R EP R I NT E D F R O M M D & D I A P RI L 2 0 0 9
12 Tips for Successful
Medical Equipment
Outsourcing
Successful outsourcing is contingent upon knowing your company’s needs and
carefully selecting a supplier.
Milton Frank
T
1. Understand the Product and the Market
before Seeking a Contract Manufacturer.
It is extremely important to understand the benefits
of the product, where it fits in the market, the demand
for it, the target buying audience, and how the market
Milton Frank is president and CEO of Nexcore Technology Inc. (Waldwick, NJ).
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Illustration by iSTOCKPHOTO
he confluence of the entrepreneurial drive to develop
sophisticated medical equipment and increased market demand has brought greater attention to contract
manufacturers. Many creative people, from large companies
to innovative doctors, are developing ideas that improve
treatment. Physicians lack most of the required resources to
manufacture and bring a product to market; corporations
often do not have the specific expertise to develop and manufacture a product. Additionally, the core manufacturing
strength of the potential customer, which in this context is
the OEM, may not lie with capital equipment. Also, contract
manufacturers can focus their energies to reach the identified
and agreed-upon goals without distractions that may deflect
the in-house team’s focus.
These factors have naturally brought about a surge in
contract manufacturers. After the initial creative flourish
and concept, choosing the right contract manufacturer has
the greatest effect on the success or failure of a product. The
wrong choice can lead to catastrophic results, such as a product failing when it reaches the market, or even beforehand, if
the process suffers significant delays and added expenses that
impede commercial success. Although no system is foolproof
and no two experiences are the same, the following tips can
offer OEMs the greatest opportunity for success.
can be expanded. Corporate America, including medical
device companies, is rampant with examples of products
that failed because the manufacturer failed to understand the
market, the expected demand, or the benefit (or lack thereof)
of its product. If the company’s strength is in marketing and
sales, this will not be an issue. Otherwise, the OEM should
consult with the contract manufacturer and see whether it
has the expertise to assist in this area. The OEM can also
work with an additional company that specializes in marketing a specific type of product.
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critical to have a full audit prior to retaining the contractor
to ensure that the manufacturer’s quality system can meet
the OEM’s needs over the long haul.
The audit should also include a review of document and
data controls and retention, quality record controls, training
requirements, receiving controls, the calibration program,
and preventive maintenance.
Although circumstances vary, it is often best to seek a full-service
contract manufacturer. Shown above is the assembly area at
Nexcore Technology.
2. Be Certain the Contract Manufacturer Has a
Methodology to Select and Manage Suppliers.
Similar to the chain only being as strong as its
weakest link, the quality of a product is dependent
on the quality of its components. A single inferior
component can undermine the operation of the product and
cause significant financial and reputation damage for the
manufacturer and distributor. Therefore, the medical device
OEM should review the contract manufacturer’s quality
control program for selecting vendors and components. Vendor selection needs to be a disciplined process that leads to
repeatable, high-quality fabricated parts and components.
One issue to raise during the vetting process is the contract manufacturer’s relationships with the vendors supplying components for the product. If there is no established
relationship, the OEM should ask about the process used
to identify and vet new vendors. The contract manufacturer should have a robust system in place for monitoring
vendors for quality shipments and on-time performance.
The contract manufacturer’s inspection department needs
defined incoming test criteria for all components purchased
as well as those supplied by the OEM. Components should
be traceable by lot. A red flag is raised if the contract manufacturer lacks the resources for a properly staffed inspection
department. The contract manufacturing partner should also
be CGMP compliant. It is important that the contractor has
robust internal quality procedures that are compatible with
the customer’s quality system.
Other issues that the OEM should consider up front include whether the contract manufacturer has previous experience in the specific medical specialty or previous experience
with similar technologies. A limited audit should also be
conducted, which can be based on a checklist developed by
the customer. A standard supplier questionnaire may ask for
information such as the following: names of key personnel,
a list of equipment and the condition, and details on maintenance of the manufacturing facility. It should also ask for
current customers and products manufactured. In addition,
OEMs should also ask for an organizational chart and the
company’s quality manual.
This limited audit and vetting process should suffice during the preliminary review of a short list of potential contract
manufacturers. The OEM, however, should perform a full
in-plant audit with special attention to the procurement and
inspection departments before the contract is awarded. A full
audit can involve a two-day session including plant tours and
assessment of manufacturing and inspection equipment. It is
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3. Don’t Automatically Select the Lowest Bid.
Contract manufacturers provide a variety of services that ultimately affect the cost structure. If the
OEM has an accurate and precise set of drawings
and only needs the product assembled, it does not
require a contract manufacturer with strong engineering
capabilities. However, a program that begins with specifications and functional product requirements requires a
partner that can realize the product and create the necessary
documentation.
On the other hand, if assistance is required with agency
approvals, engineering, software, and customer service, an
OEM needs a contract manufacturer with the necessary
depth to provide support in these areas. Trying to do something in-house when the capabilities are lacking is a sure path
to failure. Remember, people often do get what they pay for.
Trying to cut corners by choosing a contract manufacturer
that lacks the expertise and services needed undermines the
project. The OEM needs a quality product, and only a quality contract manufacturer can provide that.
In evaluating prices, the OEM should carefully analyze
responses to its request for proposal and specs from each
contract manufacturer so that it is certain that all requirements are included in the bid, and that there is mutual understanding of these requirements by both parties. Finally,
both the limited audit and the full audit will provide evidence
of the contract manufacturer’s capabilities and can give a
solid indication of whether the lowest bid can, in fact, do
the job.
A technician cleans boards prior to assembly. OEMs should be
certain that the contract manufacturer complies with all regulatory requirements.
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4. Seek Full-Service Contract Manufacturers.
The fewer outsourcing companies involved, the
smoother the process. Overoutsourcing—or having
too many companies involved in the project—results
in missteps, miscommunications, and a slower process. The contract manufacturer should be able to provide
all of the services needed from initial concept through design,
prototype build, preproduction fabrication, verification and
validation, and product manufacturing.
Often medical device projects involve mechanical engineering, electronic design, software development, and ultimately
system fabrication. If four separate companies are used, the
OEM must have the infrastructure to deal with four different
partners, which includes refereeing issues that arise among
them. It also often requires balancing egos and competition
among the companies. By employing a single-source contract
manufacturer that can manage the entire project, OEMs
have an increased opportunity to implement the recommendations discussed in this article. The recommendations
include a methodology to manage suppliers and the creation
of a team to work with the contract manufacturer.
An OEM may choose to contract specialized agents and
use a primary contract manufacturer to provide support
for the project if the scope expands or additional requirements arise.
However, in some instances, a specialist or small contract
manufacturer is more appropriate than a full-service partner.
This usually occurs with well-defined, one-concept projects
with no latitude for changes—for example, when a product
has been fully designed by the customer with good documentation. In such a case, the primary contract manufacturer
would only provide build-to-print services.
5. Investigate Several Companies and
Rigorously Vet the Finalists.
Outsourcing to a contract manufacturer is a major
step that requires the selected company to have the
capabilities and expertise to perform up to the OEM’s
standards. The initial limited audit (see Step #2) provides a
good guideline to assess the quality and capabilities of the
contract manufacturer. When the field is narrowed down to
one or two firms, a full audit should be conducted.
Another consideration is the chemistry between the companies and their personnel involved in the project. Good
chemistry is essential. Lack of respect or differences in operating philosophies can doom a project from the beginning
or at least lead to miscommunication as well as delays and
costly overruns.
As part of the audit, OEMs should get to know both the
key executives at the contract manufacturer’s company and
the people who will be managing the project. Senior management from the OEM should visit the partner’s facility
to be certain that it is up to the standards claimed and has
the capabilities promised. It helps to speak to companies
that have worked with the contract manufacturer, if possible. These can include references provided by the contract
manufacturer and others that can be identified through an
Internet search or industry contacts. The customer should
also check on the financial stability of the company by
obtaining credit information, annual reports, etc. These
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partnerships are designed to be long-term relationships, and
the financial viability of both parties is a major ingredient to
achieving success.
6. When Using Multiple Contract
Manufacturers, Blend the Expertise.
Before starting development of the product with a
design company, it is essential to choose the outsourcing partner that will manufacture the product. OEMs
must determine at the outset that a design can be manufactured cost-effectively in the targeted annual quantities. Not
doing so can cause massive and costly delays in transitioning
the design to manufacturing. Concepts created by industrial
design companies cannot always be manufactured. Rework
or repair may require disassembling the entire unit.
A good product design team always includes a representative from manufacturing. If the design firm is reluctant to
include the contract manufacturer or says that the decision
on the selection of a contract manufacturer can be delayed,
this is a warning sign that this might not be the design house
to work with.
7. Emerging Companies: Select a Contract
Manufacturer Experienced with Start-Ups.
Start-up companies present a unique situation and
typically need a partner that is sufficiently flexible to
change direction or revisit processes. Start-ups are
stretched for resources and the right contract manufacturer
can fill in the gaps and provide experience and guidance
in design control and product release that a start-up may
lack. Such companies need a contract manufacturer that has
systems in place to meet the stringent and comprehensive
FDA and ISO requirements.
The contract manufacturer can assume these responsibilities, allowing the start-up to focus on design and
development. In addition, having an experienced hand
manage FDA and ISO compliance and certification testing
saves time and money.
The initial device concept may lack a user-friendly interface when modeled or shown to prospective end-users. At
this point, a capable contract manufacturer can help analyze
the specifications to improve the interface. One effective
means of improvement is conducting focus groups at hospitals with potential users to get their input, a process that may
be more easily managed by the contract manufacturer.
8. Determine Which Services to Outsource.
This article has already discussed whether the
OEM needs a full-service contract manufacturer
or can use the services of several. In making this
decision, the OEM should analyze its capabilities
and determine what services should be performed by
the contract manufacturer. The OEM must determine
whether its engineering team can create a thorough product specification or will need assistance from the contract
manufacturer. The OEM should make a list of the services
required from the contract manufacturer and then find one
that can provide the missing links. The company must fully
understand its role and what support is needed from the
contract manufacturer.
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9. Work Closely with the
Contract Manufacturer.
The OEM should create a team of product specialists to facilitate and expedite the decision-making
process for product design and production. This
team should stay in place throughout the total product life
cycle so that the contract manufacturer always has access to
a responsible party at the OEM as issues arise. Otherwise,
the OEM, which has ownership for the product sold, could
easily lose control over the process and only learn about
deviations to its initial concepts when changes are costly
and time-consuming. There are numerous issues that can
arise such as design changes, component obsolescence, or
complaints.
At a minimum, the OEM team should comprise a contracts expert (to deal with the business side of the relationship; this team member may be from purchasing or material
control), an engineering liaison, a quality assurance expert,
and a marketing representative.
10. Have Realistic Expectations.
Although a good contract manufacturer is invaluable in the development and manufacture of a medical device and can bring specific experience that may
not exist within the OEM’s company, the contract
manufacturer is not the developer of the product idea and
marketing concept. The OEM needs to prepare specifications that define what the product will do and then choose a
contract manufacturer capable of meeting the specifications.
In defining the specifications, the OEM needs to state the requirements of the user and the marketing team has to define
how it will market the product. An OEM should not expect
the outsourcing partner to figure out what the product is
supposed to do.
The contract manufacturer is not responsible for adding
bells and whistles to the product; its job is to manufacture
the product to the specifications. The contract manufacturer
needs this guidance to ensure that the OEM’s requirements
are met.
11. Do the Gut Check.
When vetting is complete, is the head of the OEM
company comfortable with the decision? The leaders
should set aside the analysis to see whether they feel
comfortable entering into a partnership with the chosen contract manufacturer. Also, the OEM’s chief executive
should consult the key team members to see whether they
have the same feelings. If the OEM has an open corporate culture in which the CEO trusts the judgment of the
people in the organization, no further action is necessary.
If a frank discussion is not possible, a confidential survey
may be needed. Team members should also feel that they
can work effectively with their counterparts at the contract
manufacturing firm. Even with a partner analysis that is
astute and accurate, poor chemistry can easily disintegrate
the relationship.
Reviewing final instructions prior to assembly is one aspect of
an effective quality control system. The selection process for
hiring a contract manufacturer should include vetting these
controls.
12. Determine Length of Relationship.
All contract manufacturers are excited about getting new business. As the program rolls out, no matter how carefully each party has prepared, there will
be problems that neither anticipated. Such issues
place stress on the relationship.
The contract manufacturer that is looking for a long-term
relationship and not a quick sale will be more responsive and
will work more closely with the OEM. It’s much like the difference between a couple that is dating and a couple that is
married when a disagreement comes up. A couple committed
to maintaining the marriage has a significantly better chance
of resolving the issue. If, however, the company is looking
for a one-time project, this, too, needs to be expressed to
the contract manufacturer at the beginning of the project.
Finding out midway through the project could create hard
feelings and create a hurdle in the relationship.
Conclusion
Following these 12 tips does not guarantee an unblemished relationship; no system can. But, these tips do cover
many of the basic issues that are frequently overlooked in
the outsourcing process and provide strong indications of
the quality of the contract manufacturer. As a safeguard,
the contract should define all customer expectations and
specifically designate which activities will be controlled by
the OEM and which by the contract manufacturer. The
OEM should also be prepared to follow up regarding other
areas of concern or competency to ensure the manufacture
of a high-quality product. ■
Reprinted with permission from Medical Device & Diagnostic Industry, April 2009. On the web at www.devicelink.com.
© A Canon Communications LLC Publication. All rights reserved. Foster Printing Service: 866-879-9144, www.marketingreprints.com.
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The Go-To Company
for Medical Equipment
Outsourcing
Technical Expertise
Innovation
Customer Service
Accountability
“NEXCORE’s attention
to us, understanding of
our product and speed
in getting the product
to market was vital.”
Frank Carter, CEO
GI Supply, Developer
of the Polar Wand
NEXCORE Technology
Milton Frank
President and CEO
150 Hopper Avenue
Waldwick, NJ 07463
201-968-9400
[email protected]
www.nexcoretech.com
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