Contract manufacturers have an increasingly critical role in medical device manufacturing. For original equipment manufacturers (OEMs) that choose to outsource manufacturing operations, a successful contract manufacturing organization (CMO) partnership can help ensure that a new product will reach the market sooner, achieve financial success, and deliver high-quality innovation to end users.
Working in close collaboration with clients, CMOs can play a pivotal role in helping OEMs meet market needs and overcome development and manufacturing challenges. A successful partnership should always be a win-win for both the customer and its CMO partner.
Every development program, even projects that do not achieve or sustain market success over the long haul, can offer lessons about how to conduct business more effectively and efficiently in both the short and long term. A CMO’s business operations might undergo a transformation as a result of the lessons learned from a development program, so every project has something to teach, from those that exceed market expectations to those that fall short of their initial goals and sales targets.
MICRO, for example, had one such project that did not achieve lasting market success, but that played a big part in taking business in a positive and growth-oriented direction. In this instance, a customer request allowed the company to expand its capabilities and helped to build a foundation for how the company conducts business today. The project afforded the company an opportunity to establish capabilities relating to project management, supply-chain logistics, and full device assembly, which were not core competencies at the program’s start. Operationally, the business today is much stronger and more diversified in large part due to this project — despite the fact that the project did not ultimately succeed commercially.
The development program did not achieve long-term value, but the company’s intellectual property represented a breakthrough in medical technology innovation and was a precursor to robotics applications for surgery. In its initial iteration, the startup OEM was working to design a game-changing handheld articulating device for use in laparoscopic surgery. It would be the first to articulate in a way that replicated a hand motion, which had not been achieved before.
As the CMO, this was the company’s first full-device assembly project requiring manufacture, sourcing, and assembly of over 40 components. Prior to this project, the company had primarily focused on components and subassemblies in the medical device field. At the start of the project both sides agreed development would be shared. The CMO would co-engineer the product along with the OEM technical team. The CMO role required being the supplier to a number of diverse manufacturing processes, including plastic molding, metal injection molding, cabling, and laser operations. The CMO also validated the different subassemblies that were required for a full assembly project of this magnitude and complexity. As such, the project forced the CMO to establish and reinforce the project management and complex supply chain operations still used today. The development program set in motion a course of events that propelled the company on a growth trajectory as a full-service CMO. A dedicated group of 50 people devoted to new project engineering is in place today, thanks in large part to this program.
The product did achieve validation and market launch and was hailed as an innovative breakthrough. Unfortunately, a number of factors prevented it from achieving a lasting market presence — not the least of which was the fact that the surgical specialty that it was designed for (single incision laparoscopic surgery) did not revolutionize the market as hoped.
Five Rules for Success
While contract manufacturers can learn from any development project, whether it realizes long-term market success or not, these five rules can help ensure a project’s success.
Ask the Right Questions. Any successful partnership needs to begin with a clear understanding of each party’s role and the OEM’s cost drivers, processes, and methods. Contract manufacturers need to know why they should invest their time and resources on a customer’s program. This is essential before any project begins or ideally before a partnership is formalized. Contract manufacturers also need to have a firm understanding of the product’s marketing and distribution plans as well as cost drivers and sales projections. If an OEM cannot answer how it plans to market and distribute the product and communicate its expectations for the development program, including timelines, key milestones, responsibilities, and supply chain, it is best to walk away from the project. Asking the right questions up front helps build OEM confidence in the contract manufacturer’s ability to deliver. It is to everyone’s benefit to ask the right questions and ask them early on.
Confirm Synergies. A business partnership is based on trust, transparency, clear communication, and mutual collaboration. It is essential that each company’s core values and best practices are aligned, and it should be clearly defined how the parties will work together. A successful partnership ensures that the parties complement one another’s capabilities and competencies. The partners will work together closely and need to respect each other’s ideas, suggestions, and expertise. Enter into partnerships wisely and take the time needed to understand a prospective partner’s business. Ideally the partners will forge a long-term relationship.
Periodically Realign. Even with the appropriate up-front details in alignment, often in the medical device industry, programs change dramatically during development. A product often undergoes redesign and issues can arise with each redesign. A product may fail functional testing or may not obtain regulatory approval. These are all common occurrences that can happen as a program evolves and moves through the development phase. These types of issues can dramatically alter timelines, costs and resources required to complete development. Companies must be willing to continually revaluate at any given moment to guard against “scope creep” and ensure that each design and production adjustment is in alignment with the original objective of both companies. If project alterations, regulatory hurdles, or other factors interfere with the ability to meet a customer’s objectives or deliver at cost, CMOs and their customers may need to re-evaluate whether the project remains mutually beneficial before moving forward.
Seek Opportunity for Growth. As illustrated in the example noted earlier, a project can achieve technological or market success in various stages of development. The project discussed above ultimately led to greater education on assembly of minimally invasive, articulating devices and ultimately led the CMO to enter the robotic-assisted surgery market, something the company would not have been able to do that without this initial project presenting a valuable learning opportunity. It also allowed the CMO to develop a deeper expertise and framework for estimating programs and putting component traceability systems in place. It made the company more knowledgeable, flexible and, efficient in business operations and complex supply chains. Seek opportunities to grow and expand capabilities with every project.
Apply Lessons Learned for Future Experiences. Do not overlook the importance of a program for its potential to be an educational and engineering breakthrough. It is important to recognize when a new technology has potential for future applications. This may not happen for years. Even a product failure can teach important lessons, establish a roadmap for success, or take a company in a new direction. Be open to these opportunities and ask good questions of any prospective partner, and take the long view.
An unrelenting focus on the customer, along with the capabilities and know-how to meet customer needs should be a CMO’s foundation and what sets it apart as a contract manufacturer. The CMO should work every day to exceed customer expectations through technical expertise, full-service manufacture offerings, and an in-depth understanding of the customer’s goals. Its team should excel at aligning the requirements of a project with the right engineering capabilities, resources, and manufacturing techniques. Start by asking the right questions to see whether the CMO understands your expectations and pain points. The CMO should be able to put themselves in the OEM’s shoes, anticipate what problems might arise, and find a solution. It is all hands on deck.
This article was written by Carl Savage, Vice President of Business Management for MICRO, Somerset, NJ. For more information, visit here .