|When outsourcing disposables manufacturing, strong relationships among all parties are essential.|
That’s why when it comes to outsourcing of disposable medical devices, the interaction among the OEM, contract manufacturing partner, and suppliers is especially important. From the design and development stage to the production of the validated commer-
cial product, the most capable contract manufacturers offer a range of services that support their OEM partners in the consumables realm. A highly integrated partnership between OEMs and their contract partners can result in better risk mitigation, collaboration, innovation, and economics.
When outsourcing manufacturing of disposables, it is important for OEMs to recognize not only the technical and manufacturing capabilities of their outsourcing partner, but also the quality and regulatory environment that exists at the contract manufacturer’s facilities. Establishing an outsourcing relationship with a vendor that lacks medical device manufacturing experience or one that does not sustain a corporate culture committed to the fundamentals of ISO 13485 and 21 CFR 820 exposes the OEM to unwanted risk.
OEMs are increasingly calling on contract partners to participate in site audits, manage quality agreements, and maintain safety stock inventories with their raw materials providers. With the increasing prevalence of tertiary vendors in the overall supply chain, medical device OEMs are beginning to demand that their primary contract manufacturing partners take on these responsibilities.
Disposable products are made from advanced materials such as nonwovens, membranes, and adhesive films. Research and development in these areas continues to push the functionality of these materials forward, offering new and exciting advantages in application markets. For example, the advanced wound care field has innovated the use of antimicrobials, silicone adhesives, and superabsorbent technologies. Such advancements stem from the combined efforts of OEMs, contract manufacturers, and suppliers that are willing to engage in longer-term integrated relationships that promote innovation by equally incentivizing all of the supply chain partners.
But collaborative environments that promote innovation and equally incentivize all of the stakeholders can be difficult to build—especially when more than two companies are involved. For converters and contract manufacturers of disposable medical device products, part of the value proposition is to act as a conduit between the OEM’s new application technologies and suppliers of advanced materials. A few keys to accomplishing this task are ensuring a good technological fit, establishing transparent and direct communication, and ensuring all parties share a fair investment in the opportunity.
Assessing the technological fit of OEMs, contract manufacturers, and suppliers is particularly crucial. For example, hiring a contract manufacturer without medical device experience can be costly if the relationship is not managed properly. Project managers should vet the technological fit of all players early in the process and fill gaps with resources as needed.
Transparent and direct communication is also critical to create lasting partnerships. All of the parties involved in a project—including OEMs, contract manufacturers, and suppliers—should be aware of the goals, risks, costs, and rewards associated with the project. They should also have a full understanding of their responsibilities. Equipping a strong project leader with a detailed description of the project early on will help position the project for success.
Fair investment does not always mean equal investment, but some sharing of incentives and costs is important when it comes to disposables manufacturing. Whatever the economics of a relationship are, they must be clearly understood by the parties and appropriately connected to the risks and rewards. Imbalances in these collaborative relationships can result in strains that could negatively impact the project and the relationship among the OEM, contract manufacturer, and suppliers.
Qualified contract manufacturers are familiar with having participated in well-managed and well-executed projects that yielded economic and strategic rewards and had longevity in the marketplace. Such success results from a collaborative orientation that places all of the active parties on one side of the table. On the other hand, even the best contract manufacturers will also have experienced failed projects. In many cases, failed projects can be attributed to technological shortcomings, negative market conditions, or more often than not, the lack of partnership and collaboration.
At the same time, as consumers and businesses demand mass customization of consumable medical devices, leading OEMs are developing, manufacturing, and delivering products and services in new ways. As the relationship between the medical device OEM and the supplier evolves, the most successful companies will have to be more selective about the products and services they offer while delivering them in a scalable way. In order to provide support and innovate with noncore technologies, contract partners and suppliers will have to rely on each other’s capabilities.
OEMs that create a collaborative and innovative ecosystem for suppliers will ultimately be better positioned in the market.
Matthew Boyd is vice president of business development at Boyd Technologies. Before joining the company, he was a sales associate at Citigroup Global Markets. A member of the executive committee of the River Valley Investor Group in Springfield, MA, Boyd received a bachelor's degree in economics from the University of Vermont and an MBA from the F.W. Olin Graduate School of Business at Babson College. E-mail him at [email protected].