Gaining a Competitive Advantage with Strategic
Medical Device Operational Outsourcing
Hantel Technologies, Inc., May 13, 2011
In recent years, the outsourcing of medical device design and manufacturing activities to contract firms has become more and more common. This has largely been due to pressure to keep product pricing down, manage rising costs, and maintain a competitive edge in the marketplace. Consulting Engineering and Contract Manufacturing firms can streamline the product lifecycle and greatly reduce the time to market and total cost of product development. In particular, they can help companies operate efficiently and allocate resources appropriately when market conditions are difficult, such as those we face in the current economic climate. Some of the advantages offered by consulting firms include decreased time and cost of product development, increased flexibility in timing of development efforts, reduced fixed overhead and capital equipment costs, greater access to expert engineering and manufacturing resources, and increased leverage of infrastructure.
Consulting firms are uniquely structured to quickly get a project up and running thanks to several unique factors. First, contract firms that specialize in an array of medical device technologies have an outstanding depth and breadth of talent available from which to choose for each project. Thus, the right resources can be tailored to each project, bringing with them the expertise to get the work started quickly. Second, because contract firms are service oriented, the work environment rewards not only excellence in device development and manufacture but also timeliness in delivery and adherence to project budget. This not only allows projects to start quickly but also decreases the time to market, an essential factor to ensure strong company positioning in a competitive market environment.
Because contract firms already have the equipment needed to design, test, and manufacture medical devices, a client may avoid incurring substantial overhead costs involved in purchasing and maintaining machinery. Contract firms also typically have established infrastructures that can be readily leveraged, including document control and complete quality systems. Though frequently taken for granted, the time and effort involved in creating this infrastructure is substantial; utilizing the systems in place at the contract firm can greatly reduce the total project cost and reduce the time to market. These systems are tried and true; this is a great advantage for startup companies that might otherwise lose valuable time and money when a flaw in a newly established quality or document control system is discovered.
Perhaps the greatest value in a contract firm is the flexibility it provides. Projects may be started and stopped on a dime. As a result, when the project needs to be frozen due to economic constraints or the need to rethink the next steps for product development, the client does not incur the overhead costs of keeping employees and facilities running, with the exception of their own core staff. Conversely, project phases that are under enormous deadline pressure may receive the benefit of resources that can be quickly and easily added, without the expense and hassle of hiring and training new employees.
Selecting a Contract Firm
Several factors must be taken into account in order to select the contract firm that will best meet your needs. Numerous contract firms are available from which to choose. This is a testament to their utility as cost effective and time efficient organizations. Each brings unique strengths to the table, and it is therefore crucial to think critically about your product development and/or manufacturing needs before selecting a contract firm.
Questions for you to ask include:
General: What is the nature of the device? Is it complex, with multiple parts or components? Does it involve novel processes or technology? Does it require specialized expertise for difficult‐to‐perform processes such as tip forming? Does it interface with other devices or equipment? Rigorously assessing your product’s key features will help you determine whether you need a firm with specific technical expertise, or one that has more diverse expertise. Most firms will offer a fairly broad array of expertise; however some have specific areas in which their knowledge and experience is particularly deep.
Engineering: What experience do engineers at the contract firm bring to the table? Can the firm help with product conceptualization in addition to design? Can they help with design for manufacturing once the product is nearing readiness for market? What is their experience with guiding verification and validation testing? Can they rapidly produce prototypes, solid models, and CAD? Do they have the resources available to meet your needs, both in terms of expertise and in terms of project timelines? Can they add or remove engineering resources easily? Finally, what is the contract firm’s experience with similar devices? Questions like these will allow you to establish whether or not a contract firm has the engineering resources and expertise to meet your needs.
Quality and Regulatory Affairs: Do you have a quality system? A document control system? A regulatory affairs manager or consultant? If not, you will need to ensure that the contract firm has these services. Are they ISO 13485 certified? Are they registered with the FDA and with the California FDB? Have they passed all of their FDA and ISO audits? Have they passed all customer audits? Do they have strong relationships with other service providers for activities such as shipping validation, sterilization validation, biocompatibility testing, etc? Product realization from concept to production is a thrilling process, and it can be easy to overlook the fact that every step along the way must be performed with impeccable adherence to quality control systems, and that regulatory activities must be performed appropriately and in a timely manner. A good contract firm can help you with all of these services. Even if you do have your own quality and regulatory affairs systems in place, it is important for the contract firm to have their own as well, so that you know that all activities are conducted in accordance with federal and state regulation and that any potential quality issues are recognized and addressed early.
Manufacturing: What are the manufacturing and machining capabilities of the contract firm? Does the machine shop have both manual mills and lathes and CNC machining? Do they offer quick turnaround on prototype and custom parts? Is there a clean room (and what class is the clean room)? Is there a shipping and receiving system in place? Is there a supply chain system and do they provide warehousing services? Is there a regulated materials control system? Are there highly trained and skilled assembly workers who have experience with the materials used in your device?
Contract Firm Policies and Management: Does the contract firm retain any of the intellectual property for the devices it helps design and build? Does it make any of its own products that might compete with your device? Does it have a strong accounting system such that purchase orders are closely tracked and billable hours tightly controlled? Does it have a well structured management system? Is the company structured such that the departments work cross functionally and as a team to meet your needs? Selecting a Contract Firm Summary: Prospective clients must do their due diligence prior to selecting a contract firm. However, selecting the right firm can make all the difference in a successful and productive partnership.
Successful Management of the Contract Relationship
Outsourcing is not without its challenges. Regular and open communications are essential for smooth project coordination and execution. Because the contract firm and client teams are separated geographically, the casual yet critical conversations that occur throughout the day in the office place are absent between these two groups. Though taken for granted, this constant communication is essential for identifying and addressing challenges, both small and large, that invariably arise throughout the course of the product lifecycle. Something that is considered to be “common knowledge” in one location may be completely unknown to another. Hence, a more formal and regular meeting structure is highly recommended in order to ensure that all parties are kept informed and up‐to‐date regarding issues and even slight changes in project direction.
Another challenge that is magnified in the outsourcing environment is scope creep. The scope of a project will naturally expand to accommodate unforeseen challenges in design, manufacturing, test results, etc. In‐house, this creep may go unnoticed, or be more generally accepted as a normal part of product development. However, a contract firm is working under a much more specifically defined and tightly controlled timeline and budget, and is under contract to fulfill this obligation. Therefore, even a seemingly small change in design or process, or the identification of a previously unforeseen risk, may have a significant impact on the timeline and budget of the project, especially in light of the project scope as defined in the original contract. Thus, it is essential to constantly review the project status and projected activities in light of the existing contract, and update it as necessary in order to accommodate changes in scope. This allows both parties to operate with complete transparency, forces them to think more critically about changes to the project (thus contributing to project streamlining), and prevents surprises and miscommunication on the part of both parties.
Outsourcing medical device development and manufacturing activities to an established and respected contract design and manufacturing firm can greatly reduce the time to market and total cost of development of medical devices. Outsourcing can also allow a company to gain access to engineering, manufacturing, and quality expertise that it otherwise might not have in‐house or on an as‐needed basis. Finally, outsourcing also provides the flexibility crucial for product development in a competitive market, allowing projects to start, stop, or change direction quickly. In a competitive market environment, key business decisions such as the choice to use a contract firm can greatly improve your company’s chances for success.