Continued innovation is at the heart of the medical device industry, with new technology supporting critical outcomes such as earlier and more accurate diagnoses, more effective treatments, and helping people live longer and healthier lives. By regularly evaluating existing products and placing a stronger emphasis on total cost of ownership (TCO) during the new product development process, medical device manufacturers can maintain the critical balance of innovation and cost management, while staying ahead of the competition and bringing greater value to the healthcare system.
TCO calculates all costs associated with a particular product or service through its entire lifecycle. It considers price, risk, and opportunity cost, as well as hidden costs, including product recalls. This article explores how critical assessment of supply partners can help medical device manufacturers optimize TCO.
Strategies to Help Drive Down TCO
When assessing a supply partner, ask the following three questions:
- Are they solutions oriented? Suppliers are often consulted far along into the design process and asked to deliver a specific product or service. But what if that product or service is not the optimal solution for the device being manufactured? By engaging with a supplier during the specification phase and allowing them to conduct a thorough TCO analysis, they can come to the table fully understanding the project and recommend a solution based on its distinct goals, objectives, and challenges. With this approach, suppliers may be able to reduce price per piece, increase automation, or add components that eliminate steps later in the production process. They can often tap into their supply chain partners’ expertise to ensure the best overall solution. Ultimately, any supplier’s final recommendation should be packaged in a plan that considers product design, specifications, quality requirements, testing methods, price targets, machinery solutions, production requirements, and inventory needs.
- Can they test and validate new materials? Material selection is essential not only for design but for device functionality as well. Choosing the wrong material can lead to delays in a product launch as well as additional costs. Suppliers that can test and validate materials can eliminate additional R&D work for medical device manufacturers and provide peace of mind that the chosen materials will meet product performance standards.
- What value-added services and support do they provide? The best suppliers are those that work with their customers beyond the sale and set them up for continued success. That can be accomplished through training, the availability of production machinery to support the accurate installation of any components and maximize their performance, and the availability of additional services (i.e., subassembly) to help reduce supply-chain activity and increase efficiency.
Align TCO to the Product Life Cycle
The TCO life cycle follows the product life cycle, and each stage brings with it different challenges and opportunities to drive out costs. For example, when manufacturing new devices, suppliers can often develop components and subassemblies that are most likely to meet performance and biocompatibility testing while also being manufacturable at target costs. In the launch and growth stages, the focus should be redirected to managing machinery and production methods that allow for agility based on market demand. And in the maturity stage, suppliers should help medical device manufacturers reduce unit costs, make ongoing manufacturing process improvements, decrease inventory, and increase throughput.
It is important for medical device manufacturers to align themselves with suppliers that can handle all stages of production from sampling through scale up and large-scale production and help maintain consistent quality and regulatory compliance. This is especially critical when transitioning between life cycle stages. Changing suppliers to meet the specific needs of each product life cycle phase is time consuming and expensive.
Prevent Unnecessary Losses
Being an innovator is a critical advantage for medical device manufacturers, but it comes with a financial cost. The good news is that innovation and cost management can coexist. By partnering with a qualified supplier and investing the time and effort to conduct a comprehensive TCO analysis, medical device manufacturers can effectively balance the two inputs and make smarter decisions. It also enables them to maintain quality and adherence to regulatory standards, minimizing the risk and impact of defective goods, product recalls, and consumer complaints.
CASE IN POINT: COST ANALYSIS AND INNOVATION HELP REVITALIZE ANKLE BRACE OFFERING
Challenge: Replace existing ankle brace technology with a new solution that would enhance performance and increase competitiveness in the market.
Solution: YKK’s TCO analysis included examining the total cost of its customer’s outsourcing process, analyzing the competitive performance of the product and prioritizing areas where component upgrades would enhance performance. When the analysis was complete, YKK took steps to provide higher-performance components only in places they would positively affect product performance, shortened the supply chain by setting up the assembly process where YKK components were being manufactured and reducing the number of outsourced items, and implemented a shared production planning process to maximize efficiencies and minimize inventory safety stock.
Result: The collaboration resulted in several key outcomes for the customer:
- Enhanced product offering with significantly improved patient performance.
- Reduced costs by decreasing inventory of safety stock and eliminating third-party contract manufacturing.
- Increased market share and profitability.
This guest blog was written by Keith Glaser, Director, Medical & Hygiene, YKK (U.S.A.) Inc. YKK solves complex fastening and attaching challenges for the medical device market with a focus on cost control, quality, and regulatory compliance. For more information, go here .