Sean Fenske, Editor-in-Chief05.02.22
The pandemic has proven to be challenging for many on both a personal and professional level. Companies were also adversely affected by having to change operation protocols and implement digital solutions to enable a portion (or all) of its labor force to work remotely. It created an environment that caused many to question techniques, evaluate how to best handle requirements, and revise standard operating procedures to eliminate delays in production as best as could be expected.
With this disruption, a great number of lessons were learned that could be taken forward and implemented into standard business practice. One example of this involves the relationships between outsourcing service providers and their medical device OEM customers. These partnerships have likely never faced a challenge as significant as what was encountered during the more than two years of the pandemic (or at least, as dramatic as the first few months of the pandemic). Still today, there are forces causing stress, including supply chain issues, raw material and labor shortages, and overwhelming demand for products.
As a result of this turbulence, there were a number of factors worth covering with this year’s group of participants in the annual MPO outsourcing feature. While not all respondents offered an answer to every question, this year’s response marks one of the most robust collection of replies on the queries presented.
As such, I’d like to take a moment to thank each person who shared feedback for this feature. That list of participants includes:
Sean Fenske: Overall, how has your company responded to the pandemic to ensure critical components still got to OEMs?
Tim Binder: Cirtec Medical took several steps to reduce the impacts of the pandemic on our employees as the key to our success is a healthy and happy workforce. In addition to standard masking, social distancing, and increased cleaning practices, Cirtec adopted daily employee screening early on to prevent any potential spread within our plants and offices. We further adapted daily working conditions, moving as many functions to remote work as possible, staggering shift changes to reduce traffic in high-risk areas, such as entrances, and adapted our production lines to space employees out where possible. While staffing availability has been a challenge at times, to date, we have had no major work stoppages in any plant or production line.
Jennifer Bolt: Throughout the pandemic, our top priority was—and continues to be—protecting the health and safety of our associates. Integer’s Pandemic Team, including 90-plus professionals across the company, continues to monitor local and global guidance to ensure we have the necessary policies, processes, tools, and rigor in place to keep our manufacturing facilities safe and open for business, so we can continue to deliver the critical devices and components our customers’ patients count on to improve, sustain, and save lives.
We partnered closely with customers to better forecast demand and adjust production accordingly, and with suppliers to help them keep their doors open and deliver on their commitments so we could deliver for our customers.
Randy Clark: We are very proud of how Flex Health Solutions responded to challenges of the pandemic. Early on during 2020, we learned we needed to be nimbler and more collaborative with our customers to get critical COVID medical equipment products into the marketplace. The challenges with travel, training, and getting critical parts were all hurdles we had to overcome. We learned we could leverage subject matter experts around the globe to reduce historical timelines and utilize virtual meetings to effectively support launches.
In 2021, we continued to support many customer ramps critical to new medical product offerings in the marketplace. This included 18 large-scale launches for products from diagnostic and imaging equipment to diabetes care, respiratory devices, patient monitoring, laboratory equipment, drug delivery systems, and surgical devices. Additionally, to ensure global supply continuity, we partnered with customers to add dual-source capability by leveraging Flex-to-Flex site regional capabilities.
Melissa Green: Throughout the pandemic, the safety and health of our employees has remained paramount. At its inception, we immediately instituted work-from-home arrangements for all employees not involved in product manufacturing and shipment. We implemented daily health screens and additional personal protective equipment for our in-plant workforce, and indefinitely suspended any non-essential visits to all manufacturing facilities.
From there, increased communication, coordination, and collaboration both internally (i.e., procurement, sales, and operations) and externally (i.e., customers and suppliers) were all key to minimizing any supply disruption. Strategic inventory stockpiling of either raw materials or finished goods also aided in our ability to consistently supply customers.
On the medical compounding and tubing aspects of our business, our global footprint was both a strategic advantage to us and a benefit to our customers. With six extrusion and four compounding facilities worldwide, we helped customers validate products from different facilities around the globe to limit shipping and supply chain issues. Our vertical integration with in-house compounding and tubing manufacturing provided further control over our overall supply chain.
Judy Huang: Our facilities are based in China and Asia, where COVID has been well controlled fairly well since March of 2020. Since then, we have not experienced too much interruption of our supply base. In fact, some customers have grown during this time due to rapidly increased needs. Understandably, others had to cut back on ordering, but that was due more to a change of material or phasing out of product lines. We’ve been a consistent supplier for our clients and have helped them to gain market share as they were able to maintain the necessary inventory.
Mike Kaiser: Donatelle was able to respond quickly at the start of the pandemic to have most of our non-manufacturing and support personnel work from home. Appropriate social distancing practices and mandatory mask wearing were also quickly implemented on the manufacturing floor. We also increased inventory levels for personal protective equipment in an effort to stay ahead of pending supply shortages. This allowed us to maintain a stable workforce and continuity of manufacturing without any manufacturing shutdowns. We also focused on securing critical purchased components to ensure continuity of supply.
Gaurav Kapoor: The global pandemic highlighted several new areas for improvement across multiple industries and functions. Spectrum’s number one priority throughout the pandemic was the health and safety of our teammates. Several policies and procedures were implemented early in the pandemic to not only protect our team, but also to secure the supply chain for our OEM partners with the ultimate goal of protecting patients worldwide. Spectrum immediately formed a Rapid Response Team focused on these goals in March 2020, a team that still drives our global response today. A key facet of our strategy has been open and clear communication with our teammates, our suppliers, and our customers.
James W. LaVersa, Jr.: We remained operational throughout the pandemic because we kept our facilities largely COVID-free by taking early steps to protect our most valuable assets: our people. We diversified our product range to support customers with lifesaving COVID products and manufactured surgical masks to protect frontline workers. In one case, we ramped up a new product from initial outreach to shipping quality batches in just 61 days.
As the pandemic exposed some vulnerabilities, we worked with our critical component suppliers to balance demand across multiple customers and secure this vital stock. We ensured the continuity of supply most critical to patient care and healthcare worker protection across the globe. It hasn’t been easy, but our outstanding supply chain team has done an amazing job mitigating most of our challenges.
Vince Marino: Precision Concepts has improved communication channels with both our supplier and customer base to mitigate problematic situations in these uncertain times. We have extended blanket orders to go far beyond traditional lead times for raw materials, purchased components, services, and more. In addition, we removed risk by bringing on and qualifying alternate suppliers to use as backups. On the personnel side of the business, Precision Concepts implemented mandatory daily temperature checks, case tracking throughout all facilities, daily workstation cleanings, required visitor screening, and even offered on-site vaccinations. This was all done to ensure the health and safety of all employees in our facilities. To attract and retain employees during the pandemic, we instituted an employee referral program that was wildly successful. We also increased our base wage rates and rates for our long-term employees.
John Nino: Most of our customers supply LSO with materials and we all had a fair share of challenges related to the global supply chain issues. We had to address those per customer because each was different from the next. Large global customers that had well-developed procurement groups had more success than small start-ups and LSO had been involved in both scenarios. For the large customers, LSO had made arrangements to receive multiple months of supply to ensure a consistent flow. Smaller customers are still struggling, and LSO offers them similar conditions according to their ability to procure.
Rich Warren: MMT’s leadership team anticipated potential constraints very early in the pandemic and took actions to minimize the impacts through increasing safety stock levels and standing up second sources on critical components. Our TotalCare program brings customers into service-level agreements with forward stocking of critical spares to ensure uptime.
Fenske: Were there lessons learned (i.e., best practices) that you will be able to carry forward post-pandemic?
Green: The increased communication, coordination, and collaboration both internally and externally is a best practice that remains as we (hopefully) have the pandemic’s end in sight. Processes such as sales, operations, and inventory planning will continue. Testing the robustness of our business continuity plans and looking for further opportunities to leverage our global manufacturing footprint will also continue, as we help our customers validate their supply from multiple locations around the world.
Huang: COVID has illustrated resiliency in the supply chain is a major factor. As such, we have asked clients to be more bold and hold more in inventory, or place a blanket PO [purchase order] with us. Further, as raw material supply fluctuates, this strategy is able to help them with stabilized pricing. Finally, 889 will hold approximately one to two months of inventory as safety stock for customers.
Kaiser: Many of our systems were already set up as paperless, which allowed for an easier transition to a remote work environment. These include most of our manufacturing, quality, process monitoring, planning/purchasing, and other business systems. Internal and external communication moved to virtual meetings and included the need to expand our video conferencing capabilities, which we were quickly able to accomplish. Those systems have now become the norm in our day-to-day interactions.
Kapoor: Global pandemics were not in our playbook historically, but they are now. Although communication and transparency have been hallmarks of Spectrum’s business model, these attributes took on a renewed and outsized role during the pandemic. The restriction of on-site visits caused engineer-to-engineer conversations to suffer—these are the bedrock of research and development as well as the critical relationship building between firms. The utilization of technology to replace these interactions was critical in keeping our industry moving forward. Beyond communication, the pandemic exposed weaknesses in supply chains across the industry. Single-source suppliers that were not built to navigate something as crippling as a global shutdown hobbled critical patient products. Having a well-developed business recovery plan, with built-in redundancies and narrowing the list of primary suppliers, are the biggest takeaways from the pandemic for Spectrum.
LaVersa: Yes. As a global CDMO [contract development and manufacturing organization] servicing a broad spectrum of medtech segments, we were exposed due to a small number of OEM customers having sole-sourcing contracts on critical components. We have now adopted a multi-layer, risk-mitigation process to focus on root-cause challenges and early indicators of supply chain risks through regular communication with suppliers and customers to deal with potential vulnerabilities.
Marino: Open and clear communication. In the business world, many people like to keep their cards close to their chest. Precision Concepts has found that being upfront and candid with our customers has produced the best results. Even in problematic situations, we are able to work through the issues together, rather than the customer finding out about a problem when it is too late to make a change. We also learned a referral program works exponentially better than recruiters in terms of retention, so our program will remain active even as the pandemic winds down. In addition, we will be continuing to source and qualify multiple suppliers to ensure backups are in place for any critical materials.
Nino: Most of the “lessons learned” have to do with putting the safety of people first and focusing on adaptability. Putting people first was a super big challenge in that it cost money to support employees and not be able to meet customer requirements, which impacted revenue streams. Not all companies had the luxury of supporting their teams, and as such, people lost their jobs. As a result, now that people are re-entering the workforce, I think they are looking for those organizations that will be better positioned to support the employees if we come into this type of situation in the future. I also think our previous notions of all work needing to be done in an office, with all employees together, are no longer viable. If job functions can be done remotely, we must be willing to support this work model.
Warren: At the beginning of the pandemic, MMT pivoted to operate 80 percent remote within 24 hours. Being a nimble, fast-moving company, we relied heavily on impromptu meetings with our customers and colleagues to evaluate and change course to meet their project goals. We invested in video and collaboration systems; our interactions with our customers changed, focusing on digital presence, and delivering clear messages. We leaned heavily on previously developed Industry 4.0 support systems to help our customers manage their production equipment in this new environment. Further, we deployed more geographic resources as travel was restricted, which changed the landscape on how we serviced our customers.
Fenske: How did your communication with customers/OEMs change during the pandemic and did you find ways to improve communication that you will continue to use going forward?
Binder: Regular monthly and quarterly in-person business reviews went remote with the pandemic. Cirtec has streamlined a regular review process to allow our customers the transparency of an onsite visit, while negating the need for travel. We have found that for existing customers, the remote reviews are effective. Onsite visits have picked up in Q1 2022, however, some customers have elected to stay remote.
Green: The importance of open lines of communication with customers increased during the pandemic. From raw material supplies to freight challenges, we were all living through the challenges together—meaning clear, frequent, and frank conversations became even more crucial to ensure our customers’ needs were continuously met.
Huang: We conducted more frequent check-ins, initially in 2020. There were a good number of Zoom and phone calls. Then, closer to the later part of 2021, we returned to in-person visits with customers who were open to receiving us (with safety protocols being observed, of course). During these visits, we were able to keep them abreast of our anticipated raw material outlook, logistics congestion, fluctuation of pricing, and recommendations to best navigate these situations.
Kaiser: All of our customer communication moved to virtual meetings, including the use of various video conferencing systems. The transition allowed us to maintain the frequency of customer communication, and everyone was able to adapt quickly. It’s difficult, however, to replace the effectiveness of in-person meetings with our local customers when you need to look at parts or processes and make real time decisions.
Kapoor: The utilization of video conferencing within Spectrum skyrocketed as a result of the pandemic. The process initially posed some challenges but soon became the norm. Over time, the lack of face-to-face interaction, both within Spectrum and with our customers, became a detriment. Spectrum utilized more advanced technical solutions to enhance the virtual engagement. Solutions such as lens-based Augmented Reality system—this allows individuals around the globe to see what an engineer at a specific site sees, which enables co-development and communication. Spectrum is fully utilizing these enhanced tools in our day-to-day operations moving forward.
LaVersa: Our frequency of communication certainly increased. It was paramount during the pandemic and continues today. Harmac remained transparent with our partners—customers and suppliers alike—to mitigate risks and maintain delivery. We shared innovations and collaboration to ensure any disruption was minimal and balanced. Some of our elective surgery products experienced lower demand due to government mandates, while hospital staff focused on managing the high demand COVID patients fueled.
We will continue to follow our rigorous sales and operations planning process with each customer. We’ll assess the potential demand volatility in their near- and long-term forecasts and evaluate our manufacturing capacity and raw material network risks.
Marino: As I’m sure most businesses will report, our use of virtual tools to communicate with customers skyrocketed. Video meetings became incredibly commonplace, where they were previously just a phone call or email. This allowed us to introduce many more members of our organization to our customers who may not have had the opportunity to meet face-to-face in the past. Having this face-to-face access to our customers has significantly improved our relationships.
Warren: Our TotalCare service customers benefited by having a relationship with our team of experts that could be deployed worldwide 24/7 via various remote diagnostic and collaborative systems. We have been installing communication nodes in our equipment since 2006. This enables our team to remotely diagnose system problems. These systems are paramount to reduce downtime and keep production facilities running with reduced resources in today’s global climate. For those customers not leveraging these technologies and services, it was a rush to get them up to speed and integrated into their production methodologies. One challenge the industry faces is the lack of seasoned technicians, as many of our customers rely heavily on outside resources such as the equipment OEM to close that gap in application knowledge and support. Recognizing this shift, we have invested and continue to invest heavily in our support team and expand our offerings within our TotalCare system.
Fenske: Have you had OEM customers take part in virtual tours, audits, inspections, or another such activity that would have normally taken place in person? If so, can you share the highlights of your experience (what worked, challenges, benefits, etc.)?
Binder: Cirtec Medical has hosted several remote audits and has developed a successful process. We have developed a streamlined method of document sharing via online applications coupled with video services. We walk the customers and/or auditors through our plants and facilities using video conferencing or even FaceTime applications to ensure the “visitor” can see everything. We have found remote audits to be effective and efficient by eliminating the time and cost of travel.
Green: Necessity is the mother of invention, and with travel limited on our customers’ ends as well, virtual quality audits were regularly conducted across our plants. Upfront planning was an important aspect of successful execution.
Huang: During COVID, we started to work with India vendors and have hired our own local inspection team. We historically conducted live audits but like many supplier companies, we’ve relied on virtual tours, Zoom conversations, and audits conducted by our staff members on the ground. Our OEM clients had not asked to perform an audit during this time, but they did accept our internal audit information.
Kaiser: Pre-pandemic, all customer/OEM audits and ISO re-certifications were completed in person. A large number of these were performed virtually over the last two years with minimal prep work needed. Having the electronic systems already available—including CAPA, MRB, SPC, ECO, and manufacturing lot traceability—we realized very good success. Prior to the pandemic, we were able to access all the required information in a conference room setting. Having robust systems already in place allowed for a seamless transition to virtual audits.
When there was no travel allowed, we recognized the need to offer a virtual presentation of our manufacturing capabilities and facility. With the help of a professional videography company, we produced a video that is the best alternative to showing our capabilities through an in-person tour. The video is now available on our website.
Kapoor: Our standard approach since 2020 has been virtual tours and audits. Although these offer a glimpse into our operations, they still only offer a glimpse. The value of an onsite tour or an onsite audit cannot be fully offset in a virtual setting. The true benefit of an in-person visit is the opportunity to interact with the entire team at a Spectrum facility, to feel their passion for the products we make, and to immerse in the inner workings of our facilities. As we begin to get closer to the model of 2019, I believe we will find a middle ground between what can be done virtually and should be done in person.
LaVersa: Yes. We conducted a number of quality audits and customer tours virtually. It provided us the opportunity to highlight our scale and capabilities across our global footprint and demonstrate, in real-time, the strengths of our lean manufacturing and automation without customers having to travel. In our opinion, nothing can replace the true value of a face-to-face meeting on the manufacturing floor, but overall, the virtual tours worked well. They were the catalyst for a number of new contracts during the pandemic and continue today. Also, a significant number of customer quality audits were conducted remotely/virtually without issue or findings.
Marino: Due to various travel restrictions, virtual tours became common place for us. We found them to be very helpful in providing our customers a glimpse into our facilities. One challenge we found was the importance of updating the tour videos to include new equipment and facilities as we continued to expand during the pandemic.
Nino: Yes. We have participated in numerous virtual audits and facility tours as a result of the pandemic. This provides a somewhat effective alternative, but has limitations. Limited views shared through video conferencing can provide a different perspective versus being onsite. I believe onsite audits and visits are more efficient and effective due to the close connection with the auditor, customer, or inspector.
Warren: MMT’s operating units had to move from onsite Factory Acceptance Testing (FAT) to remote demonstrations due to customer restrictions on travel—as well as our own internal policy—to maintain the highest levels of safety. The FATs we have performed through video and Zoom proved very successful; in fact, some customers will continue to utilize this service.
Fenske: What has been the impact to your company without participating in/attending live (i.e., in-person) tradeshows?
Green: Lead generation had previously relied on tradeshow participation, and with in-person events halted, alternate strategies were implemented. The pandemic forced us to move deeper into using digital technology to our advantage, and is now giving us the platform to become more creative about how we communicate to the market moving forward. What started as a necessary backup plan has led to ways of approaching things differently, and in ways that may not have fit pre-pandemic.
Content creation, such as white papers, case studies, and webinars, also became a heightened focus. Targeted email blasts and social media campaigns also increased, as did database research to find targeted audiences with which to engage.
TekniPlex also wanted to take the opportunity to go beyond hosting standard webinars. We employed a “Mytaverse” platform to host a unique, interactive, immersive experience for our customers, including a virtual tradeshow exhibit hall and conference auditorium. This was a first-of-its-kind launch in the healthcare space.
Overall, our creativity using different and multiple tactics increased lead generation, and further strengthened our position as a thought leader in the healthcare space.
Huang: We decided to do more local, regional shows in 2021, but during 2020, we hadn’t participated in any live events. This impacted our ability to find new customers at a show, but we’ve kept our existing clients well supplied and satisfied. The lack of live events also affected our clients’ ability to sell their products and, for some, they had to delay releasing orders due to shortages within their sales staff.
Kaiser: Historically, Donatelle has participated in a variety of conferences and tradeshows—both large and small. It’s difficult to replace the impromptu face-to-face interactions and touchpoints with new prospects and existing customers that take place during tradeshows. We were very successful by increasing web-based activities over the past two years. They generated new program leads that would potentially be uncovered during tradeshows.
Kapoor: The cancelling of multiple tradeshows has led to more digital activities to engage with new and existing customers. We placed a prioritized focus on virtual site tours, technical webinars, virtual lunch & learns, and most notably, our Spectrum Connect week—a virtual engineering week where we created a large amount of educational content and fun activities for our customers to access online.
LaVersa: Overall, virtual trade shows have been underwhelming and we don’t see a future for them, post-pandemic. We look forward to returning to face-to-face meetings with new and existing customers and suppliers at major tradeshows across the globe.
Marino: While we have missed being at the trade shows (great place to network with existing customers), the impact to our business has been minimal. We have been very fortunate to have continued our growth without having access to tradeshows. Our company has focused on long-term relationships that allowed us to create a wealth of customers we work with regularly. We have been fortunate to grow our business through word-of-mouth during this time, but we are very much looking forward to being back in-person to meet new customers.
Nino: Being unable to attend tradeshows during the pandemic significantly reduced the number of in-person customer meetings we typically attend over the course of a year. This, in turn, has limited cross-sell opportunities with existing customers and reduced the number of new customer engagements. This change caused us to put more focus on our website enhancements and deploy a virtual sales, marketing, and advertising strategy. Publications such as MPO and ODT magazine have been incredibly supportive in helping us to establish a virtual presence in the markets we serve.
Warren: The lack of in-person tradeshows impacted our ability to showcase processes and solutions; however, we were able to pivot and expanded our engagement via pay-per-click, customer referrals, and our best-in-class reputation. Our view remains that it is hard to substitute for live events where we can discuss the customer’s needs and the complex engineering challenges of their projects. As such, MMT made a swift return to trade shows as restrictions were lifted to allow us to reconnect with our partners.
Fenske: Some have speculated there may be some nearshoring/reshoring of medical device manufacturing in the coming years (i.e., back to the North American region). Do you agree/disagree/unsure? Explain.
Binder: I disagree. The call to increase control by nearshoring is common during any supply disruption, however, we have found a resilient supply chain to be the best form of controlled supply for our customers. Having manufacturing capacity domestically and internationally has allowed Cirtec to continue servicing customers throughout the pandemic. The benefit for our customer is one supplier to manage, while Cirtec takes on the responsibility of developing a reliable supply chain.
Green: Our global team has slightly different opinions on nearshoring. Our European team has received feedback that customers are exploring their options regarding their global manufacturing footprint, but so far, there is no strong evidence that anything has changed.
Among our North American customers, there is slightly more activity, as some have made plans to move back to the United States or Mexico to shorten their supply chains. So it’s a mixed bag, and location isn’t the only factor involved in customers’ decision-making. Business continuity plans and supplier redundancy also factor into the equation.
Huang: This is what is heard in public and from politicians, but when you consider raw material sourcing, labor rates, and the lack of available work force, this strategy becomes much more difficult. I think a dual-source method is best, both domestic and international.
Kaiser: There have been a number of unforeseen disruptions in supply chains due to offshore supply of components and assemblies. Risk mitigation and potential dual sourcing for critical components will most likely be a priority moving forward.
Kapoor: Perhaps the biggest challenge experienced throughout the pandemic (and continuing today) is the reliance on a global supply chain. I would agree with the sentiment that the coming years will bear a nearshoring/reshoring of critical products within the medical device supply chain. The impact of country-based shutdowns coupled with long transit times has exposed a significant weakness in how we manage our healthcare system. Diversified and localized manufacturing based on region should grow because of the lessons learned.
LaVersa: We totally agree. In fact, we’ve benefited from active transfer projects with a number of customers moving products back from Asian strongholds in China, Malaysia, and others. Our customers want to achieve higher quality standards and yields, and streamline their distribution channels to eliminate time-to-market delays. Also, supply chain challenges associated with sea freight and labor at shipping ports has compounded their urgency. Harmac has proven to be extremely competitive with our sites in Buffalo, N.Y., and Tijuana, Mexico. We’re providing customers with higher quality, greater reliability, and value engineering by utilizing automation to reduce labor. We’re also expanding our Tijuana location by adding a second facility that’s more than 100,000 square feet in size to support our growth trajectory.
Marino: It does seem to be a trend we are seeing on some of the more critical path products. All of our manufacturing is located in the Americas, and we have seen several of our customers look to us for integrated solutions that will reduce the overall lead times and provide a level of supply chain security.
Nino: I agree that pandemic-related supply chain issues have caused LSO and many of our customers to rethink elements of our strategic supply chain. Contingencies must now be considered across the supply chain. The geographic origin of the supply must be taken into consideration as part of a proactive risk mitigation strategy. Onshore “backup” suppliers should be put in place wherever it’s feasible to do so.
Warren: In MMT’s experience, the feedback from our customers is more focused on securing the supply chain—supply chain integrity is more important than the location. Through MMT’s TotalCare program, we have been able to support our global customer base through managed inventories of spares and consumables at our forward stocking locations (FSL).
Fenske: With shortages becoming an issue for certain types of products during the pandemic, have OEMs approached you about offering warehousing or logistics services? If you already offered these types of service, are OEMs seeking to increase their usage of them?
Green: Inventory planning programs were a part of our supply strategy pre-pandemic. We will continue to collaborate with our customers to design creative supply strategies, which may or may not include inventory management programs. This is typically a very customized process, which means matching the customer to the supply chain solution that best suits its needs.
Huang: Yes. We have always handled the logistics as we quote landed duty paid pricing, and have always offered a blanket PO with warehousing options. Recently, customers are placing longer blanket POs.
Kapoor: We haven’t seen a noticeable change in these requests, as this is not a primary part of our business. However, we have seen more discussions around safety stock, business continuity planning, and VMI (vendor-managed inventory) to mutually de-risk future supply chain issues.
Marino: Yes, they have. The use of the service has increased, but this is due to just-in-time deliveries being extended further and further out. With 20-, 30-, and 40-week lead times becoming the norm, we had to begin ordering more material at one time than we have in previous years. As such, our warehouse space consumption has increased considerably.
Nino: Yes. For those customers that utilize LSO’s distribution service as part of our full-service contract manufacturing service offerings, we are seeing increased requirements in safety stock levels. Providing this service to our customers provides another level of supply chain protection to help ensure their continuity of supply.
Warren: MMT’s TotalCare program pre-dated the pandemic and through this, we have been able to support our global customer base through managed inventories of spares and consumables at our plants and FSLs. We see strong demand from our customers for this service to build secure supply chains and drive production continuity.
Fenske: Given the fallout from the pandemic, are international manufacturing locations as attractive as they were before the pandemic? Why or why not?
Binder: International and alternate manufacturing locations remain attractive and will be an important part of any resilient supply chain going forward. The pandemic showed borders and boundaries are not safety nets, however, impacts of a viral infection can present timing differences. While we have seen impacts in all our locations, our ability to shift production between domestic and international production has helped mitigate regional impacts. Our Costa Rica facility was able to increase production when our domestic facilities were seeing the largest impacts from the pandemic and the reverse was true when Costa Rica saw increased infection rates. Having geographic diversity qualified into our supply chains continues to be a vital part of Cirtec’s strategy.
Bolt: Yes. The medical device market is global and Integer has supported and will continue to support the global development and manufacturing needs of our customers. Last September, we announced the expansion of our operations in Galway, Ireland, with the construction of a new Medical Device Innovation and Manufacturing facility that will meet increased demand for regional research, development, and manufacturing capabilities as well as capacity for catheters and delivery systems.
Our international manufacturing and development footprint enables us to be more responsive to our customers’ needs, recruit a culturally diverse and talented workforce, and identify and adopt global best practices. All of these factors contribute to us being our customers’ partner of choice.
Clark: We see the attractiveness of international manufacturing locations continuing as we all adjust to the fallout of COVID-19. The supply chain challenges that were created by the pandemic were felt around the globe and required regional solutions to meet market demand. The end-customer needs for medical products were not localized; we’ve had many customers working with Flex Health Solutions to develop manufacturing solutions in our international locations. Additionally, some customers have requested that we create multi-region solutions to ensure business continuity for their products. These requests span our manufacturing offerings in North America, Europe, Latin America, and Asia.
Green: Having a multi-pronged approach to business continuity will always stay in vogue, and international manufacturing locations are typically part of that plan. In many cases, our customers are producing their products in multiple geographies, and value suppliers with local supply options.
From a risk mitigation standpoint, customers are seeking validation of existing products produced in another manufacturing facility—with the caveat that this secondary facility is located in a different geography. This scenario favors suppliers with a global footprint.
Kapoor: International manufacturing locations will always be attractive for multiple reasons including proximity to customer locations and access to labor. Spectrum is co-located in medical device hubs internationally in the United States, Mexico, Ireland, Costa Rica, and Malaysia. These sites serve OEMs within their region, a trend that will grow in the coming years.
LaVersa: We still believe that customers prefer a supplier with a global footprint. During the second half of 2020 and all of 2021, demand surges revealed the difficulty in providing a sufficient supply of critical medical components, including base resins, semiconductors, and packaging. For this reason, debates on increasing the resilience and redundancy of manufacturing sites to ensure continuity have gained importance. Our multiple international locations with similar capabilities have proven attractive and necessary. Our headquarters in Buffalo is complemented by our European location in Castlerea, Ireland and our Tijuana operation.
We’re supporting customers by manufacturing the same products at multiple sites for some, and different products at different sites for others. Our mature, proven 21 CFR Part 11 Compliant quality system we share across all three sites drives this continuity and customer confidence. We’ve proven we can be an effective partner to many Fortune 500 customers, despite not having any Asian manufacturing, which is a clear advantage today.
Marino: No, mainly due to access to travel. While virtual tools helped connect us in difficult times, they were not a panacea for traveling and meeting in-person. Our business typically starts with our customers developing a product. As such, facilities tours that allow them to better understand our capabilities are commonplace. Having to put these tours on hold for the duration of the pandemic cost our customers the chance to visit the facilities in-person.
Nino: Difficulties in getting components and sub-assemblies from overseas and the interruption in supply from offshore suppliers are causing the entire medtech industry to reconsider onshore alternatives as part of a proactive risk mitigation strategy.
Warren: MMT’s customer base is global and expects support throughout the world. We continue to support this demand through our international subsidiaries and expect to continue to build our global footprint in support of this.
Fenske: Now that we are almost two years removed from the start of the pandemic, how have you altered your recovery plans to address a future crisis?
Binder: Cirtec’s recovery plans have always included reliance on our supply base as well as internal capacities. The pandemic has reassured us that having multiple manufacturing sites is vital to our success. Renewed focus on supply redundancy will help inform our customers of opportunities to protect supply through qualification of Cirtec as an internally multisource CMO.
Green: The pandemic actually proved the integrity of our existing supply chains, and further solidified our relationships with key suppliers. We will continue to look for opportunities to expand further.
Kaiser: Lead times for capital equipment and some purchased items have been extending out, requiring more focus on future business planning. Donatelle has placed greater focus on program forecasting and order visibility from our OEM customers to allow added or increased safety stocks for longer lead-time and more critical items.
Kapoor: Absolutely. Aside from our recovery plans encompassing pandemic policies now, we are also aggressively working to strengthen our supply chain with preferred and alternate vendors on behalf of our customers. Qualifying alternate vendors and materials is critical to providing maximum flexibility in future crises and these discussions are happening earlier in customer programs.
Marino: We have become hyper aware of our supply chain. The challenges we faced throughout the course of the pandemic have caused us to create multi-level backup plans for all jobs in-house. Speed and agility are of paramount importance during these times as every day brings new challenges. We have also added improved communication channels between facilities to ensure we can function throughout any crisis.
Nino: Even though some pandemic-driven supply chain issues have been resolved, others have not. We are therefore deploying a corporate initiative focused on continuously improving our supply chain as part of our 2022 operating plan. This includes tactics associated with stocking levels, continuous inventory analysis, and better utilization of ERP systems. We will be changing to a much more capable ERP system in 2022 in part to better ensure our continuity of supply in the future.
Fenske: While EtO sterilization concerns were put on the back burner during the pandemic, how do you expect this issue to affect your company going forward and are you exploring alternatives for new projects?
Green: TekniPlex is a leading materials science company. With that being said, we seek to utilize materials that can, in many cases, be sterilized with alternative methods. We maintain close relationships with our customers to understand their current and future requirements regarding sterilization. Where needed, we will innovate to meet future needs.
Kapoor: We support customer projects around a variety of sterilization methods (determined by our customers), but we do not have internal EtO sterilization operations. We continue to support customer projects and work with subcontracted sterilizers to address changes in alternative sterilization methods, including comparison studies and revalidation activities.
Marino: EtO sterilization is not a large portion of our business currently, so we do not anticipate much of an impact to our current production. However, we are seeing the requirement resurface in the new programs we are quoting and are actively working with our suppliers to plan for the increased demand that is on the horizon.
Nino: EtO sterilization will always have significant impacts on the industry at large. We actively keep our ear to the ground, and we expect larger sterilizers to prioritize high-volume OEMs as they strive to meet new industry standards of EtO reduction, leaving medium- to small-volume clients hugely neglected. As a result, we have been working hard to establish relationships with these larger sterilizers so we can bridge the gap that will affect said medium- to small-volume clients. We can now leverage our experience, in-house capabilities, and relationships with these larger sterilizers to complete new projects with similar timelines as previously expected. Our work with these two groups allows us to model the path they choose, adjust to these changes in the industry, and keep us ahead in terms of future regulatory changes that may affect our clients.
Fenske: Another topic put on hold during the pandemic was corporate social responsibility. Post-pandemic, will this gain renewed attention within your company or are there other higher priority items ahead of it?
Binder: As a CMO, Cirtec remains committed to the requirements and expectations of our customers. Cirtec holds a high set of standards for our organization and our supply base to ensure we present an ethical and agile supply option at all times.
Bolt: Integer never put corporate responsibility on hold during the pandemic, continuing to prioritize and advance our commitment. A few examples include expanding our diversity and inclusion program, with more than 150 events and initiatives driven by our associates at the site level globally in 2021. Our associates around the world additionally maintained their commitment to giving back to our local communities through a number of creative, safe, socially-distanced initiatives benefitting local nonprofit organizations.
Green: For TekniPlex, corporate social responsibility gained higher priority as the pandemic wore on. For example, our “Tekni Gives” program was born as a result of the pandemic. A program originally designed to help employees and their families who struggled financially due to the pandemic, the program has morphed into helping people and communities in need, both near and far.
Our Diversity, Equity, and Inclusion (DEI) council also has progressed over the last two years, and is a strong focus within our company. In addition, environmental programs to ensure TekniPlex is doing its part to be more sustainable will continue, and become more prominent “post” pandemic.
Kaiser: Corporate social responsibility has always been a priority at Donatelle. Our efforts did not waver over the past two years, and Donatelle expects to maintain that priority going forward.
Kapoor: Corporate social responsibility [CSR], as part of our ESG (environmental, social & governance) platform, actually became a stronger focus for Spectrum during the pandemic. We firmly believe in the tenets of CSR and have rolled out several new policies in this area that include employee volunteer time and company donations in the areas of healthcare, education, and community—all areas in greater need as a result of the pandemic. Our website, spectrumplastics.com has a link to all our CSR initiatives and policies.
LaVersa: At Harmac, not only did we not put social responsibility on hold, we enhanced it. Our vision statement reads, “Changing the lives of patients, employees, and the communities in which we work.” During the pandemic, this held even greater significance. Patient health had never been more at stake. Our employees’ safety and that of their families was paramount—and critical if we were to remain in operation. And the communities in which we worked were all dealing with unprecedented levels of need and crises.
For example, we delivered PPE to hospitals across our regions. We made healthy food deliveries to those who were house bound or experiencing tough financial times. We partnered with K-12 educators to deliver lessons via TV/remotely. We even turned a cooking school into a food pantry led by our Ireland team.
We continued to partner with area businesses, organizations, and municipalities to make a difference in our neighbors’ everyday lives. Each of our facilities has unique cultures, customs, and opportunities to engage with its community. We go beyond charitable donations and volunteer work, and instead look for opportunities to take leadership roles in transforming the communities we call home.
Marino: At Precision Concepts, corporate social responsibility is never put on hold. We understand we impact the community around us, and we strive to improve the lives of our employees and the members of our community. We actively fundraise for cancer research, veteran’s affairs, and local charities. Also, we are introducing more educational initiatives for our employees to take advantage of and better themselves.
Nino: LSO’s post-pandemic “corporate social responsibility” has developed into a new global governance model to promote the ability to reach collective decisions on topics surrounding this unprecedented situation. The COVID-19 crisis has challenged LSO regarding our commitment to ethical business conduct and “corporate social responsibility” factors for our business. For instance, LSO has purchased personal protective equipment, hand sanitizer, respirators, and testing kits to mitigate our risk in the workplace. As a result of the COVID-19 pandemic and the impact of new challenges to the medical device manufacturing industry, LSO adjusted our operations to overcome obstacles and eliminate redundancies. LSO’s post-pandemic accomplishment over fighting COVID-19 will build our company’s “corporate social responsibility” and provide a remarkable relationship with our community and, most importantly, our employees. At LSO, our number one priority is to keep our employees safe and minimize risk for the organization. As we navigate moving past this pandemic, LSO’s priority will be just that.
Warren: At MMT, CSR has never dropped from the agenda. During the pandemic, of course, resources shifted to the responsibility for our employees, community, and continuing the supply of lifesaving devices. But, even before the end of the pandemic, MMT deployed a clear vision of both our commitment to the environment in the form of landfill reduction, and also our commitment to be a diverse and inclusive organization.
Fenske: Sustainability was gaining momentum pre-pandemic and will undoubtedly return to prominence. How is your company addressing this trend?
Binder: Just as with the aforementioned CSR, we are committed to the requirements and expectations of our customers. Each customer’s individual requirements vary for ESG. Cirtec actively participates in several sustainability programs and initiatives as directed by our customer’s individual requirements.
Clark: Our vision is to be the most trusted global technology, supply chain, and manufacturing solutions partner. Sustainability is essential to making this vision a reality.
Building on nearly 20 years of sustainability investment and experience, we launched our 2030 strategy and targets, as well as joined the Science Based Targets initiative (SBTi)—the global movement of leading companies working to mitigate climate change—in 2021. As a member, we have adopted greenhouse gas emissions reduction targets necessary to meet the Paris Agreement’s goal of limiting global warming to 1.5°C above pre-industrial levels.
Our commitments span the value chain and align to the U.N. Global Compact and Sustainable Development Goals. As part of our sustainability strategy, we are committed to significantly lowering emissions through science-based targets in partnership with customers and suppliers; investing in our communities; advancing a safe, inclusive, and respectful work environment; and driving ESG-compliant practices with transparency.
Another example is our circular economy focus. We are now creating a design for environment (DfE) framework to incorporate into product development. Several customers have already asked us to run this innovative new tool on their products. It covers the gamut of design for durability, standardization, and compatibility; ease of maintenance and repair; upgradability and adaptability; disassembly; and reassembly. For medical equipment that can be refurbished under regulatory guidelines, design for circularity makes it more cost-effective, whether it’s the entire framework or giving the parts within a new life elsewhere, as in batteries and PCBAs.
Another foundational element of our circular economy approach is conducting an analysis of customers’ products to estimate the environmental impact of CO2 emission, energy, and water consumption. This helps our customers define a baseline of their environmental impact and, together, we can evaluate the right circular economy solutions to help work toward sustainability goals. We used this method when designing a customizable autoinjector platform recently introduced to the market. Our design team evaluated CO2 emissions, energy, and water consumption for each component of the injector to ensure they were minimized while still providing a robust drug delivery system.
Green: We have always been mindful of the importance of our responsibilities from an environmental perspective, and strived to act responsibly in this regard. That said, sustainability in the healthcare arena is increasingly coming to the front of everyone’s minds, especially for single-use disposable devices and sterile packaging. Going forward, we have plans to focus heavily on innovating sustainability for healthcare products, while remembering patient safety and well-being cannot be compromised.
Kapoor: Sustainability was another focus for us throughout the pandemic as part of our ESG platform, which included formalized policies on our website and engagement with EcoVadis to assess our current state and identify immediate and long-term areas for improvement. In addition, we have offered eco-friendly/biodegradable flexible packaging solutions to our customers with a focus on the entire product lifecycle and its environmental impact.
LaVersa: We’ve had a sustainable mindset for years, earning our first ISO 14001 certification in 2011. We’re committed to achieving ongoing sustainability and supporting the safety, environment, and wellness of our employees and the communities in which we work. We have active programs addressing energy, water, and waste reduction; workforce wellness; and community investment. In fact, our environmental health and safety director just completed her term as president of the Western New York Sustainable Business Roundtable.
Marino: Precision Concepts is focused on continuously reducing our carbon footprint, and ultimately reaching net-zero. We are improving our inventory management systems to reduce waste, improving our recycling systems, and have implemented energy-efficient appliances in our new factory.
Warren: Sustainability is a core tenant of MMT’s values. Within our sustainability programs, we continuously evaluate the environmental impacts of our products and global operations from our suppliers through to our customers. As an example, we are committed to constantly monitoring all waste streams for recycling opportunities, which we believe will lead to a meaningful reduction in our landfill burden.
Fenske: When faced with an OEM customer who presents consistent requests for a percentage cost reduction year over year, does it cause a rift in the relationship or a reevaluation of whether the customer’s business is worth it?
Binder: Cirtec is committed to the full lifecycle of components and devices we support. We look for opportunities to improve safety, quality, delivery, then cost, in all of our work. The request to reduce cost does not cause a rift, however, it does present an opportunity to review the value proposition Cirtec presents. With a fully staffed design and development division, Cirtec is poised to drive real cost improvement through design and manufacturing process improvements. Focusing on cost savings for both Cirtec and the OEM has proven to be the most sustainable and effective for the long-term viability of each medical device.
Green: We find that working in collaboration with our strategic customers to leverage synergies often yields win-win scenarios, which allow for any resultant cost savings to be shared. This is something we endeavor to bring to the table for the mutual benefit of both parties, and thereby strengthen the business relationship rather than harm it. Recently, this has become even more important due to the month-on-month escalation of manufacturing costs including feedstocks, energy, transport, packaging, etc.
We believe the key to maintaining customer relationships is very simple: deliver a product that brings value (not cost) to our customers, and the relationship will be mutually beneficial.
Huang: Yes. When you consider costs—oil, raw material, and inflation—this becomes very difficult to maintain. OEMs and suppliers should have a partnership relationship where both parties work together. We are blessed to have very long term OEM clients who are partners and share cost increases and decreases together. We have to continue to help our clients find cost savings through product design improvements or manufacturing processes, as well as inventory control and locking in pricing with hedging of material. It requires a partnership, not a win/loss relationship.
Kaiser: This has become a normal mode of business for some longstanding customer relationships. In order to sustain those relationships and achieve cost down goals, there needs to be a high level of collaboration and willingness to apply resources and make those changes to achieve the goals. This environment of continuous improvement can help drive new innovation through alternate manufacturing methods. When true costs and significant costs can be taken out of the processes, it becomes a win/win for both parties.
Kapoor: This is certainly becoming a standard expectation, but has been challenging to realize due to raw material increases and global inflation. If both the OEM and CMO can align on objectives early and create a scenario of mutual effort leading to mutual benefit, it can work.
Marino: Precision Concepts is a vertically integrated contract manufacturer that focuses on not only manufacturing components but also reducing cost to our customers. As such, requests for price reductions do not cause rifts in the relationships we have with our customers. We understand everyone in the industry is trying to improve their bottom line and be as profitable as they can be. When presented with situations such as this, we negotiate in good faith with our customers until we come to an agreement. We always have and always will operate on an open and transparent basis.
Nino: Yes. Some OEMs approached us with that, and we are open to it since LSO had been providing those services to all customers from the beginning. This is usually the case with mid- to small-size customers who do not have their logistics system developed.
Warren: MMT truly believes in partnership with our clients. MMT’s value extends beyond pure price by generating savings for our customers from the productivity and quality of our production technologies, and the uptime and business continuity driven from our TotalCare program. Of course, there are times when price is an overriding factor for our clients and, in these instances, MMT will use our ability to support longer-term planning to capture purchasing synergies that can lead to win-win savings.
Fenske: The industry is experiencing a shortage of skilled labor for many production positions. How is your company addressing this and what are you doing to attract/retain talent?
Binder: Cirtec continues focusing on presenting a balance between work and home life, ensuring our staff has the ability to make a livable wage on a reliable schedule. We have changed some facilities to four-day work weeks and supported shift timing changes in other locations. Staying on top of what our employees need, beyond pay, has helped Cirtec attract and retain talent. Increased efforts are underway to build on our culture of innovation and collaboration to empower all employees to improve our daily work lives.
Huang: Our company maintains an active focus on culture, flexible working hours, remote work capabilities with computer/IT services to support it, base salary and commission to maintain motivation as well as additional income, and the ability to access all documents from a cloud-based server. For workforce on the manufacturing floor in Asia, we have invested in more automation equipment and have found some creative ways of hiring and retaining talent with more benefits of profit sharing, housing allowances, and management/leadership training.
Kapoor: We start by ensuring we have a company and culture where people are engaged and want to stay. Employee referrals have been very helpful, and we’ve done a lot with our employee engagement program to see how we can continuously improve, celebrate our great people, and allow everyone to have a voice.
Marino: Precision Concepts is actively recruiting and hiring skilled laborers. We do so through referral programs, traditional recruiting, and internships. In order to retain our employees, we are constantly improving work/life balance in our facilities. Flexible hours, quality benefits, and a positive culture at our facilities are crucial for employee retention.
Nino: After the initial COVID hit to the industry and economy in general, temporary labor had become the main choice for most employers. Some companies had increased their hourly rates and LSO had done some of that as well. As time went by, LSO realized new employees were not just looking for a simple paycheck but also the benefits companies offer. We decided to invest in training of our employees, offer interactive classes so we can shorten the conversion time from temporary to permanent employee status. This seems to have a positive impact since more employees are making inquiries about conversion to permanent status.
Warren: MMT aspires to be an employer of choice and that starts with culture. We recognize the challenges of recruitment and, thus, pay close attention to retention. Communication and transparency are key, and we remain committed to promoting and monitoring workforce engagement. A core value is that we all win together. To support our drive for clarity of vision and objectives, all team members participate in goal attainment and profit sharing. Further, our leadership team has deployed innovative programs, such as tuition reimbursement to allow team members to grow, scholarships for team members’ families, and supported engagement in local non-profits.
Fenske: What recommendations do you have for OEMs currently seeking new CMO suppliers? How can they best evaluate a prospective partner and what traits should be considered most important?
Binder: While qualifying multiple sources may not be an effective regulatory strategy, look for a CMO with a broad depth of resources and established supply chains. The pandemic has reinforced the importance of resilient supply chains. Ensuring your CMO has strong internal regulatory, engineering, and supply chain abilities will pay dividends in the long run as you enjoy uninterrupted supply of your component or medical device.
Clark: When Flex Health Solutions initially engages with an OEM, we recommend an open dialogue to fully understand their needs and business results they are looking to achieve by partnering with a CMO. The first step in an evaluation should be for the OEM and CMO to complete an in-depth analysis of their core versus non-core capabilities. When an OEM knows what non-core capabilities they need from a CMO, they then can determine how to leverage the partnership to create the greatest benefit to their business. Second, we recommend the OEM visit our design and manufacturing sites so we can demonstrate how we manage our customer relationships, develop subject matter collaboration, and provide world-class operational execution. Third, and probably most important, is to build a relationship on trust and confidence. We know an OEM is trusting us to deliver a solution that meets the expectations of their patients and their brand.
Kaiser: In many cases, a past relationship between individuals of the OEM and the prospective new CMO starts the interaction. There’s already a certain level of trust in the relationship, which is very important. Things OEMs need to consider are the CMO’s certifications, their level of experience in the type(s) of products to be outsourced, and the need to gain insight into the CMO’s new product development processes—the amount of resources available and the amount of attention they will receive. During the early stages, Donatelle has found success when various functional levels interact with each other to develop those relationships. This results in a better understanding of the cultural fit between the companies and a longstanding partnership.
Kapoor: It all starts with a foundation of quality and service, then quickly moves to how well the CMO can support the specific needs of the OEM. The OEM should feel confident the CMO has expertise in the application, the portfolio of capabilities or offerings to support that application, and the ability to drive speed and value in getting new programs to market.
LaVersa: Finding a partner with FDA and ISO certifications is critical. You also want to align the culture of your company and theirs. Select a partner who is open, creative, innovative, and proven. Harmac has been awarded multiple accolades for exactly these kinds of traits. Chose a CMO with breadth and scope in assembling complex medical devices, as well as one that uses cGMP and strong lean principles in their plants. They should have world-class engineering—a “one-stop shop” leveraging vertical integration, cleanroom injection molding, and automation capabilities.
The right CDMO can manage multiple phases of a product lifecycle and ultimately deliver large-volume manufacturing with unquestionable quality. Our engineering and project management expertise ensures a product will benefit from our successful experience and track record.
Marino: We realize finding a high-quality CMO to partner with is a daunting task. We recommend a thorough assessment of the supplier’s capabilities and culture. Many challenges can be overcome by working together, but a supplier missing core capabilities or having a culture that does not align is a recipe for disaster. Ensure any potential suppliers will align with what your needs are, and you understand what their capabilities are. Additionally, years in business, cost, and ease of working together are key variables in supplier selection.
Nino: There are a number of traits a CMO should offer to customers:
Binder: Some of the best OEMs Cirtec currently works with are keenly aware of the manufacturing and sourcing expertise a CMO may present. Our OEM partners focus on the requirements of the device, while collaborating with Cirtec to find the highest quality and most cost-effective manufacturing options to meet those requirements. Treat your CMO as an extension of your own organization—bring them in early and often to ensure alignment.
Huang: It always needs to be a partnership, and not just a vendor/client situation. More transparency is necessary, and less discussion of pure cost. Both parties need to discuss how to improve design and how to best take advantage of manufacturing locations. There are many elements to the cost of manufacturing—raw material, labor rates, manufacturing equipment, scrap rate, possible outsource secondary options, packaging, sterilization, transportation, logistics, and inventory. An OEM should really work with a CMO on all these factors so they can find a win/win situation.
Kapoor: From the beginning, there needs to be two-way transparency and alignment of respective goals. When the CMO knows exactly what success looks like as a whole for the OEM and the individuals involved (not just success of the project itself), the teams can mitigate risks, align on bigger objectives, and partner toward mutually beneficial and proactive solutions.
LaVersa: While the OEM retains in-house strategic capabilities and IP, they should leverage the CDMO’s knowledge and expertise to bridge competence gaps when transferring existing products and developing next-generation or new products. Harmac provides valuable input during the design phase and can combine OEM knowledge with our proven expertise. This lets us improve quality and design, which gets products to market faster without sacrificing quality.
Marino: Communicate with your CMO and be as transparent as you can be. The easiest way for a relationship with a CMO to evolve from supplier to collaborative partnership is to treat the CMO as you would an employee. The more information you can provide, the better the relationship will be. Use the talent of your CMOs to your advantage and engage them early on. CMOs are not looking for a “transactional” type of business, but a partnership to develop quality components.
Nino: A true collaborative partnership between OEMs and CMOs must start with a mutual understanding of what each organization requires to succeed. CMOs are best suited to provide the best possible service when OEMs engage with them as early as possible in the product development lifecycle. This enables collaborative DFM efforts to take place during early development phases, resulting in the most efficient commercialization possible. These efficiencies promote success on both sides of the table.
Fenske: Conversely, what does a CMO need to do to illustrate to an OEM it is capable of being a collaborative partner in a medical device project?
Binder: Focus on design controls and product lifecycles. A good CMO should support the OEM through each phase, with the spectrum of control shifting throughout the lifecycle. Initial design and development, while controlled by the OEM, is the key point to engage with a CMO to ensure design for manufacturability. In sustained manufacturing, control of the Critical to Quality outputs should be the CMOs main focus—a strong CMO will leverage internal and external resource to deliver a quality component or device.
Clark: A valued design and manufacturing partner’s mission is ultimately to accelerate the OEM’s speed to market and de-risk its investments. This is largely achieved through innovative design; a reliable, resilient supply chain network; and advanced manufacturing abilities both regional and global.
Kapoor: CMOs should build confidence with the OEM by aligning on objectives early and creating trust through frequent and open communication where the CMO thinks and acts on behalf of the OEM. This includes less “will do” conversations and more “it would be better if…” conversations that can result in less risk, more value, and faster time to market.
LaVersa: We work to develop long-term relationships beyond the OEM agreement terms. Our focus is on mutual success and a beneficial partnership. We view our cleanrooms as an extension of our OEMs’ operations. Thus, we share goals, expertise, objectives, continuous improvement metrics, and accountability. We work together to achieve success for the ultimate customer: the patient.
Marino: Engage the customer, even on the little details. Let them know how their request is coming along, invite them to your facilities for tours, provide timely feedback/advice on any questions they may have. Again, treat them like you would an employee. The more information you can provide, the better the relationship will be.
Nino: CMOs must offer a suite of services that results in one-stop shop efficiencies for the OEM. This not only streamlines operations, but simplifies and reduces the cost associated with materials and subcontract management. Being able to demonstrate how the CMO can reduce costs from product introduction through to volume production is key. Being able to demonstrate alignment with the OEM’s production ramp requirements is also an important factor.
Fenske: Is M&A activity within the industry having an effect on the OEM/CMO relationship? If so, what is the impact?
Binder: Definitely. Not all CMOs are created (or merged) equally. OEMs should remain diligent while vetting potential CMOs. It is easy for a CMO to bolt together several disparate manufacturing types and present a unified brand, however, the OEM should dig deeper to look for the signs of a truly integrated CMO. Look for one quality management system to ensure results will be same from every division of the CMO. Look for a clear and focused strategy to ensure the CMO understands your product and your market. Look for vertical integration within the CMO to ensure you are truly getting the full leverage of the CMOs breadth.
Bolt: Yes. Integer’s acquisition strategy is actually strengthening our customer relationships. For example, the recent acquisition of Oscor Inc. has allowed us to further differentiate our manufacturing expertise by expanding our capabilities, capacity, and global footprint to better support our customers’ evolving needs. It also creates opportunities for our customers to streamline their supply base.
Kapoor: M&A will always have some impact for both OEMs and CMOs, but the more diversified and full-service CMOs with strong track records of quality and service will be of little concern for OEMs looking to consolidate their supply chains.
Marino: OEMs are looking for stability. Precision Concepts is a privately owned organization that has been in business since 1976. Some of our customers have been with us for over 20 years, and in that time, have seen incredible growth. However, even with the growth of the organization, our customers know where we are located and how to reach us. They are very appreciative of our stability and consistency. When M&A occurs, there can be a loss of culture that was responsible for the original relationship prospering. This puts unwanted strain on both the customer and supplier, and makes for a difficult situation all around.
Fenske: What trend(s) in medtech will you be following that you expect to become more important once we’ve had some sense of normalcy restored? Explain.
Clark: We foresee evolutions in many therapeutic spaces and are actively working with customers to ignite these innovations, notably, in diagnostics, dialysis, and infusion markets. This is where care is moving from a traditional hospital or medical center-based site over to the office or clinic, and ultimately, to the home setting. The same applies to patient monitoring, where we are seeing a shift from large form-factors to small, connected, wearable devices. Flex Health Solutions is positioned to aid our customers in the transition to new technologies with greater speed and reduced risk.
At the same time, there are some capabilities that were important before the pandemic and remain so for medical OEMs to flourish, but they may not possess these capabilities. Some prime examples where a CMO can partner with the OEM for success are:
Robotics, 3D device printing, and sustainability are the other trends we will be keeping a close eye on.
Kapoor: As mentioned previously, supply chain de-risking and business continuity planning will be a critical objective for both OEMs and CMOs. From a product perspective, there will likely be a continued focus on point-of-care solutions, bringing diagnostics and therapies closer to the patient with more comfort and convenience.
LaVersa: We believe the continued outsourcing trend will accelerate. As such, financially sound and privately held CDMOs like Harmac are well-positioned to continue as key strategic partners to OEMs. Harmac provides Six Sigma quality operational excellence. We offer industry-leading quality and mitigate operational risks. As outsourcing demand remains robust, we believe OEMs will increasingly seek supply chain partners with domestic and near-shore manufacturing. We’re well-positioned with locations in the U.S., Ireland, and Mexico to support the European and North American markets.
Marino: One trend Precision Concepts has been keeping a very close eye on is supply chain consolidation. As a vertically integrated manufacturer, we are seeing many opportunities in this area with customers looking to improve their logistics. Also, connectivity between patients and doctors is at an all-time high, and we want to support that growth however we can. Internet of Things products are allowing the patients greater control of their treatments and are a great fit for Precision Concepts’ capabilities.
Warren: The market today is characterized by the struggle of the supply chain stops and starts, and the challenging end-use demand patterns. As the demand and supply chain normalize, we expect major OEMs to transition from supply chain “firefighting” to focusing on operational excellence and supply chain robustness. This will mean a change in conversations with suppliers and more pressure on them to formalize as the OEMs shift to efficiency and cost saving. At the same time, resources will likely pivot to innovation to mitigate the increasing competitiveness of the more stable market.
Fenske: What impact, if any, will the war between Ukraine and Russia have on the medical device European market, or the worldwide medical device market?
Green: The war in Ukraine has created a large amount of political uncertainty in the region, which often results in a reduced healthcare spend. In addition, sanctions imposed on Russia are expected to have a significant impact on commodity costs (e.g. oil, gas, metals, plastics, foodstuffs, etc.)—at least for as long as they are in place, which could be a very long time. Reduced spend and increased costs are a perfect storm, and one we may need to weather for quite some time.
Kapoor: It’s not clear what the overall impact will be, but it speaks to globalization versus localization and the companies that have operations in those areas will be the most affected. OEMs and CMOs without contingency plans or second-source options will see more downstream effects.
Marino: Many products we manufacture use rare-earth elements. As such, the conflict is causing a dramatic increase in material pricing, especially specialty materials. This past week, we saw a 400 percent spike in the nickel commodities market and a halt on trading, something that is unprecedented at a global scale. The impact of this is felt in pricing of many of the metals we use, but most dramatically in the nitinol components we manufacture.
Nino: This is such an interesting and challenging question since I hail from that part of the world. Wars there last long and cut deep in every aspect of life. They create challenges for a multitude of medical device industry subdivisions. Everything from critical care, wound management, and surgical equipment to neonatal and childcare, cancer, and every other medical condition in between. Supply chains are broken, supplies come infrequently to treat chronic patients, and chemotherapy and dialysis are almost cut-off completely. Humanitarian tragedy and the number of displaced people will strain some countries’ abilities to help those in need. Therefore, the supply chains must be allowed to flow to take supplies to those who need them and to allow those in need to be evacuated. Only then, we can think how the markets need to be navigated.
The oil supply for most of Europe flows from Russia and the EU raw material manufacturers will have a hard time producing plastics and any other derived product, affecting their customers’ ability to produce. Therefore, on this side of the Atlantic, we must be prepared to supply a diverse variety of products at short notice.
Warren: While we expect to see continued supply chain disruptions, the demand impact on non-elective minimally invasive surgeries is likely to be muted. Certainly, our concern is less on the market impact and much more on the human impact of this conflict.
Fenske: Do you have any additional comments you’d like to share regarding the OEM/CMO relationship in the medical device design and manufacturing space?
Kapoor: The pandemic demonstrated the importance of what we do in the healthcare industry every day. It really created a community where we know we can keep making a difference in the lives of patients everywhere. As the pandemic subsides, we should all reflect on how important our day-to-day work continues to be—even if it’s not on every news channel.
LaVersa: The key to any relationship is to foster a mutually satisfying, balanced, and rewarding partnership. We strive to practice the tenets of honesty, integrity, and respect internally and externally. As a CDMO, we play an integral role for our OEM customers. They depend on Harmac to provide world-class quality, ongoing innovation, and value engineering across all sites.
Marino: Think long term in the near term. If you engage your CMOs early enough, they can be an invaluable asset and partner. Input from your CMO in the early R&D stages has the potential to prevent significant problems in the production stage.
Nino: Proper alignment between OEMs and CMOs is a critical part of a successful and long-term OEM/CMO relationship. At LSO, we pride ourselves on effectively supporting large and small OEMs from product introduction through volume production. Our ability to accomplish this comes from ensuring alignment with our customers throughout their product lifecycle. We have enabled hundreds of small OEMs to commercialize a wide variety of medtech implants and instruments by providing a wide variety of services, including assembly, packaging, sterilization, sterilization validation, packaging testing, reprocessing, and distribution. We take pride in our one-stop shop capabilities, which allow us to effectively support our OEM and CM customers as they grow.
With this disruption, a great number of lessons were learned that could be taken forward and implemented into standard business practice. One example of this involves the relationships between outsourcing service providers and their medical device OEM customers. These partnerships have likely never faced a challenge as significant as what was encountered during the more than two years of the pandemic (or at least, as dramatic as the first few months of the pandemic). Still today, there are forces causing stress, including supply chain issues, raw material and labor shortages, and overwhelming demand for products.
As a result of this turbulence, there were a number of factors worth covering with this year’s group of participants in the annual MPO outsourcing feature. While not all respondents offered an answer to every question, this year’s response marks one of the most robust collection of replies on the queries presented.
As such, I’d like to take a moment to thank each person who shared feedback for this feature. That list of participants includes:
- Tim Binder, Director of Supply Chain, Cirtec Medical Corp.
- Jennifer Bolt, Executive Vice President, Global Operations and ESG, Integer
- Randy Clark, President of Health Solutions, Flex
- Melissa Green, Head of Global Marketing—Healthcare, TekniPlex
- Judy Huang, CEO, 889 Global Solutions Ltd.
- Mike Kaiser, VP, Business Operations, Donatelle Plastics Inc.
- Gaurav Kapoor, Chief Technical Officer, Spectrum Plastics Group
- James W. LaVersa, VP, Business Development, Harmac Medical Products Inc.
- Vince Marino, President and Founder, Precision Concepts Group LLC
- John Nino, CEO, Life Science Outsourcing Inc.
- Rich Warren, Chief Commercial Officer, MMT Inc.
Sean Fenske: Overall, how has your company responded to the pandemic to ensure critical components still got to OEMs?
Tim Binder: Cirtec Medical took several steps to reduce the impacts of the pandemic on our employees as the key to our success is a healthy and happy workforce. In addition to standard masking, social distancing, and increased cleaning practices, Cirtec adopted daily employee screening early on to prevent any potential spread within our plants and offices. We further adapted daily working conditions, moving as many functions to remote work as possible, staggering shift changes to reduce traffic in high-risk areas, such as entrances, and adapted our production lines to space employees out where possible. While staffing availability has been a challenge at times, to date, we have had no major work stoppages in any plant or production line.
Jennifer Bolt: Throughout the pandemic, our top priority was—and continues to be—protecting the health and safety of our associates. Integer’s Pandemic Team, including 90-plus professionals across the company, continues to monitor local and global guidance to ensure we have the necessary policies, processes, tools, and rigor in place to keep our manufacturing facilities safe and open for business, so we can continue to deliver the critical devices and components our customers’ patients count on to improve, sustain, and save lives.
We partnered closely with customers to better forecast demand and adjust production accordingly, and with suppliers to help them keep their doors open and deliver on their commitments so we could deliver for our customers.
Randy Clark: We are very proud of how Flex Health Solutions responded to challenges of the pandemic. Early on during 2020, we learned we needed to be nimbler and more collaborative with our customers to get critical COVID medical equipment products into the marketplace. The challenges with travel, training, and getting critical parts were all hurdles we had to overcome. We learned we could leverage subject matter experts around the globe to reduce historical timelines and utilize virtual meetings to effectively support launches.
In 2021, we continued to support many customer ramps critical to new medical product offerings in the marketplace. This included 18 large-scale launches for products from diagnostic and imaging equipment to diabetes care, respiratory devices, patient monitoring, laboratory equipment, drug delivery systems, and surgical devices. Additionally, to ensure global supply continuity, we partnered with customers to add dual-source capability by leveraging Flex-to-Flex site regional capabilities.
Melissa Green: Throughout the pandemic, the safety and health of our employees has remained paramount. At its inception, we immediately instituted work-from-home arrangements for all employees not involved in product manufacturing and shipment. We implemented daily health screens and additional personal protective equipment for our in-plant workforce, and indefinitely suspended any non-essential visits to all manufacturing facilities.
From there, increased communication, coordination, and collaboration both internally (i.e., procurement, sales, and operations) and externally (i.e., customers and suppliers) were all key to minimizing any supply disruption. Strategic inventory stockpiling of either raw materials or finished goods also aided in our ability to consistently supply customers.
On the medical compounding and tubing aspects of our business, our global footprint was both a strategic advantage to us and a benefit to our customers. With six extrusion and four compounding facilities worldwide, we helped customers validate products from different facilities around the globe to limit shipping and supply chain issues. Our vertical integration with in-house compounding and tubing manufacturing provided further control over our overall supply chain.
Judy Huang: Our facilities are based in China and Asia, where COVID has been well controlled fairly well since March of 2020. Since then, we have not experienced too much interruption of our supply base. In fact, some customers have grown during this time due to rapidly increased needs. Understandably, others had to cut back on ordering, but that was due more to a change of material or phasing out of product lines. We’ve been a consistent supplier for our clients and have helped them to gain market share as they were able to maintain the necessary inventory.
Mike Kaiser: Donatelle was able to respond quickly at the start of the pandemic to have most of our non-manufacturing and support personnel work from home. Appropriate social distancing practices and mandatory mask wearing were also quickly implemented on the manufacturing floor. We also increased inventory levels for personal protective equipment in an effort to stay ahead of pending supply shortages. This allowed us to maintain a stable workforce and continuity of manufacturing without any manufacturing shutdowns. We also focused on securing critical purchased components to ensure continuity of supply.
Gaurav Kapoor: The global pandemic highlighted several new areas for improvement across multiple industries and functions. Spectrum’s number one priority throughout the pandemic was the health and safety of our teammates. Several policies and procedures were implemented early in the pandemic to not only protect our team, but also to secure the supply chain for our OEM partners with the ultimate goal of protecting patients worldwide. Spectrum immediately formed a Rapid Response Team focused on these goals in March 2020, a team that still drives our global response today. A key facet of our strategy has been open and clear communication with our teammates, our suppliers, and our customers.
James W. LaVersa, Jr.: We remained operational throughout the pandemic because we kept our facilities largely COVID-free by taking early steps to protect our most valuable assets: our people. We diversified our product range to support customers with lifesaving COVID products and manufactured surgical masks to protect frontline workers. In one case, we ramped up a new product from initial outreach to shipping quality batches in just 61 days.
As the pandemic exposed some vulnerabilities, we worked with our critical component suppliers to balance demand across multiple customers and secure this vital stock. We ensured the continuity of supply most critical to patient care and healthcare worker protection across the globe. It hasn’t been easy, but our outstanding supply chain team has done an amazing job mitigating most of our challenges.
Vince Marino: Precision Concepts has improved communication channels with both our supplier and customer base to mitigate problematic situations in these uncertain times. We have extended blanket orders to go far beyond traditional lead times for raw materials, purchased components, services, and more. In addition, we removed risk by bringing on and qualifying alternate suppliers to use as backups. On the personnel side of the business, Precision Concepts implemented mandatory daily temperature checks, case tracking throughout all facilities, daily workstation cleanings, required visitor screening, and even offered on-site vaccinations. This was all done to ensure the health and safety of all employees in our facilities. To attract and retain employees during the pandemic, we instituted an employee referral program that was wildly successful. We also increased our base wage rates and rates for our long-term employees.
John Nino: Most of our customers supply LSO with materials and we all had a fair share of challenges related to the global supply chain issues. We had to address those per customer because each was different from the next. Large global customers that had well-developed procurement groups had more success than small start-ups and LSO had been involved in both scenarios. For the large customers, LSO had made arrangements to receive multiple months of supply to ensure a consistent flow. Smaller customers are still struggling, and LSO offers them similar conditions according to their ability to procure.
Rich Warren: MMT’s leadership team anticipated potential constraints very early in the pandemic and took actions to minimize the impacts through increasing safety stock levels and standing up second sources on critical components. Our TotalCare program brings customers into service-level agreements with forward stocking of critical spares to ensure uptime.
Fenske: Were there lessons learned (i.e., best practices) that you will be able to carry forward post-pandemic?
Green: The increased communication, coordination, and collaboration both internally and externally is a best practice that remains as we (hopefully) have the pandemic’s end in sight. Processes such as sales, operations, and inventory planning will continue. Testing the robustness of our business continuity plans and looking for further opportunities to leverage our global manufacturing footprint will also continue, as we help our customers validate their supply from multiple locations around the world.
Huang: COVID has illustrated resiliency in the supply chain is a major factor. As such, we have asked clients to be more bold and hold more in inventory, or place a blanket PO [purchase order] with us. Further, as raw material supply fluctuates, this strategy is able to help them with stabilized pricing. Finally, 889 will hold approximately one to two months of inventory as safety stock for customers.
Kaiser: Many of our systems were already set up as paperless, which allowed for an easier transition to a remote work environment. These include most of our manufacturing, quality, process monitoring, planning/purchasing, and other business systems. Internal and external communication moved to virtual meetings and included the need to expand our video conferencing capabilities, which we were quickly able to accomplish. Those systems have now become the norm in our day-to-day interactions.
Kapoor: Global pandemics were not in our playbook historically, but they are now. Although communication and transparency have been hallmarks of Spectrum’s business model, these attributes took on a renewed and outsized role during the pandemic. The restriction of on-site visits caused engineer-to-engineer conversations to suffer—these are the bedrock of research and development as well as the critical relationship building between firms. The utilization of technology to replace these interactions was critical in keeping our industry moving forward. Beyond communication, the pandemic exposed weaknesses in supply chains across the industry. Single-source suppliers that were not built to navigate something as crippling as a global shutdown hobbled critical patient products. Having a well-developed business recovery plan, with built-in redundancies and narrowing the list of primary suppliers, are the biggest takeaways from the pandemic for Spectrum.
LaVersa: Yes. As a global CDMO [contract development and manufacturing organization] servicing a broad spectrum of medtech segments, we were exposed due to a small number of OEM customers having sole-sourcing contracts on critical components. We have now adopted a multi-layer, risk-mitigation process to focus on root-cause challenges and early indicators of supply chain risks through regular communication with suppliers and customers to deal with potential vulnerabilities.
Marino: Open and clear communication. In the business world, many people like to keep their cards close to their chest. Precision Concepts has found that being upfront and candid with our customers has produced the best results. Even in problematic situations, we are able to work through the issues together, rather than the customer finding out about a problem when it is too late to make a change. We also learned a referral program works exponentially better than recruiters in terms of retention, so our program will remain active even as the pandemic winds down. In addition, we will be continuing to source and qualify multiple suppliers to ensure backups are in place for any critical materials.
Nino: Most of the “lessons learned” have to do with putting the safety of people first and focusing on adaptability. Putting people first was a super big challenge in that it cost money to support employees and not be able to meet customer requirements, which impacted revenue streams. Not all companies had the luxury of supporting their teams, and as such, people lost their jobs. As a result, now that people are re-entering the workforce, I think they are looking for those organizations that will be better positioned to support the employees if we come into this type of situation in the future. I also think our previous notions of all work needing to be done in an office, with all employees together, are no longer viable. If job functions can be done remotely, we must be willing to support this work model.
Warren: At the beginning of the pandemic, MMT pivoted to operate 80 percent remote within 24 hours. Being a nimble, fast-moving company, we relied heavily on impromptu meetings with our customers and colleagues to evaluate and change course to meet their project goals. We invested in video and collaboration systems; our interactions with our customers changed, focusing on digital presence, and delivering clear messages. We leaned heavily on previously developed Industry 4.0 support systems to help our customers manage their production equipment in this new environment. Further, we deployed more geographic resources as travel was restricted, which changed the landscape on how we serviced our customers.
Fenske: How did your communication with customers/OEMs change during the pandemic and did you find ways to improve communication that you will continue to use going forward?
Binder: Regular monthly and quarterly in-person business reviews went remote with the pandemic. Cirtec has streamlined a regular review process to allow our customers the transparency of an onsite visit, while negating the need for travel. We have found that for existing customers, the remote reviews are effective. Onsite visits have picked up in Q1 2022, however, some customers have elected to stay remote.
Green: The importance of open lines of communication with customers increased during the pandemic. From raw material supplies to freight challenges, we were all living through the challenges together—meaning clear, frequent, and frank conversations became even more crucial to ensure our customers’ needs were continuously met.
Huang: We conducted more frequent check-ins, initially in 2020. There were a good number of Zoom and phone calls. Then, closer to the later part of 2021, we returned to in-person visits with customers who were open to receiving us (with safety protocols being observed, of course). During these visits, we were able to keep them abreast of our anticipated raw material outlook, logistics congestion, fluctuation of pricing, and recommendations to best navigate these situations.
Kaiser: All of our customer communication moved to virtual meetings, including the use of various video conferencing systems. The transition allowed us to maintain the frequency of customer communication, and everyone was able to adapt quickly. It’s difficult, however, to replace the effectiveness of in-person meetings with our local customers when you need to look at parts or processes and make real time decisions.
Kapoor: The utilization of video conferencing within Spectrum skyrocketed as a result of the pandemic. The process initially posed some challenges but soon became the norm. Over time, the lack of face-to-face interaction, both within Spectrum and with our customers, became a detriment. Spectrum utilized more advanced technical solutions to enhance the virtual engagement. Solutions such as lens-based Augmented Reality system—this allows individuals around the globe to see what an engineer at a specific site sees, which enables co-development and communication. Spectrum is fully utilizing these enhanced tools in our day-to-day operations moving forward.
LaVersa: Our frequency of communication certainly increased. It was paramount during the pandemic and continues today. Harmac remained transparent with our partners—customers and suppliers alike—to mitigate risks and maintain delivery. We shared innovations and collaboration to ensure any disruption was minimal and balanced. Some of our elective surgery products experienced lower demand due to government mandates, while hospital staff focused on managing the high demand COVID patients fueled.
We will continue to follow our rigorous sales and operations planning process with each customer. We’ll assess the potential demand volatility in their near- and long-term forecasts and evaluate our manufacturing capacity and raw material network risks.
Marino: As I’m sure most businesses will report, our use of virtual tools to communicate with customers skyrocketed. Video meetings became incredibly commonplace, where they were previously just a phone call or email. This allowed us to introduce many more members of our organization to our customers who may not have had the opportunity to meet face-to-face in the past. Having this face-to-face access to our customers has significantly improved our relationships.
Warren: Our TotalCare service customers benefited by having a relationship with our team of experts that could be deployed worldwide 24/7 via various remote diagnostic and collaborative systems. We have been installing communication nodes in our equipment since 2006. This enables our team to remotely diagnose system problems. These systems are paramount to reduce downtime and keep production facilities running with reduced resources in today’s global climate. For those customers not leveraging these technologies and services, it was a rush to get them up to speed and integrated into their production methodologies. One challenge the industry faces is the lack of seasoned technicians, as many of our customers rely heavily on outside resources such as the equipment OEM to close that gap in application knowledge and support. Recognizing this shift, we have invested and continue to invest heavily in our support team and expand our offerings within our TotalCare system.
Fenske: Have you had OEM customers take part in virtual tours, audits, inspections, or another such activity that would have normally taken place in person? If so, can you share the highlights of your experience (what worked, challenges, benefits, etc.)?
Binder: Cirtec Medical has hosted several remote audits and has developed a successful process. We have developed a streamlined method of document sharing via online applications coupled with video services. We walk the customers and/or auditors through our plants and facilities using video conferencing or even FaceTime applications to ensure the “visitor” can see everything. We have found remote audits to be effective and efficient by eliminating the time and cost of travel.
Green: Necessity is the mother of invention, and with travel limited on our customers’ ends as well, virtual quality audits were regularly conducted across our plants. Upfront planning was an important aspect of successful execution.
Huang: During COVID, we started to work with India vendors and have hired our own local inspection team. We historically conducted live audits but like many supplier companies, we’ve relied on virtual tours, Zoom conversations, and audits conducted by our staff members on the ground. Our OEM clients had not asked to perform an audit during this time, but they did accept our internal audit information.
Kaiser: Pre-pandemic, all customer/OEM audits and ISO re-certifications were completed in person. A large number of these were performed virtually over the last two years with minimal prep work needed. Having the electronic systems already available—including CAPA, MRB, SPC, ECO, and manufacturing lot traceability—we realized very good success. Prior to the pandemic, we were able to access all the required information in a conference room setting. Having robust systems already in place allowed for a seamless transition to virtual audits.
When there was no travel allowed, we recognized the need to offer a virtual presentation of our manufacturing capabilities and facility. With the help of a professional videography company, we produced a video that is the best alternative to showing our capabilities through an in-person tour. The video is now available on our website.
Kapoor: Our standard approach since 2020 has been virtual tours and audits. Although these offer a glimpse into our operations, they still only offer a glimpse. The value of an onsite tour or an onsite audit cannot be fully offset in a virtual setting. The true benefit of an in-person visit is the opportunity to interact with the entire team at a Spectrum facility, to feel their passion for the products we make, and to immerse in the inner workings of our facilities. As we begin to get closer to the model of 2019, I believe we will find a middle ground between what can be done virtually and should be done in person.
LaVersa: Yes. We conducted a number of quality audits and customer tours virtually. It provided us the opportunity to highlight our scale and capabilities across our global footprint and demonstrate, in real-time, the strengths of our lean manufacturing and automation without customers having to travel. In our opinion, nothing can replace the true value of a face-to-face meeting on the manufacturing floor, but overall, the virtual tours worked well. They were the catalyst for a number of new contracts during the pandemic and continue today. Also, a significant number of customer quality audits were conducted remotely/virtually without issue or findings.
Marino: Due to various travel restrictions, virtual tours became common place for us. We found them to be very helpful in providing our customers a glimpse into our facilities. One challenge we found was the importance of updating the tour videos to include new equipment and facilities as we continued to expand during the pandemic.
Nino: Yes. We have participated in numerous virtual audits and facility tours as a result of the pandemic. This provides a somewhat effective alternative, but has limitations. Limited views shared through video conferencing can provide a different perspective versus being onsite. I believe onsite audits and visits are more efficient and effective due to the close connection with the auditor, customer, or inspector.
Warren: MMT’s operating units had to move from onsite Factory Acceptance Testing (FAT) to remote demonstrations due to customer restrictions on travel—as well as our own internal policy—to maintain the highest levels of safety. The FATs we have performed through video and Zoom proved very successful; in fact, some customers will continue to utilize this service.
Fenske: What has been the impact to your company without participating in/attending live (i.e., in-person) tradeshows?
Green: Lead generation had previously relied on tradeshow participation, and with in-person events halted, alternate strategies were implemented. The pandemic forced us to move deeper into using digital technology to our advantage, and is now giving us the platform to become more creative about how we communicate to the market moving forward. What started as a necessary backup plan has led to ways of approaching things differently, and in ways that may not have fit pre-pandemic.
Content creation, such as white papers, case studies, and webinars, also became a heightened focus. Targeted email blasts and social media campaigns also increased, as did database research to find targeted audiences with which to engage.
TekniPlex also wanted to take the opportunity to go beyond hosting standard webinars. We employed a “Mytaverse” platform to host a unique, interactive, immersive experience for our customers, including a virtual tradeshow exhibit hall and conference auditorium. This was a first-of-its-kind launch in the healthcare space.
Overall, our creativity using different and multiple tactics increased lead generation, and further strengthened our position as a thought leader in the healthcare space.
Huang: We decided to do more local, regional shows in 2021, but during 2020, we hadn’t participated in any live events. This impacted our ability to find new customers at a show, but we’ve kept our existing clients well supplied and satisfied. The lack of live events also affected our clients’ ability to sell their products and, for some, they had to delay releasing orders due to shortages within their sales staff.
Kaiser: Historically, Donatelle has participated in a variety of conferences and tradeshows—both large and small. It’s difficult to replace the impromptu face-to-face interactions and touchpoints with new prospects and existing customers that take place during tradeshows. We were very successful by increasing web-based activities over the past two years. They generated new program leads that would potentially be uncovered during tradeshows.
Kapoor: The cancelling of multiple tradeshows has led to more digital activities to engage with new and existing customers. We placed a prioritized focus on virtual site tours, technical webinars, virtual lunch & learns, and most notably, our Spectrum Connect week—a virtual engineering week where we created a large amount of educational content and fun activities for our customers to access online.
LaVersa: Overall, virtual trade shows have been underwhelming and we don’t see a future for them, post-pandemic. We look forward to returning to face-to-face meetings with new and existing customers and suppliers at major tradeshows across the globe.
Marino: While we have missed being at the trade shows (great place to network with existing customers), the impact to our business has been minimal. We have been very fortunate to have continued our growth without having access to tradeshows. Our company has focused on long-term relationships that allowed us to create a wealth of customers we work with regularly. We have been fortunate to grow our business through word-of-mouth during this time, but we are very much looking forward to being back in-person to meet new customers.
Nino: Being unable to attend tradeshows during the pandemic significantly reduced the number of in-person customer meetings we typically attend over the course of a year. This, in turn, has limited cross-sell opportunities with existing customers and reduced the number of new customer engagements. This change caused us to put more focus on our website enhancements and deploy a virtual sales, marketing, and advertising strategy. Publications such as MPO and ODT magazine have been incredibly supportive in helping us to establish a virtual presence in the markets we serve.
Warren: The lack of in-person tradeshows impacted our ability to showcase processes and solutions; however, we were able to pivot and expanded our engagement via pay-per-click, customer referrals, and our best-in-class reputation. Our view remains that it is hard to substitute for live events where we can discuss the customer’s needs and the complex engineering challenges of their projects. As such, MMT made a swift return to trade shows as restrictions were lifted to allow us to reconnect with our partners.
Fenske: Some have speculated there may be some nearshoring/reshoring of medical device manufacturing in the coming years (i.e., back to the North American region). Do you agree/disagree/unsure? Explain.
Binder: I disagree. The call to increase control by nearshoring is common during any supply disruption, however, we have found a resilient supply chain to be the best form of controlled supply for our customers. Having manufacturing capacity domestically and internationally has allowed Cirtec to continue servicing customers throughout the pandemic. The benefit for our customer is one supplier to manage, while Cirtec takes on the responsibility of developing a reliable supply chain.
Green: Our global team has slightly different opinions on nearshoring. Our European team has received feedback that customers are exploring their options regarding their global manufacturing footprint, but so far, there is no strong evidence that anything has changed.
Among our North American customers, there is slightly more activity, as some have made plans to move back to the United States or Mexico to shorten their supply chains. So it’s a mixed bag, and location isn’t the only factor involved in customers’ decision-making. Business continuity plans and supplier redundancy also factor into the equation.
Huang: This is what is heard in public and from politicians, but when you consider raw material sourcing, labor rates, and the lack of available work force, this strategy becomes much more difficult. I think a dual-source method is best, both domestic and international.
Kaiser: There have been a number of unforeseen disruptions in supply chains due to offshore supply of components and assemblies. Risk mitigation and potential dual sourcing for critical components will most likely be a priority moving forward.
Kapoor: Perhaps the biggest challenge experienced throughout the pandemic (and continuing today) is the reliance on a global supply chain. I would agree with the sentiment that the coming years will bear a nearshoring/reshoring of critical products within the medical device supply chain. The impact of country-based shutdowns coupled with long transit times has exposed a significant weakness in how we manage our healthcare system. Diversified and localized manufacturing based on region should grow because of the lessons learned.
LaVersa: We totally agree. In fact, we’ve benefited from active transfer projects with a number of customers moving products back from Asian strongholds in China, Malaysia, and others. Our customers want to achieve higher quality standards and yields, and streamline their distribution channels to eliminate time-to-market delays. Also, supply chain challenges associated with sea freight and labor at shipping ports has compounded their urgency. Harmac has proven to be extremely competitive with our sites in Buffalo, N.Y., and Tijuana, Mexico. We’re providing customers with higher quality, greater reliability, and value engineering by utilizing automation to reduce labor. We’re also expanding our Tijuana location by adding a second facility that’s more than 100,000 square feet in size to support our growth trajectory.
Marino: It does seem to be a trend we are seeing on some of the more critical path products. All of our manufacturing is located in the Americas, and we have seen several of our customers look to us for integrated solutions that will reduce the overall lead times and provide a level of supply chain security.
Nino: I agree that pandemic-related supply chain issues have caused LSO and many of our customers to rethink elements of our strategic supply chain. Contingencies must now be considered across the supply chain. The geographic origin of the supply must be taken into consideration as part of a proactive risk mitigation strategy. Onshore “backup” suppliers should be put in place wherever it’s feasible to do so.
Warren: In MMT’s experience, the feedback from our customers is more focused on securing the supply chain—supply chain integrity is more important than the location. Through MMT’s TotalCare program, we have been able to support our global customer base through managed inventories of spares and consumables at our forward stocking locations (FSL).
Fenske: With shortages becoming an issue for certain types of products during the pandemic, have OEMs approached you about offering warehousing or logistics services? If you already offered these types of service, are OEMs seeking to increase their usage of them?
Green: Inventory planning programs were a part of our supply strategy pre-pandemic. We will continue to collaborate with our customers to design creative supply strategies, which may or may not include inventory management programs. This is typically a very customized process, which means matching the customer to the supply chain solution that best suits its needs.
Huang: Yes. We have always handled the logistics as we quote landed duty paid pricing, and have always offered a blanket PO with warehousing options. Recently, customers are placing longer blanket POs.
Kapoor: We haven’t seen a noticeable change in these requests, as this is not a primary part of our business. However, we have seen more discussions around safety stock, business continuity planning, and VMI (vendor-managed inventory) to mutually de-risk future supply chain issues.
Marino: Yes, they have. The use of the service has increased, but this is due to just-in-time deliveries being extended further and further out. With 20-, 30-, and 40-week lead times becoming the norm, we had to begin ordering more material at one time than we have in previous years. As such, our warehouse space consumption has increased considerably.
Nino: Yes. For those customers that utilize LSO’s distribution service as part of our full-service contract manufacturing service offerings, we are seeing increased requirements in safety stock levels. Providing this service to our customers provides another level of supply chain protection to help ensure their continuity of supply.
Warren: MMT’s TotalCare program pre-dated the pandemic and through this, we have been able to support our global customer base through managed inventories of spares and consumables at our plants and FSLs. We see strong demand from our customers for this service to build secure supply chains and drive production continuity.
Fenske: Given the fallout from the pandemic, are international manufacturing locations as attractive as they were before the pandemic? Why or why not?
Binder: International and alternate manufacturing locations remain attractive and will be an important part of any resilient supply chain going forward. The pandemic showed borders and boundaries are not safety nets, however, impacts of a viral infection can present timing differences. While we have seen impacts in all our locations, our ability to shift production between domestic and international production has helped mitigate regional impacts. Our Costa Rica facility was able to increase production when our domestic facilities were seeing the largest impacts from the pandemic and the reverse was true when Costa Rica saw increased infection rates. Having geographic diversity qualified into our supply chains continues to be a vital part of Cirtec’s strategy.
Bolt: Yes. The medical device market is global and Integer has supported and will continue to support the global development and manufacturing needs of our customers. Last September, we announced the expansion of our operations in Galway, Ireland, with the construction of a new Medical Device Innovation and Manufacturing facility that will meet increased demand for regional research, development, and manufacturing capabilities as well as capacity for catheters and delivery systems.
Our international manufacturing and development footprint enables us to be more responsive to our customers’ needs, recruit a culturally diverse and talented workforce, and identify and adopt global best practices. All of these factors contribute to us being our customers’ partner of choice.
Clark: We see the attractiveness of international manufacturing locations continuing as we all adjust to the fallout of COVID-19. The supply chain challenges that were created by the pandemic were felt around the globe and required regional solutions to meet market demand. The end-customer needs for medical products were not localized; we’ve had many customers working with Flex Health Solutions to develop manufacturing solutions in our international locations. Additionally, some customers have requested that we create multi-region solutions to ensure business continuity for their products. These requests span our manufacturing offerings in North America, Europe, Latin America, and Asia.
Green: Having a multi-pronged approach to business continuity will always stay in vogue, and international manufacturing locations are typically part of that plan. In many cases, our customers are producing their products in multiple geographies, and value suppliers with local supply options.
From a risk mitigation standpoint, customers are seeking validation of existing products produced in another manufacturing facility—with the caveat that this secondary facility is located in a different geography. This scenario favors suppliers with a global footprint.
Kapoor: International manufacturing locations will always be attractive for multiple reasons including proximity to customer locations and access to labor. Spectrum is co-located in medical device hubs internationally in the United States, Mexico, Ireland, Costa Rica, and Malaysia. These sites serve OEMs within their region, a trend that will grow in the coming years.
LaVersa: We still believe that customers prefer a supplier with a global footprint. During the second half of 2020 and all of 2021, demand surges revealed the difficulty in providing a sufficient supply of critical medical components, including base resins, semiconductors, and packaging. For this reason, debates on increasing the resilience and redundancy of manufacturing sites to ensure continuity have gained importance. Our multiple international locations with similar capabilities have proven attractive and necessary. Our headquarters in Buffalo is complemented by our European location in Castlerea, Ireland and our Tijuana operation.
We’re supporting customers by manufacturing the same products at multiple sites for some, and different products at different sites for others. Our mature, proven 21 CFR Part 11 Compliant quality system we share across all three sites drives this continuity and customer confidence. We’ve proven we can be an effective partner to many Fortune 500 customers, despite not having any Asian manufacturing, which is a clear advantage today.
Marino: No, mainly due to access to travel. While virtual tools helped connect us in difficult times, they were not a panacea for traveling and meeting in-person. Our business typically starts with our customers developing a product. As such, facilities tours that allow them to better understand our capabilities are commonplace. Having to put these tours on hold for the duration of the pandemic cost our customers the chance to visit the facilities in-person.
Nino: Difficulties in getting components and sub-assemblies from overseas and the interruption in supply from offshore suppliers are causing the entire medtech industry to reconsider onshore alternatives as part of a proactive risk mitigation strategy.
Warren: MMT’s customer base is global and expects support throughout the world. We continue to support this demand through our international subsidiaries and expect to continue to build our global footprint in support of this.
Fenske: Now that we are almost two years removed from the start of the pandemic, how have you altered your recovery plans to address a future crisis?
Binder: Cirtec’s recovery plans have always included reliance on our supply base as well as internal capacities. The pandemic has reassured us that having multiple manufacturing sites is vital to our success. Renewed focus on supply redundancy will help inform our customers of opportunities to protect supply through qualification of Cirtec as an internally multisource CMO.
Green: The pandemic actually proved the integrity of our existing supply chains, and further solidified our relationships with key suppliers. We will continue to look for opportunities to expand further.
Kaiser: Lead times for capital equipment and some purchased items have been extending out, requiring more focus on future business planning. Donatelle has placed greater focus on program forecasting and order visibility from our OEM customers to allow added or increased safety stocks for longer lead-time and more critical items.
Kapoor: Absolutely. Aside from our recovery plans encompassing pandemic policies now, we are also aggressively working to strengthen our supply chain with preferred and alternate vendors on behalf of our customers. Qualifying alternate vendors and materials is critical to providing maximum flexibility in future crises and these discussions are happening earlier in customer programs.
Marino: We have become hyper aware of our supply chain. The challenges we faced throughout the course of the pandemic have caused us to create multi-level backup plans for all jobs in-house. Speed and agility are of paramount importance during these times as every day brings new challenges. We have also added improved communication channels between facilities to ensure we can function throughout any crisis.
Nino: Even though some pandemic-driven supply chain issues have been resolved, others have not. We are therefore deploying a corporate initiative focused on continuously improving our supply chain as part of our 2022 operating plan. This includes tactics associated with stocking levels, continuous inventory analysis, and better utilization of ERP systems. We will be changing to a much more capable ERP system in 2022 in part to better ensure our continuity of supply in the future.
Fenske: While EtO sterilization concerns were put on the back burner during the pandemic, how do you expect this issue to affect your company going forward and are you exploring alternatives for new projects?
Green: TekniPlex is a leading materials science company. With that being said, we seek to utilize materials that can, in many cases, be sterilized with alternative methods. We maintain close relationships with our customers to understand their current and future requirements regarding sterilization. Where needed, we will innovate to meet future needs.
Kapoor: We support customer projects around a variety of sterilization methods (determined by our customers), but we do not have internal EtO sterilization operations. We continue to support customer projects and work with subcontracted sterilizers to address changes in alternative sterilization methods, including comparison studies and revalidation activities.
Marino: EtO sterilization is not a large portion of our business currently, so we do not anticipate much of an impact to our current production. However, we are seeing the requirement resurface in the new programs we are quoting and are actively working with our suppliers to plan for the increased demand that is on the horizon.
Nino: EtO sterilization will always have significant impacts on the industry at large. We actively keep our ear to the ground, and we expect larger sterilizers to prioritize high-volume OEMs as they strive to meet new industry standards of EtO reduction, leaving medium- to small-volume clients hugely neglected. As a result, we have been working hard to establish relationships with these larger sterilizers so we can bridge the gap that will affect said medium- to small-volume clients. We can now leverage our experience, in-house capabilities, and relationships with these larger sterilizers to complete new projects with similar timelines as previously expected. Our work with these two groups allows us to model the path they choose, adjust to these changes in the industry, and keep us ahead in terms of future regulatory changes that may affect our clients.
Fenske: Another topic put on hold during the pandemic was corporate social responsibility. Post-pandemic, will this gain renewed attention within your company or are there other higher priority items ahead of it?
Binder: As a CMO, Cirtec remains committed to the requirements and expectations of our customers. Cirtec holds a high set of standards for our organization and our supply base to ensure we present an ethical and agile supply option at all times.
Bolt: Integer never put corporate responsibility on hold during the pandemic, continuing to prioritize and advance our commitment. A few examples include expanding our diversity and inclusion program, with more than 150 events and initiatives driven by our associates at the site level globally in 2021. Our associates around the world additionally maintained their commitment to giving back to our local communities through a number of creative, safe, socially-distanced initiatives benefitting local nonprofit organizations.
Green: For TekniPlex, corporate social responsibility gained higher priority as the pandemic wore on. For example, our “Tekni Gives” program was born as a result of the pandemic. A program originally designed to help employees and their families who struggled financially due to the pandemic, the program has morphed into helping people and communities in need, both near and far.
Our Diversity, Equity, and Inclusion (DEI) council also has progressed over the last two years, and is a strong focus within our company. In addition, environmental programs to ensure TekniPlex is doing its part to be more sustainable will continue, and become more prominent “post” pandemic.
Kaiser: Corporate social responsibility has always been a priority at Donatelle. Our efforts did not waver over the past two years, and Donatelle expects to maintain that priority going forward.
Kapoor: Corporate social responsibility [CSR], as part of our ESG (environmental, social & governance) platform, actually became a stronger focus for Spectrum during the pandemic. We firmly believe in the tenets of CSR and have rolled out several new policies in this area that include employee volunteer time and company donations in the areas of healthcare, education, and community—all areas in greater need as a result of the pandemic. Our website, spectrumplastics.com has a link to all our CSR initiatives and policies.
LaVersa: At Harmac, not only did we not put social responsibility on hold, we enhanced it. Our vision statement reads, “Changing the lives of patients, employees, and the communities in which we work.” During the pandemic, this held even greater significance. Patient health had never been more at stake. Our employees’ safety and that of their families was paramount—and critical if we were to remain in operation. And the communities in which we worked were all dealing with unprecedented levels of need and crises.
For example, we delivered PPE to hospitals across our regions. We made healthy food deliveries to those who were house bound or experiencing tough financial times. We partnered with K-12 educators to deliver lessons via TV/remotely. We even turned a cooking school into a food pantry led by our Ireland team.
We continued to partner with area businesses, organizations, and municipalities to make a difference in our neighbors’ everyday lives. Each of our facilities has unique cultures, customs, and opportunities to engage with its community. We go beyond charitable donations and volunteer work, and instead look for opportunities to take leadership roles in transforming the communities we call home.
Marino: At Precision Concepts, corporate social responsibility is never put on hold. We understand we impact the community around us, and we strive to improve the lives of our employees and the members of our community. We actively fundraise for cancer research, veteran’s affairs, and local charities. Also, we are introducing more educational initiatives for our employees to take advantage of and better themselves.
Nino: LSO’s post-pandemic “corporate social responsibility” has developed into a new global governance model to promote the ability to reach collective decisions on topics surrounding this unprecedented situation. The COVID-19 crisis has challenged LSO regarding our commitment to ethical business conduct and “corporate social responsibility” factors for our business. For instance, LSO has purchased personal protective equipment, hand sanitizer, respirators, and testing kits to mitigate our risk in the workplace. As a result of the COVID-19 pandemic and the impact of new challenges to the medical device manufacturing industry, LSO adjusted our operations to overcome obstacles and eliminate redundancies. LSO’s post-pandemic accomplishment over fighting COVID-19 will build our company’s “corporate social responsibility” and provide a remarkable relationship with our community and, most importantly, our employees. At LSO, our number one priority is to keep our employees safe and minimize risk for the organization. As we navigate moving past this pandemic, LSO’s priority will be just that.
Warren: At MMT, CSR has never dropped from the agenda. During the pandemic, of course, resources shifted to the responsibility for our employees, community, and continuing the supply of lifesaving devices. But, even before the end of the pandemic, MMT deployed a clear vision of both our commitment to the environment in the form of landfill reduction, and also our commitment to be a diverse and inclusive organization.
Fenske: Sustainability was gaining momentum pre-pandemic and will undoubtedly return to prominence. How is your company addressing this trend?
Binder: Just as with the aforementioned CSR, we are committed to the requirements and expectations of our customers. Each customer’s individual requirements vary for ESG. Cirtec actively participates in several sustainability programs and initiatives as directed by our customer’s individual requirements.
Clark: Our vision is to be the most trusted global technology, supply chain, and manufacturing solutions partner. Sustainability is essential to making this vision a reality.
Building on nearly 20 years of sustainability investment and experience, we launched our 2030 strategy and targets, as well as joined the Science Based Targets initiative (SBTi)—the global movement of leading companies working to mitigate climate change—in 2021. As a member, we have adopted greenhouse gas emissions reduction targets necessary to meet the Paris Agreement’s goal of limiting global warming to 1.5°C above pre-industrial levels.
Our commitments span the value chain and align to the U.N. Global Compact and Sustainable Development Goals. As part of our sustainability strategy, we are committed to significantly lowering emissions through science-based targets in partnership with customers and suppliers; investing in our communities; advancing a safe, inclusive, and respectful work environment; and driving ESG-compliant practices with transparency.
Another example is our circular economy focus. We are now creating a design for environment (DfE) framework to incorporate into product development. Several customers have already asked us to run this innovative new tool on their products. It covers the gamut of design for durability, standardization, and compatibility; ease of maintenance and repair; upgradability and adaptability; disassembly; and reassembly. For medical equipment that can be refurbished under regulatory guidelines, design for circularity makes it more cost-effective, whether it’s the entire framework or giving the parts within a new life elsewhere, as in batteries and PCBAs.
Another foundational element of our circular economy approach is conducting an analysis of customers’ products to estimate the environmental impact of CO2 emission, energy, and water consumption. This helps our customers define a baseline of their environmental impact and, together, we can evaluate the right circular economy solutions to help work toward sustainability goals. We used this method when designing a customizable autoinjector platform recently introduced to the market. Our design team evaluated CO2 emissions, energy, and water consumption for each component of the injector to ensure they were minimized while still providing a robust drug delivery system.
Green: We have always been mindful of the importance of our responsibilities from an environmental perspective, and strived to act responsibly in this regard. That said, sustainability in the healthcare arena is increasingly coming to the front of everyone’s minds, especially for single-use disposable devices and sterile packaging. Going forward, we have plans to focus heavily on innovating sustainability for healthcare products, while remembering patient safety and well-being cannot be compromised.
Kapoor: Sustainability was another focus for us throughout the pandemic as part of our ESG platform, which included formalized policies on our website and engagement with EcoVadis to assess our current state and identify immediate and long-term areas for improvement. In addition, we have offered eco-friendly/biodegradable flexible packaging solutions to our customers with a focus on the entire product lifecycle and its environmental impact.
LaVersa: We’ve had a sustainable mindset for years, earning our first ISO 14001 certification in 2011. We’re committed to achieving ongoing sustainability and supporting the safety, environment, and wellness of our employees and the communities in which we work. We have active programs addressing energy, water, and waste reduction; workforce wellness; and community investment. In fact, our environmental health and safety director just completed her term as president of the Western New York Sustainable Business Roundtable.
Marino: Precision Concepts is focused on continuously reducing our carbon footprint, and ultimately reaching net-zero. We are improving our inventory management systems to reduce waste, improving our recycling systems, and have implemented energy-efficient appliances in our new factory.
Warren: Sustainability is a core tenant of MMT’s values. Within our sustainability programs, we continuously evaluate the environmental impacts of our products and global operations from our suppliers through to our customers. As an example, we are committed to constantly monitoring all waste streams for recycling opportunities, which we believe will lead to a meaningful reduction in our landfill burden.
Fenske: When faced with an OEM customer who presents consistent requests for a percentage cost reduction year over year, does it cause a rift in the relationship or a reevaluation of whether the customer’s business is worth it?
Binder: Cirtec is committed to the full lifecycle of components and devices we support. We look for opportunities to improve safety, quality, delivery, then cost, in all of our work. The request to reduce cost does not cause a rift, however, it does present an opportunity to review the value proposition Cirtec presents. With a fully staffed design and development division, Cirtec is poised to drive real cost improvement through design and manufacturing process improvements. Focusing on cost savings for both Cirtec and the OEM has proven to be the most sustainable and effective for the long-term viability of each medical device.
Green: We find that working in collaboration with our strategic customers to leverage synergies often yields win-win scenarios, which allow for any resultant cost savings to be shared. This is something we endeavor to bring to the table for the mutual benefit of both parties, and thereby strengthen the business relationship rather than harm it. Recently, this has become even more important due to the month-on-month escalation of manufacturing costs including feedstocks, energy, transport, packaging, etc.
We believe the key to maintaining customer relationships is very simple: deliver a product that brings value (not cost) to our customers, and the relationship will be mutually beneficial.
Huang: Yes. When you consider costs—oil, raw material, and inflation—this becomes very difficult to maintain. OEMs and suppliers should have a partnership relationship where both parties work together. We are blessed to have very long term OEM clients who are partners and share cost increases and decreases together. We have to continue to help our clients find cost savings through product design improvements or manufacturing processes, as well as inventory control and locking in pricing with hedging of material. It requires a partnership, not a win/loss relationship.
Kaiser: This has become a normal mode of business for some longstanding customer relationships. In order to sustain those relationships and achieve cost down goals, there needs to be a high level of collaboration and willingness to apply resources and make those changes to achieve the goals. This environment of continuous improvement can help drive new innovation through alternate manufacturing methods. When true costs and significant costs can be taken out of the processes, it becomes a win/win for both parties.
Kapoor: This is certainly becoming a standard expectation, but has been challenging to realize due to raw material increases and global inflation. If both the OEM and CMO can align on objectives early and create a scenario of mutual effort leading to mutual benefit, it can work.
Marino: Precision Concepts is a vertically integrated contract manufacturer that focuses on not only manufacturing components but also reducing cost to our customers. As such, requests for price reductions do not cause rifts in the relationships we have with our customers. We understand everyone in the industry is trying to improve their bottom line and be as profitable as they can be. When presented with situations such as this, we negotiate in good faith with our customers until we come to an agreement. We always have and always will operate on an open and transparent basis.
Nino: Yes. Some OEMs approached us with that, and we are open to it since LSO had been providing those services to all customers from the beginning. This is usually the case with mid- to small-size customers who do not have their logistics system developed.
Warren: MMT truly believes in partnership with our clients. MMT’s value extends beyond pure price by generating savings for our customers from the productivity and quality of our production technologies, and the uptime and business continuity driven from our TotalCare program. Of course, there are times when price is an overriding factor for our clients and, in these instances, MMT will use our ability to support longer-term planning to capture purchasing synergies that can lead to win-win savings.
Fenske: The industry is experiencing a shortage of skilled labor for many production positions. How is your company addressing this and what are you doing to attract/retain talent?
Binder: Cirtec continues focusing on presenting a balance between work and home life, ensuring our staff has the ability to make a livable wage on a reliable schedule. We have changed some facilities to four-day work weeks and supported shift timing changes in other locations. Staying on top of what our employees need, beyond pay, has helped Cirtec attract and retain talent. Increased efforts are underway to build on our culture of innovation and collaboration to empower all employees to improve our daily work lives.
Huang: Our company maintains an active focus on culture, flexible working hours, remote work capabilities with computer/IT services to support it, base salary and commission to maintain motivation as well as additional income, and the ability to access all documents from a cloud-based server. For workforce on the manufacturing floor in Asia, we have invested in more automation equipment and have found some creative ways of hiring and retaining talent with more benefits of profit sharing, housing allowances, and management/leadership training.
Kapoor: We start by ensuring we have a company and culture where people are engaged and want to stay. Employee referrals have been very helpful, and we’ve done a lot with our employee engagement program to see how we can continuously improve, celebrate our great people, and allow everyone to have a voice.
Marino: Precision Concepts is actively recruiting and hiring skilled laborers. We do so through referral programs, traditional recruiting, and internships. In order to retain our employees, we are constantly improving work/life balance in our facilities. Flexible hours, quality benefits, and a positive culture at our facilities are crucial for employee retention.
Nino: After the initial COVID hit to the industry and economy in general, temporary labor had become the main choice for most employers. Some companies had increased their hourly rates and LSO had done some of that as well. As time went by, LSO realized new employees were not just looking for a simple paycheck but also the benefits companies offer. We decided to invest in training of our employees, offer interactive classes so we can shorten the conversion time from temporary to permanent employee status. This seems to have a positive impact since more employees are making inquiries about conversion to permanent status.
Warren: MMT aspires to be an employer of choice and that starts with culture. We recognize the challenges of recruitment and, thus, pay close attention to retention. Communication and transparency are key, and we remain committed to promoting and monitoring workforce engagement. A core value is that we all win together. To support our drive for clarity of vision and objectives, all team members participate in goal attainment and profit sharing. Further, our leadership team has deployed innovative programs, such as tuition reimbursement to allow team members to grow, scholarships for team members’ families, and supported engagement in local non-profits.
Fenske: What recommendations do you have for OEMs currently seeking new CMO suppliers? How can they best evaluate a prospective partner and what traits should be considered most important?
Binder: While qualifying multiple sources may not be an effective regulatory strategy, look for a CMO with a broad depth of resources and established supply chains. The pandemic has reinforced the importance of resilient supply chains. Ensuring your CMO has strong internal regulatory, engineering, and supply chain abilities will pay dividends in the long run as you enjoy uninterrupted supply of your component or medical device.
Clark: When Flex Health Solutions initially engages with an OEM, we recommend an open dialogue to fully understand their needs and business results they are looking to achieve by partnering with a CMO. The first step in an evaluation should be for the OEM and CMO to complete an in-depth analysis of their core versus non-core capabilities. When an OEM knows what non-core capabilities they need from a CMO, they then can determine how to leverage the partnership to create the greatest benefit to their business. Second, we recommend the OEM visit our design and manufacturing sites so we can demonstrate how we manage our customer relationships, develop subject matter collaboration, and provide world-class operational execution. Third, and probably most important, is to build a relationship on trust and confidence. We know an OEM is trusting us to deliver a solution that meets the expectations of their patients and their brand.
Kaiser: In many cases, a past relationship between individuals of the OEM and the prospective new CMO starts the interaction. There’s already a certain level of trust in the relationship, which is very important. Things OEMs need to consider are the CMO’s certifications, their level of experience in the type(s) of products to be outsourced, and the need to gain insight into the CMO’s new product development processes—the amount of resources available and the amount of attention they will receive. During the early stages, Donatelle has found success when various functional levels interact with each other to develop those relationships. This results in a better understanding of the cultural fit between the companies and a longstanding partnership.
Kapoor: It all starts with a foundation of quality and service, then quickly moves to how well the CMO can support the specific needs of the OEM. The OEM should feel confident the CMO has expertise in the application, the portfolio of capabilities or offerings to support that application, and the ability to drive speed and value in getting new programs to market.
LaVersa: Finding a partner with FDA and ISO certifications is critical. You also want to align the culture of your company and theirs. Select a partner who is open, creative, innovative, and proven. Harmac has been awarded multiple accolades for exactly these kinds of traits. Chose a CMO with breadth and scope in assembling complex medical devices, as well as one that uses cGMP and strong lean principles in their plants. They should have world-class engineering—a “one-stop shop” leveraging vertical integration, cleanroom injection molding, and automation capabilities.
The right CDMO can manage multiple phases of a product lifecycle and ultimately deliver large-volume manufacturing with unquestionable quality. Our engineering and project management expertise ensures a product will benefit from our successful experience and track record.
Marino: We realize finding a high-quality CMO to partner with is a daunting task. We recommend a thorough assessment of the supplier’s capabilities and culture. Many challenges can be overcome by working together, but a supplier missing core capabilities or having a culture that does not align is a recipe for disaster. Ensure any potential suppliers will align with what your needs are, and you understand what their capabilities are. Additionally, years in business, cost, and ease of working together are key variables in supplier selection.
Nino: There are a number of traits a CMO should offer to customers:
- Robust quality system
- Single point of contact with specific time frames (e.g., weekly, monthly, etc.) for reviewing customer programs and open orders
- Ability to cover all assembly/packaging/sterilization needs (i.e., one-stop-shop)
- Swift response to problems or concerns
- Creative solutions for meeting customer requirements
- Cost-effective pricing
Binder: Some of the best OEMs Cirtec currently works with are keenly aware of the manufacturing and sourcing expertise a CMO may present. Our OEM partners focus on the requirements of the device, while collaborating with Cirtec to find the highest quality and most cost-effective manufacturing options to meet those requirements. Treat your CMO as an extension of your own organization—bring them in early and often to ensure alignment.
Huang: It always needs to be a partnership, and not just a vendor/client situation. More transparency is necessary, and less discussion of pure cost. Both parties need to discuss how to improve design and how to best take advantage of manufacturing locations. There are many elements to the cost of manufacturing—raw material, labor rates, manufacturing equipment, scrap rate, possible outsource secondary options, packaging, sterilization, transportation, logistics, and inventory. An OEM should really work with a CMO on all these factors so they can find a win/win situation.
Kapoor: From the beginning, there needs to be two-way transparency and alignment of respective goals. When the CMO knows exactly what success looks like as a whole for the OEM and the individuals involved (not just success of the project itself), the teams can mitigate risks, align on bigger objectives, and partner toward mutually beneficial and proactive solutions.
LaVersa: While the OEM retains in-house strategic capabilities and IP, they should leverage the CDMO’s knowledge and expertise to bridge competence gaps when transferring existing products and developing next-generation or new products. Harmac provides valuable input during the design phase and can combine OEM knowledge with our proven expertise. This lets us improve quality and design, which gets products to market faster without sacrificing quality.
Marino: Communicate with your CMO and be as transparent as you can be. The easiest way for a relationship with a CMO to evolve from supplier to collaborative partnership is to treat the CMO as you would an employee. The more information you can provide, the better the relationship will be. Use the talent of your CMOs to your advantage and engage them early on. CMOs are not looking for a “transactional” type of business, but a partnership to develop quality components.
Nino: A true collaborative partnership between OEMs and CMOs must start with a mutual understanding of what each organization requires to succeed. CMOs are best suited to provide the best possible service when OEMs engage with them as early as possible in the product development lifecycle. This enables collaborative DFM efforts to take place during early development phases, resulting in the most efficient commercialization possible. These efficiencies promote success on both sides of the table.
Fenske: Conversely, what does a CMO need to do to illustrate to an OEM it is capable of being a collaborative partner in a medical device project?
Binder: Focus on design controls and product lifecycles. A good CMO should support the OEM through each phase, with the spectrum of control shifting throughout the lifecycle. Initial design and development, while controlled by the OEM, is the key point to engage with a CMO to ensure design for manufacturability. In sustained manufacturing, control of the Critical to Quality outputs should be the CMOs main focus—a strong CMO will leverage internal and external resource to deliver a quality component or device.
Clark: A valued design and manufacturing partner’s mission is ultimately to accelerate the OEM’s speed to market and de-risk its investments. This is largely achieved through innovative design; a reliable, resilient supply chain network; and advanced manufacturing abilities both regional and global.
Kapoor: CMOs should build confidence with the OEM by aligning on objectives early and creating trust through frequent and open communication where the CMO thinks and acts on behalf of the OEM. This includes less “will do” conversations and more “it would be better if…” conversations that can result in less risk, more value, and faster time to market.
LaVersa: We work to develop long-term relationships beyond the OEM agreement terms. Our focus is on mutual success and a beneficial partnership. We view our cleanrooms as an extension of our OEMs’ operations. Thus, we share goals, expertise, objectives, continuous improvement metrics, and accountability. We work together to achieve success for the ultimate customer: the patient.
Marino: Engage the customer, even on the little details. Let them know how their request is coming along, invite them to your facilities for tours, provide timely feedback/advice on any questions they may have. Again, treat them like you would an employee. The more information you can provide, the better the relationship will be.
Nino: CMOs must offer a suite of services that results in one-stop shop efficiencies for the OEM. This not only streamlines operations, but simplifies and reduces the cost associated with materials and subcontract management. Being able to demonstrate how the CMO can reduce costs from product introduction through to volume production is key. Being able to demonstrate alignment with the OEM’s production ramp requirements is also an important factor.
Fenske: Is M&A activity within the industry having an effect on the OEM/CMO relationship? If so, what is the impact?
Binder: Definitely. Not all CMOs are created (or merged) equally. OEMs should remain diligent while vetting potential CMOs. It is easy for a CMO to bolt together several disparate manufacturing types and present a unified brand, however, the OEM should dig deeper to look for the signs of a truly integrated CMO. Look for one quality management system to ensure results will be same from every division of the CMO. Look for a clear and focused strategy to ensure the CMO understands your product and your market. Look for vertical integration within the CMO to ensure you are truly getting the full leverage of the CMOs breadth.
Bolt: Yes. Integer’s acquisition strategy is actually strengthening our customer relationships. For example, the recent acquisition of Oscor Inc. has allowed us to further differentiate our manufacturing expertise by expanding our capabilities, capacity, and global footprint to better support our customers’ evolving needs. It also creates opportunities for our customers to streamline their supply base.
Kapoor: M&A will always have some impact for both OEMs and CMOs, but the more diversified and full-service CMOs with strong track records of quality and service will be of little concern for OEMs looking to consolidate their supply chains.
Marino: OEMs are looking for stability. Precision Concepts is a privately owned organization that has been in business since 1976. Some of our customers have been with us for over 20 years, and in that time, have seen incredible growth. However, even with the growth of the organization, our customers know where we are located and how to reach us. They are very appreciative of our stability and consistency. When M&A occurs, there can be a loss of culture that was responsible for the original relationship prospering. This puts unwanted strain on both the customer and supplier, and makes for a difficult situation all around.
Fenske: What trend(s) in medtech will you be following that you expect to become more important once we’ve had some sense of normalcy restored? Explain.
Clark: We foresee evolutions in many therapeutic spaces and are actively working with customers to ignite these innovations, notably, in diagnostics, dialysis, and infusion markets. This is where care is moving from a traditional hospital or medical center-based site over to the office or clinic, and ultimately, to the home setting. The same applies to patient monitoring, where we are seeing a shift from large form-factors to small, connected, wearable devices. Flex Health Solutions is positioned to aid our customers in the transition to new technologies with greater speed and reduced risk.
At the same time, there are some capabilities that were important before the pandemic and remain so for medical OEMs to flourish, but they may not possess these capabilities. Some prime examples where a CMO can partner with the OEM for success are:
- Vertical integration: Being able to progress from pellet to product under the same roof reduces complexity, optimizes system efficiencies, and ensures continuity of supply, resulting in lower total cost.
- Global scale and regional reach: Some companies are still seeking globalization, while the pandemic accelerated others to find a way for supply and manufacturing to be closer to the end markets. A global footprint allows solutions tailored to the customer’s strategy.
- Circular economy solutions: Offering implementable solutions to deliver on ESG initiatives. These range from designing new products or redesigning current products for circularity to parts harvesting, recycling, and CO2 reporting.
Robotics, 3D device printing, and sustainability are the other trends we will be keeping a close eye on.
Kapoor: As mentioned previously, supply chain de-risking and business continuity planning will be a critical objective for both OEMs and CMOs. From a product perspective, there will likely be a continued focus on point-of-care solutions, bringing diagnostics and therapies closer to the patient with more comfort and convenience.
LaVersa: We believe the continued outsourcing trend will accelerate. As such, financially sound and privately held CDMOs like Harmac are well-positioned to continue as key strategic partners to OEMs. Harmac provides Six Sigma quality operational excellence. We offer industry-leading quality and mitigate operational risks. As outsourcing demand remains robust, we believe OEMs will increasingly seek supply chain partners with domestic and near-shore manufacturing. We’re well-positioned with locations in the U.S., Ireland, and Mexico to support the European and North American markets.
Marino: One trend Precision Concepts has been keeping a very close eye on is supply chain consolidation. As a vertically integrated manufacturer, we are seeing many opportunities in this area with customers looking to improve their logistics. Also, connectivity between patients and doctors is at an all-time high, and we want to support that growth however we can. Internet of Things products are allowing the patients greater control of their treatments and are a great fit for Precision Concepts’ capabilities.
Warren: The market today is characterized by the struggle of the supply chain stops and starts, and the challenging end-use demand patterns. As the demand and supply chain normalize, we expect major OEMs to transition from supply chain “firefighting” to focusing on operational excellence and supply chain robustness. This will mean a change in conversations with suppliers and more pressure on them to formalize as the OEMs shift to efficiency and cost saving. At the same time, resources will likely pivot to innovation to mitigate the increasing competitiveness of the more stable market.
Fenske: What impact, if any, will the war between Ukraine and Russia have on the medical device European market, or the worldwide medical device market?
Green: The war in Ukraine has created a large amount of political uncertainty in the region, which often results in a reduced healthcare spend. In addition, sanctions imposed on Russia are expected to have a significant impact on commodity costs (e.g. oil, gas, metals, plastics, foodstuffs, etc.)—at least for as long as they are in place, which could be a very long time. Reduced spend and increased costs are a perfect storm, and one we may need to weather for quite some time.
Kapoor: It’s not clear what the overall impact will be, but it speaks to globalization versus localization and the companies that have operations in those areas will be the most affected. OEMs and CMOs without contingency plans or second-source options will see more downstream effects.
Marino: Many products we manufacture use rare-earth elements. As such, the conflict is causing a dramatic increase in material pricing, especially specialty materials. This past week, we saw a 400 percent spike in the nickel commodities market and a halt on trading, something that is unprecedented at a global scale. The impact of this is felt in pricing of many of the metals we use, but most dramatically in the nitinol components we manufacture.
Nino: This is such an interesting and challenging question since I hail from that part of the world. Wars there last long and cut deep in every aspect of life. They create challenges for a multitude of medical device industry subdivisions. Everything from critical care, wound management, and surgical equipment to neonatal and childcare, cancer, and every other medical condition in between. Supply chains are broken, supplies come infrequently to treat chronic patients, and chemotherapy and dialysis are almost cut-off completely. Humanitarian tragedy and the number of displaced people will strain some countries’ abilities to help those in need. Therefore, the supply chains must be allowed to flow to take supplies to those who need them and to allow those in need to be evacuated. Only then, we can think how the markets need to be navigated.
The oil supply for most of Europe flows from Russia and the EU raw material manufacturers will have a hard time producing plastics and any other derived product, affecting their customers’ ability to produce. Therefore, on this side of the Atlantic, we must be prepared to supply a diverse variety of products at short notice.
Warren: While we expect to see continued supply chain disruptions, the demand impact on non-elective minimally invasive surgeries is likely to be muted. Certainly, our concern is less on the market impact and much more on the human impact of this conflict.
Fenske: Do you have any additional comments you’d like to share regarding the OEM/CMO relationship in the medical device design and manufacturing space?
Kapoor: The pandemic demonstrated the importance of what we do in the healthcare industry every day. It really created a community where we know we can keep making a difference in the lives of patients everywhere. As the pandemic subsides, we should all reflect on how important our day-to-day work continues to be—even if it’s not on every news channel.
LaVersa: The key to any relationship is to foster a mutually satisfying, balanced, and rewarding partnership. We strive to practice the tenets of honesty, integrity, and respect internally and externally. As a CDMO, we play an integral role for our OEM customers. They depend on Harmac to provide world-class quality, ongoing innovation, and value engineering across all sites.
Marino: Think long term in the near term. If you engage your CMOs early enough, they can be an invaluable asset and partner. Input from your CMO in the early R&D stages has the potential to prevent significant problems in the production stage.
Nino: Proper alignment between OEMs and CMOs is a critical part of a successful and long-term OEM/CMO relationship. At LSO, we pride ourselves on effectively supporting large and small OEMs from product introduction through volume production. Our ability to accomplish this comes from ensuring alignment with our customers throughout their product lifecycle. We have enabled hundreds of small OEMs to commercialize a wide variety of medtech implants and instruments by providing a wide variety of services, including assembly, packaging, sterilization, sterilization validation, packaging testing, reprocessing, and distribution. We take pride in our one-stop shop capabilities, which allow us to effectively support our OEM and CM customers as they grow.