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Assessing Core Competencies to Reduce Cycle Time and Costs

Medical Device & Diagnostic Industry Magazine MDDI Article Index Originally Published March 2001     A manufacturer striving to bring quality products to market quickly must understand its own strengths, manage its assets wisely, and take advantage of strategic alliances with suppliers. Robert T. Alvarez

Medical Device & Diagnostic Industry Magazine
MDDI Article Index

Originally Published March 2001

Robert T. Alvarez

Speed-to-market is the life-blood of OEMs. Whether a manufacturer produces medical, industrial, automotive, or consumer products, the time required to launch a particular product can impact both ultimate market share and potential profits. In many instances, the company that is first to market will be the most successful, since the product that leads the pack often determines the standard and price of those that follow. However, in and of itself, a speedy debut is not necessarily enough to capture a dominant share of the market. Demonstrated customer satisfaction and proven product quality are key to establishing customer loyalty, which helps secure the profitable launch of future products.

Three elements are critical to a strategy for getting products to market quickly. The first is that speed-to-market requires superior quality. Quality is an absolute in the medical field, and must be a given in the OEM planning process. Second, speed-to-market requires an infrastructure flexible enough to absorb product changes and still achieve rapid market release, all while maintaining necessary product quality. This infrastructure can best be defined as a partnering of OEM and supplier that results in a true strategic alliance—in which, for example, a molder would become part of the medical device product team. In the complex medical plastics arena, it is particularly crucial to have these fundamental systems coordinated and in place. Finally, companies must fully understand their core competencies and take advantage of the right opportunities for outsourcing.

Rapid market release is critical for many polymer-based devices.

SPEED-TO-MARKET STRATEGIES

OEM Responsibilities. Both the OEM and the plastics material or service supplier assume specific responsibilities in reducing time to market. For example, the OEM must be willing to establish an alliance relationship with the molder. Whereas the strength of the OEM lies in advertising, marketing, distribution, and customer service, the molder brings expertise in the manufacturing design disciplines. An agreement might be reached that would allow the OEM to review the molder's costs to allow for reasonable profits. In exchange for this oversight, the OEM could sign a long-term commitment to the molder for the specific project or product.

The OEM should treat the molder as an extension of the company's engineering and manufacturing efforts, by involving the molder in the concept and early design stages of the product-development process. Consolidation of design can be achieved at the concept phase by coordination of the OEM's design staff with the design staffs of the injection molder, tool designer, and material supplier. Most importantly for the molder, inclusion at the concept/design phase permits timelines for tooling, engineering support, assembly, and other requirements to be established. Compatibility of all these functions will go a long way toward ensuring an efficient manufacturing process and a well-designed, quality product.

Tooling. A significant item in any product launch is tooling. By involving the molder in a project's initial design phase, the medical device manufacturer can use prototype tooling early in the product launch, and thereby reduce the risk of building production tools too early (it is much simpler to make an engineering change to 1- or 2-cavity tools than to 64-cavity tools). Extended initial production runs on bridge or prototype tooling may reveal long-term manufacturing-stability issues that would not be found during short-term evaluations.

As the degree of difficulty for part configuration and part design increases, possible design faults may be exposed during long-term runs on bridge tooling. In some cases, Cpk values can be affected dramatically by cavitation; a tool that has experienced high cavitation may not meet quality requirements. Another potential problem is that many OEM design groups fail to understand that an injection molding machine can take up to 16 hours or more to stabilize. During this stabilization process, interaction of the machine and materials can influence part quality.

Molder Responsibilities. The role of the molder in accelerating the product development process has been altered by the advent of specialized—that is, customized or dedicated—molding or assembly facilities. Today, a successful medical molder must embody a structure significantly different than that of a traditional contract molding house. Over the next decade or so, plants will need to be streamlined to minimize labor and floor costs, with mandatory computerized process control allowing QC to be built in early in the manufacturing process.

In order to maximize useful input to the medical device company, the injection molder ideally should implement several measures regarding engineering design, tool design, and process engineering/ material procurement. The injection molder should have engineering personnel on staff who can work full-time at the OEM's design centers during the life of the project. Tool designers will also need to meet with the device company's design team, material suppliers, and process engineers, either at the design facility or via videoconferencing. Process engineering involves the design of assembly equipment and techniques for on-line assembly (including metallic inserts, adhesives, etc.), and interaction between process engineers and material suppliers is crucial.

The complexity of these interactions requires that the injection molder have a centralized engineering group that might not be part of a manufacturing site. With such an arrangement, engineering support costs can be invoiced separately and not appear as variable overhead expenses to manufacturing plants, lending added accounting stability to plant costs.

BENEFITS OF EARLY SUPPLIER INVOLVEMENT

The benefits of early collaboration between the device company and the injection molder include lower overall manufacturing costs and less time getting a product to market. Early collaboration reduces the number of engineering changes, and fewer engineering changes results in more-efficient production processes, lower tooling costs and faster tool qualification times, less waste of materials and personnel, an earlier position in the marketplace, and more-accurate budget estimates.

In today's global market, the ability of companies to manufacture internationally is fast becoming the norm. Tooling may be built in one location and transported to numerous manufacturing sites in other countries. Simplicity can become a strategic tool, as with lower-cavitation tooling that can be built quickly and shipped easily.

OUTSOURCING AND THE NEW PARADIGM

One of the cardinal rules of business—observed in countless examples—is that companies must change or risk obsolescence as competitors develop new products or find ways to lower production costs on existing products. The medical device industry is no less susceptible to this reality than other sectors. What's important for a company determined to move quality products to market quickly is to recognize the need for change and enact it at the right time. The preceding discussion regarding the relationship between OEMs and molders presupposes a new conception of the role of "suppliers" to the industry.

The classic model that has governed the medical device industry was developed out of necessity. In this traditional paradigm, device companies designed, prototyped, and built the devices they sold. The paradigm was unchallenged because the risks of product failure—not only catastrophic financial consequences but potential loss of a patient's life—were so high. Because the reputation of a company depended so critically on the quality of its products, there was no alternative but to manufacture medical devices internally.

More recently, however, factors such as the advent of managed care have dramatically changed the industry. With accountants and business managers making coverage decisions and group purchasing organizations negotiating lower prices, device manufacturers have been driven to reduce the cost of goods through efficiencies that were never undertaken in earlier days. Often, the desire to cut costs and appease stockholders leads to reductions in R&D budgets and thus slows development of new products. When combined with aging product lines and expiring patents, this can initiate a serious condition that is becoming endemic in the medical device market. The longer it lingers, the harder and more expensive it is to cure. This malady has to do with the utilization of assets, or asset management, and in fact involves the very thing that once characterized the industry—the internal manufacturing of medical devices. The obvious solution is contract manufacturing, or outsourcing.

Simply put, most medical device companies cannot afford to be in the manufacturing business. Although this truth may not be popular with the industry's internal manufacturing units, device companies need to concentrate on their core competencies, primarily new product development, marketing, and sales. If the manufacturing process associated with producing a medical device is not among a company's core competencies, management must question why the company continues to manufacture the product. This kind of self-examination poses hard and challenging questions, and rarely provides a perfect answer or model. The question the management of every company must ask is, "How competitive are we going to be tomorrow?"

This dynamic of changing a paradigm of internally manufactured products is not unique to medical device companies. The electronics and computer industries have gone through the same metamorphosis, and the automotive industry is currently doing the same. All of these sectors realized that shifting the cost of manufacturing to outside contractors freed assets that could be used for product development, sales, and marketing.

As recently as five years ago, medical device manufacturers had legitimate concerns about maintaining quality when manufacturing services were outsourced; since then, however, many outsourced products have well-documented manufacturing histories. Moreover, the contract manufacturing sector itself has been transformed and enhanced—from a small, fragmented collection of job shops to a multi-billion-dollar industry of extreme technical sophistication. As the device industry consolidated during the 1990s, many former employees of medical OEMs found positions with contract manufacturers, adding specialized expertise to the outsourcing sector. In sum, medical device manufacturers can now choose from an array of competent and cost-effective contract manufacturers as they weigh the increasingly critical decision of whether to outsource.

CONCLUSION

The short product life spans and intensely competitive nature of the medical device industry place a premium on getting new products to market as quickly as possible. For companies producing plastics-based medical devices, the path to profitability will increasingly depend on achieving successful collaborative alliances—relationships based on trust and early involvement of suppliers in the development process—with qualified molders and other specialized contract manufacturers.

Robert T. Alvarez is vice president of technology at United Plastics Group Inc. (Westmont, IL), a global plastics engineering design and manufacturing company that provides a variety of components and assemblies for both disposable and reusable medical products.

Photo courtesy of United Plastics Group Inc.


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Copyright ©2001 Medical Device & Diagnostic Industry
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