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Selecting a Satisfactory Partner

Shopping for an outsourcer is about research and getting the right fit.

Ron Kirscht

March 1, 2008

8 Min Read
Selecting a Satisfactory Partner

GUIDE TO OUTSOURCING: PARTNER SELECTION

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Face-to-face meetings with a prospective outsourcer are essential to ensuring the provider is a good fit.

Medical OEMs are increasingly encouraged to focus on what they do best. Such strengths could be operational excellence (winning on cost), product leadership (winning with products), or customer intimacy (winning through responsiveness). Everything else is a candidate for outsourcing so that companies can develop core competencies and provide the best products and services.

Design and manufacturing professionals in the growing medical sector need discipline and focus to adhere to good processes that faithfully meet market and regulatory demands.

Therefore, medical OEMs must expand their wish lists for suppliers. They need results faster than ever before, with shorter notice to contract service providers. And OEMs need higher quality than in the past.

But how can companies find the right partner in today's market?

The answer is as individual as the companies themselves. Answering this question means taking a hard look at processes and practices of the OEM. The following questions are those an OEM must consider before engaging an outsourcing partner:

  • How does outsourcing relate to business objectives?

  • What are our core competencies?

  • What activities are not core to the business?

  • What is the outsourcing strategy?

  • Should we outsource or offshore? Or both?

  • From an outsourcing perspective, what is the anticipated future state in three to five years?

  • Will we select a single supplier (i.e., a suite provider)?

  • Will we select multiple suppliers (i.e., best of breed)?

Once a firm has considered these aspects and achieved satisfactory answers, it is time to go shopping.

If done carefully, outsourcing noncore competencies helps com­panies control costs and achieve proper inventory levels. It also enables compnaies to minimize overall part cost, ensure a leaner operation, and improve quality. This article discusses how to assess a partner's competencies to ensure they match the OEM's needs.

Invest Time and Research

It is often difficult for OEMs to relinquish control of a noncore competency without sacrificing the quality, responsiveness, and continuous improvement that today's marketplace demands.

Each minute spent selecting the right partner leads to a better matching of supply and demand, improved quality, and stronger strategic alignment and attainment. Investing this time now can make device manufacurers more comfortable giving up direct control because it can bolster confidence in the quality of the selected outsourcing partner.

The selection process begins by filtering potential suppliers by company size, location, competencies; ISO 9001 (or other) registration; number of years in business; and manufacturing capabilities. The Internet is an effective place to gather information for this first step. If a company doesn't have a Web presence, it might be a bad idea to consider that company as a partner. The absence of a website may indicate that a firm doesn't have adequate resources to support device requirements.

The next step involves reaching out to about five viable prospects with a preliminary supplier assessment—a checklist or other analytical tools designed to lay the foundation for a personal visit. The questions should be based on ISO 9001 and ISO 13485 or revolve around the suppliers' quality manuals.

Finally, visit the candidates that appear to be good matches. Establish a cross-functional team to carefully examine key claims the prospective suppliers have made. During the site visit, look for objective evidence to support the supplier's claims. This personal visit is a great way to determine the compatibility of the two companies. It provides a sense of culture, philosophy, and a sense of how the two companies interact.

Five Signs That the Supplier Is a Poor Fit

While on-site and getting to know the prospective supplier, it is important to gauge the supplier's fitness. There are some basic tenets that must be met, no matter how much the OEM team likes a supplier. Here are some general warning signs that a supplier might not be suitable:

Warning Sign #1. The manufacturer is seeking business at all costs. It may seem unlikely, but a telltale problem is a willingness to quote on any part, at any price, for anyone. Device makers are looking for quality. If a supplier seems overly eager to make a deal, it erodes the connection between price, quality, and value.

Warning Sign #2. Procedures and policies don't exist outside the quality manual. Ask for an on-site tour to see firsthand how the supplier handles an order from the beginning to the time that it's shipped. Witness the work flow and quality assurance practices. Adherence to these procedures is hard to fake in a live setting.

Warning Sign #3. Supplier does not invest as much strategic consideration into the process as the OEM does. Does it only care that it passed an audit and not how high the score was? Is the candidate interested in whether the job is a good fit for both organizations?

Warning Sign #4. The employee turnover rate is high. A high turnover means constant new employee orientation or possibly critical positions left unfilled. Missing and new staff could affect how a supplier meets its clients needs.

Warning Sign #5. The supplier does not seem committed to identifying and meeting cross-training needs. Business is constantly changing, and it is critical to have a supplier that has a change-ready culture with training and education plans for employees at every level. Employee improvement and involvement puts everyone in a position to deal effectively with change.

Ask the suppliers's opinions on these topics, and remember, don't just take their word. The proof should be evident in a supplier's day-to-day operations.

Perform More Research

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Ensure that a contract service provider practices the procedures put forth in its manuals.

To feel completely confident in outsourcing partnerships, it is critical to go even deeper into the analysis, examining the quality section of the supplier assessment. There are two areas of suppliers assesment that deserve special scrutiny by medical OEMs: customer satisfaction and continuous improvement.

What do the supplier's customer satisfaction results show? If the supplier does not measure the satisfaction of other customers, the company is probably unlikely to do much to ensure your satisfaction either. Ask for and check referrals.

Does the supplier assess its own suppliers? By holding its vendors (such as materials and components vendors) to high standards, a supplier can improve the service it provides. It is always a good sign when a prospective supplier does its homework, too.

Consider continuous improvement. Does the supplier have improvement programs in all areas? Continuous improvement programs can directly affect the OEM. These efforts are critical to future market success. Ensure that someone within the organization is responsible for measuring and managing improvement efforts.The continuous improvement criteria should apply to critical success factors inside the organization such as scrap, cost of quality, defects per million, and value added per employee.

In addition, suppliers must consider outside factors, such as external cost of quality, customer satisfaction, and on-time delivery. A supplier should have and should share its history of standards being met and continually raised.

Once an OEM is satisfied with a supplier candidate, it is time to discuss contractual obligations. Outsourcing contracts are complicated and require discussion beyond the scope of this article. However, keep in mind that if an agreed-upon principle is not in the contract, it does not exist.

Communicate After the Contract Is Signed

Quality assurance in outsourcing is a continuous quest, not just an up-front analysis. Even after a supplier is selected, the work does not end. The OEM and the suppliers need to remain on the same page. Consider a periodic conference to let suppliers know what the OEM's goals are. Such conferences enable service providers to anticipate, accept, and adapt to change. It also helps suppliers become an integral part of the business and understand their role as it relates to the rest of the supply chain. Allow them to see their products or services in context, rather than in isolation.

Such conferences can leave all parties rejuvenated with excitement about the relationship. Conferences such as these also help supplier employees stay focused on OEM customers.

If an annual conference with all key providers is not possible, consider a one-on-one annual or quarterly sit-down visit with each key supplier.

However it is done, make sure the information shared is timely, relevant, accurate, and clearly communicated. Also, in order for the meetings to be effective, make sure you stick to them. Sometimes OEMs and manufacturers start this practice, but discard it after a few years, often before the enduring value emerges from the process.

Rate the Supplier

In addition to communication practices, an OEM must also create and apply a system to measure the quality of each supplier. Often each supplier requires an individual rating system.

For instance, some suppliers provide commodity products such as plastic resin; others provide intricate custom-built molds. It would be unfair and unwise to rate those two types of suppliers with the same processes and criteria. For commodity items, consider whether the shipment arrived on time, is accurate, and has the appropriate paperwork. For vendors such as a mold supplier, there may be more than 100 specified elements to test and check.

Evaluate suppliers on metrics appropriate for the types of products or services that they provide. Mismatched measurement tools will not motivate suppliers to improve.

Conclusion

It is important to work with suppliers that are similar to the OEM when it comes to establishing relationships, maintaining communication, and ensuring quality. These principles are even more important to continue after a supplier has been selected. When both parties are rigorous in their research, it fosters mutual understanding, respect, and trust, and it can produce a more successful and lasting partnership.

Ron Kirscht is president of Donnelly Custom Manufacturing Co. (Alexandria, MN). He can be reached at [email protected].

Copyright ©2008 Medical Device & Diagnostic Industry

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