressure medical OEMs are feeling from healthcare cost reform. A fully outsourced model enables the lowest possible cost, while offering significant balance sheet improvement for the OEM.”
As a result of these multiple factors, customers are carefully evaluating their manufacturing strategies. They also are looking closely at costs and efficiencies and expect their EMS partners to help them improve these numbers. An example is Federal Electronics, which has developed ways to support products its clients thought were too complex or low-volume to outsource.
“We address this three ways—vertical integration for printed circuit board assemblies and cables/harnesses, finding custom component suppliers that will run very small lots, and developing a very strategic approach to materials planning,” explained Evangelista. “As long as there is consistent consumption and replenishment, we can structure a kanban program, even at very low volumes. Part of the reason we added a Mexico facility was to provide an option for manufacturing higher labor content subassemblies in lower volumes. In the current analytical environment, there is definite interest in evaluating options for those projects.”
New Technology Trends
EMS trends include a growing number of handheld portable devices, smaller electronics packages and greater reliability.
“We’re also seeing more demand for wireless applications and touchscreen user interfaces,” said Mark Ester, president and CEO of GDSI, a manufacturer of custom membrane switches based in Amery, Wis. “There is also a growing requirement by customers to reduce costs and shorten lead times for production by implementing Lean manufacturing practices.”
“Products are getting smaller,” agreed Baggett. “We are now seeing 0201 and 01005 package sizes in medical device design. As a result, we have invested in more advanced placement equipment with robust inline inspection capabilities.”
A 0201 package measures 0.024 by 0.012 inches, or 0.6 by 0.3 millimeters. A 01005 package measures 0.016 by 0.008 inches, or 0.4 by 0.2 millimeters. By comparison, a human hair is approximately 0.1 millimeters wide. This miniscule size can lead to issues involving device manufacturability.
Many medical companies are redesigning their handheld, motorized devices to increase functionality and ease of use. These new designs often require smaller components, including connectors, which must be effectively sealed and able to withstand sterilization conditions.
To meet these miniature challenges, Fischer Connectors designed the MiniMax, a small package with four power connections and 20 signal connections. “We’ve minimized electrical noise and made this a very dense connector,” said Cianciolo. “By combining power and signal contacts, our customers have the flexibility to design smaller devices, which is critical to containing costs and adding mobility
to devices.”
Many companies are carefully considering the risk-reward equation when it comes to wireless. Device manufacturers are interested in wireless, but most don’t fully trust it yet because of the possibility of interference with the signal and limited power capacity.
“There are a lot of factors that can impact a wireless signal without warning, so even those who are looking at it want backup hardwired connections available for any emergencies,” added Cianciolo.
The quality of software available for automating engineering processes, such as design for manufacturability, continues to improve. More off-the-shelf software options are available for DFM, material requirements planning (MRP), enterprise resource planning (ERP), cloud-based ERP, and shop floor control that are more affordable and easier to implement for smaller operations, allowing them to enhance project management and keep overhead low. Increased affordability and a range of system options is good news for smaller companies because OEMs expect to see robust systems and full product lifecycle support, even at a regional supplier level.
“I’ve seen more across-the-board ERP/MRP upgrades in the last year, for all sizes of companies, than I have seen for a long time,” said Susan Mucha, president of Powell-Mucha Consulting Inc., an El Paso, Texas-based consulting firm whose services include helping EMS providers improve business operations. “Some of it is pent-up demand after a deep recession, but a lot is just due to the fact that systems have added functionality and there is a wider range of competitively priced options.”
For example, Federal Electronics’ customers often face significant demand volatility—which usually can’t be predicted in forecasts. The most common request is for the ability to quickly respond to an expedited issue, either confirming compliance to their need date, or identifying the contentions/constraints in material and labor for further action.
“Last year we enhanced our ERP and shop-floor control systems, which allow us to conduct such an analysis on high-complexity, multi-level bill of materials and routings, literally within seconds, and often while on the phone with the customer,” said Evangelista. “We have also continued to focus on leaning out our administrative processes so that signals to the supply chain and supply chain response are optimized. This has improved the quality and speed with which we push real-time data to both suppliers and customers. It has also supported faster collection and transfer of customer documentation and forecasts to our systems, reducing project transfer time and response to changes in demand.”
Perhaps the greatest benefit of this software is that it enhances the ability to stay in touch with customers and deepen OEM-EMS relationships. EPIC Technologies, for example, is migrating toward a cloud-based ERP to provide its customers and suppliers with greater visibility into scheduling and supply chain.
SigmaTron International uses an internally developed system called SCORE to provide customers with 24/7 visibility into project status. “The SCORE system lets customers log on and view project status at their convenience,” said Curtis. “We’ve also added off-the-shelf packages such as Valor and Agile to speed documentation transfer and review, machine programming, and generation of work instructions across all our plants. In China, operators view video work instructions of the assembly process as they are building product. We’ve also launched a pilot project in Mexico, giving engineers iPads so they can communicate with customers and look up data easily from anywhere in the factory.”
Consumer Electronics Set the Pace
Interest in new telemedicine products and applications, especially self-diagnostics and monitoring, will increase as the Patient Protection and Affordable Care Act takes hold, creating a huge amount of new research and development. It is more cost-effective to send patients home with a monitor that communicates with a doctor or hospital than to keep them in the hospital for observation. These devices must be easy to operate and comfortable to wear. Medical product design increasingly will be driven to incorporate features that consumers are comfortable with from other industries.
“The convergence of telemedicine and consumer electronics has become inevitable,” said Mozdy.
“This means a heavier reliance by manufacturers on EMS companies that can provide radio frequency, infrared frequency, and wireless technologies for this new generation of products.”
According to Ester, it’s no surprise that consumer electronics are driving trends in medical technology. “Today’s device designs are greatly influenced by the iPhone touchscreen phenomenon,” said Ester. “Designers come to us with this concept in mind for a new device and want us to design the user interface. We’re also seeing more demand for tactile switch feedback, backlighting, and LED indicators at a much higher rate than just a few years ago. Redundancy is also increasingly built into our designs for this purpose. Another trend we see is OEMs asking for software solutions and sensors that connect with smartphones to gather vital life signs.”
Migration to smaller designs similar to those found in consumer products is a key driver of this trend.
“This is an area where EMS providers can definitely add value because they already have experience dealing with the challenges associated with smaller components and denser packaging in other applications,” said Mucha.
However, she pointed out, it’s important to look for contractors who understand the difference between the controls required in medical device manufacturing compared to the looser environment in consumer products. For example, she indicated that “offshore companies that manufacture primarily consumer products typically have complete control of the majority of the approved vendor list and can substitute without customer approval. They also can change their processes or equipment without customer approval. Companies with experience in both consumer and medical realize that they don’t have that freedom with medical products.”
Baggett said his company also is experiencing increased convergence with products that have worked successfully in the pharmaceutical environment. EPIC Technologies recently accepted a project that involves a consumer diagnostic device that is completely housed in a small wearable patch. Producing this device requires specialized work cells and clean room environments as well as the ability to place and inspect smaller component sizes.
“Even though this goes against basic Lean philosophy, which values standardized equipment platforms capable of supporting all products, it’s the best way to support these types of products,” Baggett told Medical Product Outsourcing. “This type of convergence blends elements found in disposables manufacturing with printed circuit board assembly. This sets up requirements for a dedicated final assembly process requiring specialized raw material dispensing, packaging, and test equipment in a clean room environment. We can optimize the processes to a point, but can’t share the equipment among multiple customers to the extent that we do in other projects. This project is easy to support, but drives a change to our holistic Lean approach.”
Managing Risk Is the Bottom Line
It’s a simple formula—higher quality means lower risk. Quality is improved by an integrated, inter-disciplinary approach to design and production that utilizes best practices, implements rigorous quality controls, and eliminates waste.
To achieve this, Ester encourages OEMs to involve their supply base as early as possible in the design process to minimize risk by developing the most robust design solution at the lowest possible cost.
“The worst-case scenario is when an OEM designs a product, then ‘throws it over the wall’ and asks suppliers to build to print,” he said. “That makes it nearly impossible to create the best, most affordable design because the specifications for other components in the device design are set and can’t be changed.”
Along similar lines, EPIC Technologies is focusing on the front end of the product lifecycle, through design partnerships and expanding its rapid prototyping services. “The earlier we are involved, the more we can provide cost-effective feedback on issues related to design for manufacturability/testability, obsolescence risk, and strategies to optimize component availability,” said Baggett. “Involvement on the front end of the product lifecycle is critical for giving customers the enhanced schedule flexibility and rapid throughput they require.”
OnCore Manufacturing Services has increased its product design and sustaining engineering capabilities and verticalized its supply chain to meet its customers’ evolving needs. By providing more services, OnCore can speed up the customer’s decision-making and reduce risk. Federal Electronic also has vertically integrated its operations, added systems that monitor materials and production in real time, and established a supply chain willing to support the lower volumes some of its clients require. The company also developed a hybrid production model that gives customers the choice of manufacturing entirely in the United States, sourcing the higher-labor content portions of projects to its Mexico facility and keeping final assembly in the United States or migrating the entire project to Mexico.
“This isn’t a new concept in EMS,” said Evangelista. “What is different, though, is that we are able to execute on much lower volumes because we’ve optimized our systems, processes, and supply chain to support it.”
Another way of mitigating risk is bringing offshore projects back to the U.S. or near-shoring them in Mexico. The China-Mexico labor differential has narrowed and the cost of the lengthy supply chain from China to the United States (including freight) has, for many devices, given Mexico a lower total landed cost advantage.
“Not only is the China-Mexico labor differential smaller, it’s also less expensive to source most electronic components in the U.S. than China,” said Busch. “This is due to the greater spend, especially by distribution, in the U.S.”
Campbell agreed.
“There is definitely more focus on analyzing the total cost of ownership in sourcing activities,” he said. “I’ve seen projects move back onshore and brought in-house. I’ve also seen situations where OEMs doing make-versus-buy analysis fail to accurately capture the true cost of the in-house operation. It is important for EMS companies to articulate the specific value they bring to the equation and help potential customers understand what hidden costs their analytical models might be missing.”
Ultimately, all these strategies, maneuvers, integrations, and best practices are about managing risk. Measuring and documenting risk is one of the biggest challenges medical device manufacturers face this year when it comes to FDA approval. IEC 60601-1’s third edition goes into effect in the United States in June, requiring manufacturers to document the risk assessment of their new devices. That means manufacturers must be intimately aware of the risk of each component they choose, and how each component affects the risk assessment of the entire device. The new rules already went into effect in Europe and Canada in 2012.
“By far the biggest change that will be brought about by the latest edition of IEC 60601-1 is the philosophical shift to a risk management approach, bringing the standard into alignment with the industry’s broad regulatory trends over the past decade,” Cianciolo explained.
EMS manufacturers will experience the shift in several ways:
“Many EMS partners claim to be compliant with the federal regulations, but have not developed the same level of excellence that OEMs expect for complete product lifecycle services, including warranty and repair and sustaining engineering,” said Busch. “This is the key trend to watch over the next three years as medical device manufacturers seek to reduce costs while increasing product innovation and sharing risk.”
Mark Crawford is a full-time freelance business and marketing/communications writer based in Madison, Wis. He can be reached at mark.crawford@charter.net.
A host of factors—miniaturization, taxation and even the “consumerization” of electronics, to name a few—are impacting EMS providers’ role in medical device manufacturing.
Business isn’t as easy as it used to be for electronics manufacturing services (EMS) firms—it moves a lot faster and brings extra pressure to satisfy a growing list of quality and regulatory objectives. Some OEMs are asking EMS partners for complete product commercialization services such as prototyping, design for manufacturability (DFM), verification and validation, and transfer to best-cost countries for volume production—sometimes even putting a finished device into commercial service. Other medical device manufacturers expect EMS companies to provide design services that lengthen product lifecycles and take cost out of older products.
“This often requires product redesign and validation,” said David Busch, vice president of corporate development for OnCore Manufacturing Services LLC in Fremont, Calif., which provides electronic product design, supply chain services, manufacturing, and high-level assembly. “EMS partners are also expected to evaluate product design using DFM and design for testing to reduce costs and improve manufacturability.”
OEMs also are looking for more horizontal and vertical integration from their suppliers.
“Customers want a partner that can do complete box-build and also provide access to ancillary resources as they look for greater efficiencies,” said Gregg Mozdy, vice president of business development for Cirtronics Corporation, an electronic contract manufacturer in Milford, N.H. “These services include full product design, mechanical assembly, painting, kitting, warehousing, direct ship/fulfillment, and depot repair.”
Entrepreneurial medical device manufacturers also are pushing U.S. Food and Drug Administration (FDA) concerns upstream to their EMS providers, seeking more help with design and system
integration. “This brings the challenge of balancing the desire to provide more full-product solutions to customers, while also mitigating the risks associated with FDA compliance and/or certification,” said Mozdy.
Some customers seek reduced material liability yet also want the supply chain to support upside demand without annual purchase orders. Supporting this expectation, especially at lower volumes, can be challenging for EMS providers.
“Our solution is reaching compromises with customers that provide the volume pricing they want, but give us the coverage for long lead-time items and minimum buy quantities needed to achieve that pricing,” said Ed Evangelista, vice president of business development for Federal Electronics Inc., an electronics manufacturing firm in Cranston, R.I. “As long as there is consistent consumption and replenishment, kanban and limited liability programs can be created.”
In other words, medical device firms don’t want an EMS partner who says, “I can’t do that.” This even goes as far as helping to pay the bills.
“Because of market uncertainty and regulatory change, many medical device startups are relying more heavily on their EMS providers to support them financially through their early stages of growth, including product design, prototype and first-article production, and supply-chain staging—all of which occur pre-revenue stream for companies like Cirtronics,” said Mozdy.
Cost Reduction a Top Priority
Expectations are very high (and getting higher) for what EMS companies provide. The top concern, of course, is keeping costs down and doing more with less.
“Cost competitiveness and robust quality are always key issues,” said Curtis Campbell, vice president of sales, west coast operations, for SigmaTron International , a multinational EMS provider headquartered in Elk Grove Village, Ill. “Customers want a smooth product launch with no surprises.
They also want to maintain long-term relationships with their contractors because of the cost of switching suppliers. For that reason, many look not only at a contractor’s current capabilities but also at its global footprint and ability to support production scalability over time.”
Cost-consciousness is at a high level in 2013—thanks especially to the new 2.3-percent medical device excise tax.
“The Medical Device Manufacturers Association is fighting to get the tax repealed, but in the meantime, manufacturers are squeezing suppliers to help offset that increased expense,” said David Cianciolo, director of engineering for Fischer Connectors, a manufacturer of connectors based in Alpharetta, Ga. “But it’s tough for component suppliers, because our costs are holding steady and even increasing. There’s not a lot of relief available from the component manufacturers if you want to maintain your quality standards, so costs will be going up to cover the tax.”
Another side effect of the medical device tax is that more medical device manufacturers are outsourcing full-box build opportunities, especially for Class II devices. Historically, such companies have been reluctant to outsource the last touch of a product before it is shipped to the end customer.
“That mindset, however, seems to be changing,” observed Todd Baggett, senior vice president of sales and account management for EPIC Technologies LLC, a multinational EMS provider in Norwalk, Ohio. “The full outsourced model is being driven by the financial pressure medical OEMs are feeling from healthcare cost reform. A fully outsourced model enables the lowest possible cost, while offering significant balance sheet improvement for the OEM.”
As a result of these multiple factors, customers are carefully evaluating their manufacturing strategies. They also are looking closely at costs and efficiencies and expect their EMS partners to help them improve these numbers. An example is Federal Electronics, which has developed ways to support products its clients thought were too complex or low-volume to outsource.
“We address this three ways—vertical integration for printed circuit board assemblies and cables/harnesses, finding custom component suppliers that will run very small lots, and developing a very strategic approach to materials planning,” explained Evangelista. “As long as there is consistent consumption and replenishment, we can structure a kanban program, even at very low volumes. Part of the reason we added a Mexico facility was to provide an option for manufacturing higher labor content subassemblies in lower volumes. In the current analytical environment, there is definite interest in evaluating options for those projects.”
New Technology Trends
EMS trends include a growing number of handheld portable devices, smaller electronics packages and greater reliability.
“We’re also seeing more demand for wireless applications and touchscreen user interfaces,” said Mark Ester, president and CEO of GDSI, a manufacturer of custom membrane switches based in Amery, Wis. “There is also a growing requirement by customers to reduce costs and shorten lead times for production by implementing Lean manufacturing practices.”
“Products are getting smaller,” agreed Baggett. “We are now seeing 0201 and 01005 package sizes in medical device design. As a result, we have invested in more advanced placement equipment with robust inline inspection capabilities.”
A 0201 package measures 0.024 by 0.012 inches, or 0.6 by 0.3 millimeters. A 01005 package measures 0.016 by 0.008 inches, or 0.4 by 0.2 millimeters. By comparison, a human hair is approximately 0.1 millimeters wide. This miniscule size can lead to issues involving device manufacturability.
Many medical companies are redesigning their handheld, motorized devices to increase functionality and ease of use. These new designs often require smaller components, including connectors, which must be effectively sealed and able to withstand sterilization conditions.
To meet these miniature challenges, Fischer Connectors designed the MiniMax, a small package with four power connections and 20 signal connections. “We’ve minimized electrical noise and made this a very dense connector,” said Cianciolo. “By combining power and signal contacts, our customers have the flexibility to design smaller devices, which is critical to containing costs and adding mobility
to devices.”
Many companies are carefully considering the risk-reward equation when it comes to wireless. Device manufacturers are interested in wireless, but most don’t fully trust it yet because of the possibility of interference with the signal and limited power capacity.
“There are a lot of factors that can impact a wireless signal without warning, so even those who are looking at it want backup hardwired connections available for any emergencies,” added Cianciolo.
The quality of software available for automating engineering processes, such as design for manufacturability, continues to improve. More off-the-shelf software options are available for DFM, material requirements planning (MRP), enterprise resource planning (ERP), cloud-based ERP, and shop floor control that are more affordable and easier to implement for smaller operations, allowing them to enhance project management and keep overhead low. Increased affordability and a range of system options is good news for smaller companies because OEMs expect to see robust systems and full product lifecycle support, even at a regional supplier level.
“I’ve seen more across-the-board ERP/MRP upgrades in the last year, for all sizes of companies, than I have seen for a long time,” said Susan Mucha, president of Powell-Mucha Consulting Inc., an El Paso, Texas-based consulting firm whose services include helping EMS providers improve business operations. “Some of it is pent-up demand after a deep recession, but a lot is just due to the fact that systems have added functionality and there is a wider range of competitively priced options.”
For example, Federal Electronics’ customers often face significant demand volatility—which usually can’t be predicted in forecasts. The most common request is for the ability to quickly respond to an expedited issue, either confirming compliance to their need date, or identifying the contentions/constraints in material and labor for further action.
“Last year we enhanced our ERP and shop-floor control systems, which allow us to conduct such an analysis on high-complexity, multi-level bill of materials and routings, literally within seconds, and often while on the phone with the customer,” said Evangelista. “We have also continued to focus on leaning out our administrative processes so that signals to the supply chain and supply chain response are optimized. This has improved the quality and speed with which we push real-time data to both suppliers and customers. It has also supported faster collection and transfer of customer documentation and forecasts to our systems, reducing project transfer time and response to changes in demand.”
Perhaps the greatest benefit of this software is that it enhances the ability to stay in touch with customers and deepen OEM-EMS relationships. EPIC Technologies, for example, is migrating toward a cloud-based ERP to provide its customers and suppliers with greater visibility into scheduling and supply chain.
SigmaTron International uses an internally developed system called SCORE to provide customers with 24/7 visibility into project status. “The SCORE system lets customers log on and view project status at their convenience,” said Curtis. “We’ve also added off-the-shelf packages such as Valor and Agile to speed documentation transfer and review, machine programming, and generation of work instructions across all our plants. In China, operators view video work instructions of the assembly process as they are building product. We’ve also launched a pilot project in Mexico, giving engineers iPads so they can communicate with customers and look up data easily from anywhere in the factory.”
Consumer Electronics Set the Pace
Interest in new telemedicine products and applications, especially self-diagnostics and monitoring, will increase as the Patient Protection and Affordable Care Act takes hold, creating a huge amount of new research and development. It is more cost-effective to send patients home with a monitor that communicates with a doctor or hospital than to keep them in the hospital for observation. These devices must be easy to operate and comfortable to wear. Medical product design increasingly will be driven to incorporate features that consumers are comfortable with from other industries.
“The convergence of telemedicine and consumer electronics has become inevitable,” said Mozdy.
“This means a heavier reliance by manufacturers on EMS companies that can provide radio frequency, infrared frequency, and wireless technologies for this new generation of products.”
According to Ester, it’s no surprise that consumer electronics are driving trends in medical technology. “Today’s device designs are greatly influenced by the iPhone touchscreen phenomenon,” said Ester. “Designers come to us with this concept in mind for a new device and want us to design the user interface. We’re also seeing more demand for tactile switch feedback, backlighting, and LED indicators at a much higher rate than just a few years ago. Redundancy is also increasingly built into our designs for this purpose. Another trend we see is OEMs asking for software solutions and sensors that connect with smartphones to gather vital life signs.”
Migration to smaller designs similar to those found in consumer products is a key driver of this trend.
“This is an area where EMS providers can definitely add value because they already have experience dealing with the challenges associated with smaller components and denser packaging in other applications,” said Mucha.
However, she pointed out, it’s important to look for contractors who understand the difference between the controls required in medical device manufacturing compared to the looser environment in consumer products. For example, she indicated that “offshore companies that manufacture primarily consumer products typically have complete control of the majority of the approved vendor list and can substitute without customer approval. They also can change their processes or equipment without customer approval. Companies with experience in both consumer and medical realize that they don’t have that freedom with medical products.”
Baggett said his company also is experiencing increased convergence with products that have worked successfully in the pharmaceutical environment. EPIC Technologies recently accepted a project that involves a consumer diagnostic device that is completely housed in a small wearable patch. Producing this device requires specialized work cells and clean room environments as well as the ability to place and inspect smaller component sizes.
“Even though this goes against basic Lean philosophy, which values standardized equipment platforms capable of supporting all products, it’s the best way to support these types of products,” Baggett told Medical Product Outsourcing. “This type of convergence blends elements found in disposables manufacturing with printed circuit board assembly. This sets up requirements for a dedicated final assembly process requiring specialized raw material dispensing, packaging, and test equipment in a clean room environment. We can optimize the processes to a point, but can’t share the equipment among multiple customers to the extent that we do in other projects. This project is easy to support, but drives a change to our holistic Lean approach.”
Managing Risk Is the Bottom Line
It’s a simple formula—higher quality means lower risk. Quality is improved by an integrated, inter-disciplinary approach to design and production that utilizes best practices, implements rigorous quality controls, and eliminates waste.
To achieve this, Ester encourages OEMs to involve their supply base as early as possible in the design process to minimize risk by developing the most robust design solution at the lowest possible cost.
“The worst-case scenario is when an OEM designs a product, then ‘throws it over the wall’ and asks suppliers to build to print,” he said. “That makes it nearly impossible to create the best, most affordable design because the specifications for other components in the device design are set and can’t be changed.”
Along similar lines, EPIC Technologies is focusing on the front end of the product lifecycle, through design partnerships and expanding its rapid prototyping services. “The earlier we are involved, the more we can provide cost-effective feedback on issues related to design for manufacturability/testability, obsolescence risk, and strategies to optimize component availability,” said Baggett. “Involvement on the front end of the product lifecycle is critical for giving customers the enhanced schedule flexibility and rapid throughput they require.”
OnCore Manufacturing Services has increased its product design and sustaining engineering capabilities and verticalized its supply chain to meet its customers’ evolving needs. By providing more services, OnCore can speed up the customer’s decision-making and reduce risk. Federal Electronic also has vertically integrated its operations, added systems that monitor materials and production in real time, and established a supply chain willing to support the lower volumes some of its clients require. The company also developed a hybrid production model that gives customers the choice of manufacturing entirely in the United States, sourcing the higher-labor content portions of projects to its Mexico facility and keeping final assembly in the United States or migrating the entire project to Mexico.
“This isn’t a new concept in EMS,” said Evangelista. “What is different, though, is that we are able to execute on much lower volumes because we’ve optimized our systems, processes, and supply chain to support it.”
Another way of mitigating risk is bringing offshore projects back to the U.S. or near-shoring them in Mexico. The China-Mexico labor differential has narrowed and the cost of the lengthy supply chain from China to the United States (including freight) has, for many devices, given Mexico a lower total landed cost advantage.
“Not only is the China-Mexico labor differential smaller, it’s also less expensive to source most electronic components in the U.S. than China,” said Busch. “This is due to the greater spend, especially by distribution, in the U.S.”
Campbell agreed.
“There is definitely more focus on analyzing the total cost of ownership in sourcing activities,” he said. “I’ve seen projects move back onshore and brought in-house. I’ve also seen situations where OEMs doing make-versus-buy analysis fail to accurately capture the true cost of the in-house operation. It is important for EMS companies to articulate the specific value they bring to the equation and help potential customers understand what hidden costs their analytical models might be missing.”
Ultimately, all these strategies, maneuvers, integrations, and best practices are about managing risk. Measuring and documenting risk is one of the biggest challenges medical device manufacturers face this year when it comes to FDA approval. IEC 60601-1’s third edition goes into effect in the United States in June, requiring manufacturers to document the risk assessment of their new devices. That means manufacturers must be intimately aware of the risk of each component they choose, and how each component affects the risk assessment of the entire device. The new rules already went into effect in Europe and Canada in 2012.
“By far the biggest change that will be brought about by the latest edition of IEC 60601-1 is the philosophical shift to a risk management approach, bringing the standard into alignment with the industry’s broad regulatory trends over the past decade,” Cianciolo explained.
EMS manufacturers will experience the shift in several ways:
- A product’s essential performance characteristics must be examined in relation to criteria needed to avoid unacceptable risk;
- The manufacturer’s process for complying with IEC 60601-1 must itself be in compliance with ISO 14971; and
- A risk management file will be required for every product.
“Many EMS partners claim to be compliant with the federal regulations, but have not developed the same level of excellence that OEMs expect for complete product lifecycle services, including warranty and repair and sustaining engineering,” said Busch. “This is the key trend to watch over the next three years as medical device manufacturers seek to reduce costs while increasing product innovation and sharing risk.”
Mark Crawford is a full-time freelance business and marketing/communications writer based in Madison, Wis. He can be reached at mark.crawford@charter.net.